may 20 aahsa town hall: health reform and employers

1

Health Care Reform Town Hall Update

What Does It Mean For You As An Employer?

Thursday, May 202:00 – 3:00 p.m. ET

Speakers

Barbara Gay, Director of Advocacy Information, AAHSA

Dave Sanders, National Tax & Erisa Practice, Aon Consulting

Thora Johnson, Partner, Employee Benefits and Executive Compensation, Venable, LLP

2

Structure of Today’s Program

Introduction: Barbara Gay

Key Employer Provisions Overview: Dave Sanders

Timeline Implementation: Thora Johnson

Questions and Closing: Barbara Gay

3

Implementation of Health Reform Implementation Challenges

Complex and challenging law to implement

2,400 pages plus 153 page reconciliation bill

HHS (Health and Human Services) on point for implementation

Date of enactment was 3/23/10, with 6 month effective date for some provisions (9/23/2010)

Plans in existence on 3/23/10 are exempt from many rules, if remain unchanged ("grandfathered" plan)

4

Key Employer Issues – Market Reforms

Coverage of adult children up to age 26, regardless of marital or student status

– If not eligible for other group plan (this condition expires 12/31/13)

– Applies even if the child is not a tax dependent

Effective 6 months after enactment (1/1/11 for CY plans)

Dependent Coverage

No lifetime maximums permitted for overall benefits (annual/ lifetime limits on specific benefits permitted)

– Effective 6 months after enactment (1/1/11 for CY plans)

Complete elimination of annual limits beginning January 1, 2014

Restrictions on annual limits prior to 2014 TBD by regulation


Annual and Lifetime Maximums

5

Key Employer Issues – Market Reforms

Not permitted for children under age 19


Not permitted for all plan enrollees

– Effective 1/1/2014

Pre-existing Conditions Exclusions

Waiting periods greater than 90 days are not permitted

Effective 1/1/2014

Must provide first dollar coverage for evidence based preventative care

Effective 6 months after enactment (1/1/11 for CY plans)

Grandfathered plans exempt

Waiting Periods

Preventive Benefits

6

Key Employer Issues – Impactful Provisions

Applies to employees working 30+ hours/week

Employer pays $3,000 for each EE with coverage <60% of allowed costs or if EE pays >9.5% of their household income for health coverage

Employers not offering health coverage pay $2,000 per EE

First 30 employees not included in calculation of assessment

Effective 1/1/2014

Free Rider Provision Applies to employees working 30+

hours per week

Employers would convert health coverage subsidy to cash for any employees who would pay between 8% and 9.8% of their household income for health coverage and opts out of employer sponsored coverage for coverage in an Exchange based plan

Effective 1/1/2014

Employee Voucher

7

8

Key Employer Issues

Applies to new hires

Employees can opt-out

Employer can choose plan for auto enrollment

Effective 1/1/11 or issuance of regulations by DOL, if later

Employers must notify employees at time of hire of the availability of Exchanges and their potential eligibility for a subsidy

Effective 3/1/2013

No requirement to offer same coverage as Exchange plans

Auto Enrollment

OTC drugs no longer reimbursable under FSA, HRA or HSA, unless prescribed by physician


Penalty on withdrawal of HSA funds for non-medical expenses increased to 20%


Annual contributions to health FSAs limited to $2,500 annually


– Indexed to CPI as of 1/1/2014

Health Accounts

Employee Notification

Key Employer Issues

Employers required to report the “value” of health benefits provided to each employee

– Value defined as COBRA cost

Effective 1/1/2011

Same HHS transparency requirements as Exchange based plans

Claims payment policies and data

Information on cost sharing and payment for OON

Information on rating policies

Effective 1/1/2014

W-2 Reporting

Annual distribution of summary of benefits and coverage

– Not to exceed 4 pages

Uniform Explanation is in addition to the SPD required by ERISA

Effective 3/23/2012

Employers with <25 employees earning < $50,000 each are eligible for tax credit

Applies to employer contributions toward cost of health insurance

Available for 2010-13 tax years

Uniform Explanation of Coverage

Transparency RequirementsSmall Employer Tax Credit

9

Key Employer Issues

Employers permitted to increase employee reward for participation in wellness programs to 30% of total plan cost

– HHS may increase to 50%

Effective 1/1/2014


Insured plans are subject to same nondiscrimination rules as self-funded plans

Effective 1/1/2011


Wellness Incentives

Employer plans must have HHS approved external review process

Effective 1/1/2011


Out of pocket expense cannot exceed HSA related coverage

Deductibles cannot exceed $2,000 single & $4,000 family as indexed

Effective 1/1/2014


Appeals Process

Cost Sharing Limitations

Nondiscrimination

10

Key Employer Issues

Voluntary federal LTC insurance program

EEs can purchase via payroll deductions

All auto enrolled EEs can opt-out

Lifetime benefit payments

5-year vesting period

Eligible for benefit if at least 2 ADLs for 90 days

Estimated revenue: $71 billion

Effective 1/1/2011

CLASS Act

11

Other Key Provisions2010 Adoption assistance plan dollar limit

increased from $12,170 to $13,170

Nursing mothers entitled to unpaid breaks and private lactation room

2014 Medicaid expansion to 133% of FPL

Individual Mandate begins with penalties in 2015

State-based Insurance Exchanges are operational

2017 Employer plans of any size can participate in Exchanges (state approval)

2018 High cost excise tax with revised thresholds of $10,200/individual and $27,500/family

12

Other Key Provisions

Adjusted gross income >$200k for individuals and >$250k for couples

Additional Medicare payroll tax on wages of 0.9% (employee-share only)

New surtax on investment income of 3.8%

New taxes on higher income individuals replaces lost revenue from delayed enactment of high cost plan excise tax (estimated $210 billion)

Effective 1/1/2013

New Taxes on High Income Individuals

13

Impact on Post-Retirement Health Plans Taxation of Medicare Part D retiree drug subsidy

Temporary reinsurance program for pre-Medicare retirees (at least age 55)

– Re-insurance for claims covering 80% of costs between $15,000-$90,000 for pre-65 retirees

– Only funded up to $5 billion

Cutbacks to Medicare FFS providers and Medicare Advantage plan funding

Closure of Medicare Part D “donut hole”

14

Timeline for Next Steps

Effective Date Action Items

Applies to Grandfathered

Plans?

Now

If you have 25 or fewer FTEs, work with your Finance Department to evaluate whether you are eligible for the small employer tax credit and if so, apply for credit

If you offer retiree coverage and apply for the Medicare Part D subsidy, work with your Finance Department and auditors to evaluate the current impact on your financial statements under the FASB rules because the Medicare Part D subsidy will effectively become taxable in 2013

6/23/2010 If you offer retiree coverage for retirees ages 55-65 who are not eligible for Medicare, apply for the retiree reinsurance program, work with your Finance Department and obtain claims data from your insurance company/TPA and consider appropriate plan design changes

14



Plans?

1/1/2011 for calendar year plans

Evaluate what plans you are going to offer, and determine whether any plans need to be restructured

• Determine what grandfathered plans you have

• Determine whether you have any dental and vision coverage that you want to convert to “stand-alone” plans so that they are exempt from the new rules on annual and lifetime limits

• Determine whether you have any fully-insured plans that need to be restructured to comply with the nondiscrimination coverage rules, such as executive-only plans

• CLASS Act (voluntary long-term care program)

• New wellness programs (grants available for small employers).

15



Plans?


Amend medical plan documents

• Remove lifetime maximum limits for essential health benefits (and define what those are)

• Revise annual limits for essential health benefits to reflect HHS standards

• Remove pre-existing condition limits for children under age 19

• Limit right to rescind coverage only to fraud or intentional misrepresentation of a material fact

• Expand dependent eligibility to cover adult children up to age 26 (applicable to grandfathered plans only if the dependents are not eligible for coverage under another employment-based plan)

• Remove cost sharing, and implement first-dollar coverage, for preventive care (deductibles, copays, and co-insurance can't apply)

• Permit designation of any participating primary care provider

• Remove restrictions on emergency care

• Update internal and external appeals procedures

16



Plans?


Amend medical plan documents (cont’d)• Any additional design changes that may be

made to offset some of the anticipated increases in costs due to limits on annual and lifetime maximums, removal of pre-existing conditions, etc.

Amend medical FSA plan documents

• Eliminate reimbursement for OTC drugs

• If small employer, consider establishing “Simple” cafeteria plan

Provide notice of changes to participants (by 11/1/2010)

• Give at least 60 days’ advance notice of changes (SMMs or new SPDs)

Negotiate insurance costs or stop-loss coverage, as applicable

• Removal of annual, lifetime, and pre-existing condition limits, and cost sharing, the addition of other restrictions, and expansion of dependent eligibility could create more expense to employers, in terms of premiums for fully-insured plans and stop-loss

17



Plans?


Update contracts with TPAs/claims administrators

• Compliance with new internal and external claims processes

● Determine who will prepare HHS reporting on medical loss ratios

● Determine who will handle transparency disclosures to HHS (and public)

Implement auto enrollment (depending on

effective date)

Work with payroll to implement changes

● Payroll withholding to implement any “Simple” employer cafeteria plan; voluntary CLASS Act plan

● W-2 reporting of employer-provided health coverage

18

Effective DateAction Items


Plans?


Provide required notices to HHS

● Reporting to HHS on medical loss ratios

• Reporting to HHS (and public) to comply with transparency provisions

Apply for available grants for small employer wellness program



• Coordination with Medicare

Provide new required (uniform) plan summaries

Update contracts with TPAs/claims administrators

• Put systems in place to enable quality of care reports to HHS

19



Plans?


Amend Medical FSA plan documents

• Impose cap on contributions

Work with payroll to implement changes

• Medical FSA caps

• Increased Medicare taxes on earned income

Work with Finance

• Taxation of Medicare Part D subsidy

• Payment of per-participant fee (premium tax)

Provide required notices by 3/1/2013 to employees regarding availability of insurance exchanges

20



Plans?


Evaluate what plans you are going to offer

• Small employers have access to state insurance exchanges

• Large employers are subject to play or pay penalties, opt-out penalties, and “free choice” vouchers

• Permitted increase in employee reward to 30% for participation in wellness program


• Grandfathered plans must expand dependent eligibility for adult children, even if eligible for other employer-provided coverage

21



Plans?


Amend medical plan documents (cont’d)

• Remove waiting periods exceeding 90 days

• Remove all annual limits on essential benefits

• Remove all pre-existing conditions (can no longer impose on individuals age 19 and over)

Mandated cost-sharing limits

• Add coverage for clinical trials for cancer or life threatening diseases

• Any additional design changes that may be made to offset some of the anticipated increases in costs due to changes on annual limits, removal of pre-existing conditions, and limits on cost-sharing

Negotiate insurance costs or stop-loss coverage, as applicable

• Removal of annual and pre-existing condition limits, cost sharing and other restrictions, and expansion of dependent eligibility could create more expense to employers, in terms of premiums for fully-insured plan and stop-loss

Reporting to IRS on employer-provided coverage 22



Plans?


Provide required notices regarding employer-provided coverage and wellness programs



• Large employers have access to state insurance exchanges



• Work with Finance and with insurance company or actuarial firm to determine if you offer a "Cadillac" plan subject to penalty tax, or whether you can restructure your plans to minimize or avoid penalty

24

Questions?

Questions will be addressed by emailing:

[email protected].

If we cannot get to your question we will respond via email or by providing

information on the AAHSA Health Reform Hub located on aahsa.org:

http://www.aahsa.org/healthreform

25

Resources

AAHSA Health Reform Information Hubwww.aahsa.org/healthreform

AON Consulting Microsite

www.aon.com/healthcarereform

Venable, LLP

www.venable.com

26

Speaker Contact Information

Barbara Gay, Advocacy, AAHSA(202) [email protected]

Dave Sanders, National Tax & Erisa Practice, AON Consulting

(410) [email protected]

Thora Johnson, Employee Benefits and Executive Compensation, Venable, LLP

(410) 244-7747 [email protected]

27

may 20 aahsa town hall: health reform and employers

Health & Medicine

employees effective

subsidy effective

erisa effective

regulation effective

addition effective

plan enrollees effective

preventative care effective

retiree coverage