implementation of the new health reform laws northern nevada association of health underwriters...
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Implementation Of The New Health Reform Laws
Northern Nevada Association of Health UnderwritersReno, NV
November 1, 2010
PPACA
Patient Protection and Affordable Care ActEnactment Date: March 23, 2010
PPACA• PPACA (P.L. 111-148) and the Reconciliation Act
(P.L. 111-152) represent significant changes to the health care industry
• PPACA was more than 2,000 pages long and will impact consumers, employers, insurance carriers, taxpayers, state governments, et al
• PPACA is expensive, CBO projected in March the 10-year costs to be $938 billion over 10 years
• Revised estimates by CBO push the price tag up an additional $115 billion over 10 years
PPACA – Key Elements Key Provisions Affecting Employers•New Taxes•Market Reforms•Employer and Individual Mandates/Subsidies/Credits•Exchanges•New Employer Reporting Obligations•Wellness Programs
Some Guidance and/or Interim Final Regulations (IFR’s)
• Dependents covered to age 26 (May 13, 2010)
•Grandfathering Rules (June 17)
•Annual and lifetime limits ( June 21)
•No Rescissions (June 21)
• No Pre Existing limitations to age 19 (June 21)
• Patient Protections (June 21)• Chose any in network PCP• OB – Gyn with no referrals• ER – “prudent” person rule• ER – out of network ER covered as in network
•Preventive Care (July 9)
• www.federalregister.gov
Grandfathered Plans• Essentially all plans in effect on date of PPACA
enactment (March 23, 2010) are “grandfathered”
• Very few changes are permitted if a plan wants to retain grandfathered status– Plans must provide a statement to participant that it believes
it is a “grandfathered” plan
• Plans that made changes between March 23 and June 14 have an opportunity to reverse any significant changes made without losing grandfathering status.– This must be done by the plan year following September 23,
2010
What Grandfathered Plans Can’t Do
• Can’t increase co-insurance rate
• Can’t increase co-pay more than the greater of $5 (adjusted annually for medical inflation) or medical inflation plus 15%
• Can’t reduce employer contribution more than 5%
• Can’t increase deductible more than 15% plus medical inflation
What Grandfathered Plans Can’t Do
• Can’t use a merger, acquisition or business restructuring for the purpose of covering new individuals under a grandfathered plan
• Can’t change carriers if you are fully insured
• Can’t move employees to a grandfathered plan with lower benefits
• Can’t make a significant cut to benefits such as eliminating benefits for a particular condition
What Grandfathered Plans Can Do• Add family members or new employees
• Disenroll employees
• Make changes as a result of state or federal regulations
• Make changes to voluntarily adopt some or all of the law’s requirements
• Change third party administrator if you are self-funded
• Increase premiums
The “Why” of Grandfathered Plans• PPACA requirements that are waived if a plan remains
“grandfathered”– The requirement that emergency services must be provided without pre-
authorization and treated as in-network
– The rating limits, guaranteed issue, guaranteed renewability, and essential benefits packages that begin in 2014
– The cost-sharing and deductible limits, non-discrimination for clinical trial participants, non-discrimination on providers acting within scope of license
– No cost sharing for preventive care
– The non-discrimination rules for fully insured plans
– The requirement that pediatricians must be an allowable primary care physician choice
– The requirement that females can go to an OB/GYN without a referral
– The requirement that plans must provide an internal and external
appeals process
“Fixing” Grandfather status• Plans must provide a statement to participant that it
believes it is a “grandfathered” plan
• Plans that made changes between March 23 and June 14 have an opportunity to reverse any significant changes made without losing grandfathering status • This must be done by the plan year following September 23, 2010
• HHS impact analysis states that by 2013 at the midrange estimate, only 55 percent of large employers and 34 percent of small employers will retain grandfathered health plan status
Dependent Coverage
• All group and individual plans, including self-insured plans and grandfathered plans that offer dependent coverage will have to cover dependents up to age 26.
– Dependents can be married and be eligible for the group health insurance income tax exclusion as long as they don’t have another source of employer-sponsored coverage.(2014)
– Provide a 30 day special enrollment opportunity and NOTICE to adult children eligible for coverage under the age 26 rule
Preventive Care
• For all group and individual health plans, mandates coverage of specific preventive services with no cost sharing
– Services recommended by the US Preventive Services Task Force
– Immunizations recommended by the Advisory Committee on Immunization Practices of the CDC
– Preventive care and screenings for infants, children and adolescents
– Preventive care and screenings for women
– Grandfathered plans exempted
Annual and Lifetime limits• Restricted Annual Lifetime limits - Phased in
• 9/23/2010 but before 9/2011 - $750,000
• 9/23/2011 but before 9/2012 – 1.25 million
• 9/23/2012 but before 9/2014–2 million
• 2014 – unlimited- limits completely banned• Provide a 30 day special enrollment opportunity and notice to
individuals who have reached their
lifetime maximum
Expect 2 million enrollees to lose coverage with loss of “Limited Benefit” plans
Retiree Reinsurance Program
• 2010 Reinsurance Program for employer “early retiree” health benefits (age 55-64) provides for subsidies up to 80 percent of the insurance costs for claims between $15-90K IF employer invests the difference in wellness and chronic care management programs
• $5 billion was appropriated with no guarantee of future funding. Program will end when the funding is exhausted
• Approximately 3,000 employers and unions have applied and been excepted into the program
Pre-ex For Minors & Primary Care
• All group and individual health plans, including self-insured plans, will have to cover preexisting conditions for minors aged 19 and under for plan years beginning on or after September 23, 2010
• For all group and individual plans, including self-insured plans, emergency services must be covered in-network regardless of provider.
• Enrollees may designate any in-network primary care physician as their primary care physician.
Near Term Cost Impact of HealthCare for 2010 changes + added to trend of 12%
Lifetime limits 1%
Annual limits ½% to 1%
Dep age to 26 1.5% to 2%
PX under age 19 immaterial
No cost sharing Preventive 2% -4%
Estimates by Urban Institute and Cigna HC
Taxes• 10% sales-type tax on indoor tanning services (2010) (PPACA §10907: IRC
§5000B)• MLR/Carrier Rebates (2011) (PPACA §1001, §10101: PHSA §2718)• Increase to 20% of tax on distributions from HSAs and MSAs (2011)
(PPACA §9004) • Tax on pharmaceuticals, and increase fee by $4.8 billion (2011) (PPACA
§9008; HCEARB §1404)• Executive Compensation deductibility limit of $500,000 (2013) (PPACA
§9014: IRC §162(m)) New 3.8% Medicare Investment Tax on high-income individuals (2013)
(PPACA §9015) 0.9% increase the hospital insurance tax on High Income Individuals
(2013) (PPACA §9015)• 2.3% excise tax on Medical Devices (2013) (PPACA §9009; HCEARB §1405) Annual limitation on contributions to a health FSA of $2,500 (2013)
(PPACA §9005: IRC §125; HCEARB §1403)
Taxes• Elimination of deduction for expenses allocable to Medicare part D
subsidy (2013) (PPACA §9012; HCEARB §1407)• $2 (per covered beneficiary) tax to fund the Patient-Centered Outcome
Research Trust Fund (2013) (PPACA §6301, §10602) Employer Mandate – fine of $2,000/employee (2014) (PPACA §1511-
1515; HCEARB §1003)• Individual Mandate – penalties equal the greater of $95/individual or 1%
of family income in 2014; $325/individual or 2% of family income in 2015; $695/individual or 2.5% of family income in 2016, and rise in accordance with cost-of-living adjustments thereafter. (2014) (PPACA §1501; HCEARB § 1002)
• Three year tax on TPAs and insurers to fund a transitional reinsurance program (2014) (PPAHCA §1341(b))
• Annual fee imposed on all health insurers (excluding self-insured plans), based on their market share (2014) (PPACA §9010; HCEARB §1406)
40% Excise Tax on certain “Cadillac Plans” (2018) (PPACA §9001: IRC §4980I; HCEARB §1406)
2010• Insurance reforms – lifetime
limits, no rescissions, 100% preventive services, dep age 26, no pre – X under age 19, enhanced external appeals
• “Grandfather’ rules – post 3/23 changes in plans
• Small Business Tax credits – firms of 25 or less
2010• Early Retiree Reinsurance
(ERRP)• High Risk Pools• $250 Medicare RX rebate
“donut hole”• Medicare Cuts – “doc Fix”
2011 – 2013• Grants for small employer wellness programs• OTC drugs in FSA, H S A, HRA only with doctors prescription• W2 – report valued Health insurance• All working adults enrolled in CLASS , LTC program, unless they opt out.• Medicare Advantage cuts• Cost sharing on preventive services in Medicare eliminated• FSA – limit contributions to $2500 per year
2014• Individual Mandate• Individual market guaranteed issue• Rating reforms for Group & Individual markets• Employer Mandate & Penalty• Employer Voucher • Insurance exchanges, with subsidies up to 400% of federal poverty level• Medicaid expansion• Employers auto enroll (200+)
2015• IPAB – Independent Paymennt
Advisory Board to recommend reducutions Medicare spending
2016• Interstate Health Choice Compacts
2018• High Cost insurance tax – 40% of single coverage over $10,200 and family coverage over $27,500• “Cadillac” Tax
Exchanges• Requires each state to create an Exchange to
facilitate the sale of qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit co-operative plans. – In addition the states must create “SHOP Exchanges” to
help small employers purchase coverage.
– States can either create one exchange to serve both the individual and group market or they can create a separate individual market exchange and group SHOP exchange.
– States may choose to allow large groups (over 100) to purchase coverage through the exchanges in 2017
Exchanges• A state may have more than one exchange if each
serves a geographically distinct area and is sufficiently large
• New individual and group qualified health plans may be offered inside and outside the exchange, but the premiums must be the same.
• Premium and cost sharing subsidies will only be available through exchanges.
• Secretary of HHS will establish procedures for agents and brokers to enroll individuals in exchanges
Exchanges• HHS also announced the first phase of grants for
states to begin working on their state-based health insurance exchanges.– $1 Million per state is available
– Grants should be used to conduct research and planning to build a better health insurance marketplace and determine how their exchange will be operated and governed.
• HHS has also requested comments from states and interested stakeholders regarding how best to create the exchanges.
©2010 Steptoe & Johnson LLP
Exchanges
A web portal “marketplace” for health
insurance
A web portal “marketplace” for health
insurance
Federal Government• sets criteria for plan participation and purchaser eligibility • provides subsidies for small
businesses and individuals
• sets up Exchange if a state fails to
Individuals (no subsidies for ones offered
employer-based coverage, unless that coverage is “unaffordable”)
Small Businesses If up to 100
employees, can buy thru Exchange
States•each sets up own Exchange•will be involved in premium
reasonableness reviews; can approve/reject as provided under state law
Self-insured plans not eligible to Participate
Individual Mandate• Requires all American citizens and legal residents to
purchase qualified health insurance coverage.
• Penalty for non compliance to either a flat dollar amount per person or a percentage of the individual’s income, whichever is higher.– In 2014 the percentage of income determining the fine amount
will be 1%, then 2% in 2015, with the maximum fine of 2.5% of taxable (gross) household income beginning in 2016.
– The alternative is a fixed dollar amount that phases in beginning with $95 in 2014, $325 per person in 2015 to $695 in 2016.
Employer Responsibilities
• Effective starting January 1, 2014
• Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees– Certain seasonal workers are not counted in determining if
employer has 50 workers
– Full-time = 30 hours per week, determined on a monthly basis
– No more than 90 day Waiting period for enrollment
• Penalties assessed for “no coverage” or coverage that is not “affordable”
Summary of Potential Employer Penalties under PPACA, Cong. Research Service May 14, 2010
Employers That Do Not Offer Coverage
• If an employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage,” and
• One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then
• Employer penalty = $2,000 for each full-time employee ($167 per month)– Penalty is non-deductible
– Penalty does not offset the cost of employee coverage
Employers That Offer “Unaffordable Coverage”
• If employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and
• One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost sharing reduction because
– The employee’s share of the premium exceed 9.5% of income, or
– The actuarial value of the coverage was less than 60%, then • Employer penalty = $3,000 for each full-time employee who
receives a tax credit or cost-sharing reduction ($250/per mo)
– Penalty is lesser of $3000 per subsidized EE or $2000 per EE
Vouchers
• The third prong of the employer responsibility requirements.
• Requires employers to provide a voucher to use in the exchange instead of participating in the employer-provided plan in limited circumstances. – Employees must be ineligible for subsidies
– Employees share of premium must be more than 8% to 9.8% of family income that is less than 400% of FPL
– Employee can keep amounts of the voucher in excess of the cost of coverage
Wellness
• In 2011, businesses with fewer than 100 employees who work 25 hours or more a week will be eligible for grants to help implement new wellness programs
• To be eligible for funding from this $200 million grant program, the program must be available to all employees and include: – health awareness initiatives
– initiatives to change unhealthy behaviors and lifestyle choices
– mechanisms to encourage employee participation
Wellness
• Starting in January 1, 2014, employers with “bona fide wellness programs” will be allowed to provide discounts of 30% of the cost of individual or family insurance premiums. The discount could grow to 50% if the Secretaries of Health and Human Services, Labor and Treasury deem it appropriate. – Currently, HIPAA only allows a 20% discount
• PPACA also expands wellness discounts in the individual market, with an initial demonstration project in 10 states launched in July 2014 by the Secretaries of Treasury and Labor.
New Reporting Requirements• To Enrollees: Summary of Coverage (1/1/12)
• To Enrollees: 60 days Advance Notice of Material Changes To Plan (eff. date unclear, likely no later 1/1/11)
• To Enrollees: Plan’s Appeals Process & State Consumer Assistance Office (9/23/10) (Does not apply to grandfathered plans)
• To Enrollees & HHS: Quality of Care Measures/Wellness Programs (2012) (Does not apply to grandfathered plans)
• To HHS/State/Internet: “Unreasonable” Premium Increases Notice/Justification (3/23/10) (Does not apply to grandfathered plans)
• To HHS/States: Claims Payment Policies/Rating Practices/Others (2014)
Employer Info
• Increase Employer Reporting Obligations– Confirmation that they offer (or do not offer) “minimum essential
coverage” to full time employees and dependents
– Length of any applicable waiting period
– Lowest cost option in each enrollment category under the plan
– Employer’s share of the total allowed costs of benefits provided under the plan
– Total number and names of full time employees receiving health coverage
Employer Info
• W-2s – Health Insurance Value (2012)
• EEs & New Hires – Exchange & Subsidies Notice (3/1/2013)
• Treasury Department – Comprehensive Info Regarding Coverage Provided & Who Is Covered (2014)
• Cadillac Taxes – Report Amounts To Carriers & HHS (2018)
1099 Reporting• An all-but-overlooked provision of the health reform law
is threatening to swamp U.S. businesses with a flood of new tax paperwork.
• Section 9006 mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.”
• The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year.
1099 Reporting• Congress is already considering changing the 1099
reporting requirements – from repealing to raising limit to over $5000 for $600
• Senator Hutchinson (TX) introduced leg to repeal changes to OTC in H S A’s/ FSA and remove the $2500 cap on FSA plans 2013
• Congressional action unlikely in 2010
• Your Health Care, Explained
A federal government Website managed by the U.S. Department of Health & Human Services200 Independence Avenue, S.W. - Washington, D.C. 20201
Conclusion
• PPACA will remain political issue in 2010 electionsPPACA will remain political issue in 2010 elections• Administration and congressional leadership de-Administration and congressional leadership de-
emphasizing health care and trying to focus on jobs and emphasizing health care and trying to focus on jobs and the economythe economy
• 34 congressional Democrats that voted against 34 congressional Democrats that voted against legislation touting their “no” voteslegislation touting their “no” votes
• Republicans’ “Pledge for America” calls for repeal and Republicans’ “Pledge for America” calls for repeal and replace, but repeal unlikely. There likely will be changes replace, but repeal unlikely. There likely will be changes thoughthough
• Agents and brokers need to focus on implementation Agents and brokers need to focus on implementation and educating clients on reformsand educating clients on reforms
