Patient Protection and Affordable Care Act (PPACA)

Patient Protection and AffordableCare Act (PPACA)

The information contained in this presentation has been collected from multiple documents and presentations. It is not intended to contain any legal advise. Please consult with you legal advisors for specific information that may apply to you and your company.

Editorial Moment

Who is at fault?

Consumer

Insurance

Companies

Doctors

Agents

Lawyers

The Law

The President signed the health care legislation into law on March 23, 2010.

The regulations defining the law are being written by HHS, DOL and IRS.

IRS & OSHA have monitoring responsibility

CMS has responsibility for most of the implementation, including that of the Marketplace

You can keep your insurance

Grandfathered Plans

Grandfathered PlanBenefits of Retaining Status

◦Exemption from rating restrictions based on age variation

◦Ability to continue coverage based on class

◦Exemption from implementing Essential Health Benefits (e.g. pediatric dental)

A Grandfathered Plan

Increase Deductible up to 15%

Increase Co pays up to 15%

Increase Co insurance more than 15%

Decrease employer contributions by more than 5%

Grandfathered Plan

Most plans have lost Grandfather status. Those who have retained status must:

◦Plans must provide a statement to participant that it believes it is a “grandfathered” plan

◦Do you have your documents?

Dependents Coverage

Age 26

•Coverage for children must be available until the child reaches age 26

Do you have proof of the notice to employees? (Penalty up to $100 per day)

Minimum Loss RatioMLR

Minimum Loss Ratio MLR (2011)

The MLR is 85% for large group plans and 80% for individual and small group plans (50 and below).

Carriers will have to issue a premium rebate to individuals for plans that fail to meet the minimum MLR requirements.   

Large Groups

51 or More Full Time Employees

Play or Pay

Play or Pay 2015

Employer Responsibility

Effective starting January 1, 2015

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

No 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, then

Employer penalty = $2,000 for each of its full-time employees in the workforce◦This penalty is non-deductible◦Penalty does not offset the cost of employee coverage

Calculating Full Time Equivalent Employees

Total number of full time employees = 30Part time employees = 40Total hours worked by each part time employees in a

calendar month = 20 hrs / week X 40 = 3,200 hrs3,200 / 120 = 27 Part time equivalent employeesTotal full time and full time equivalent employees =

57Play or Pay penalties apply

Affordable 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

Affordable Coverage

◦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• If the employer has many employees in this

category, the alternative penalty reverts to $2,000 per FT employee

Affordable Coverage Example

Employee hourly wage $9.50 per hour

$9.50 X 40 hours = $380.00

$380 X 9.5% = $36.10 per week

Employee cost of health insurance $156.43

Tracking Time

Start tracking part time hours now

Start tracking full time hours now

Learn about the safe harbor for seasonal employees

Miscellaneous Requirements

If employee is covered by spouses plan there is no penalty to employer unless 50+ and employer does not provide coverage or provides unaffordable coverage.

Employers are not required to cover spouses. Definition of a dependent does not include the spouse

Small Groups

1 to 50 Full Time Employees

PPACA “Metal” Plans

BronzeSilver

GoldPlatinum

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

60%70%

80%90%

Minimum Value Standards

Minimum value - actuarial value threshold of 60%

Small group plans in the bronze level of coverage meet minimum value requirements.

Beginning in 2014, summaries of benefits and coverage must indicate whether the plan meets applicable minimum value requirements

Minimum Essential Coverage

The type of coverage an individual needs to have to meet the individual responsibility requirement◦Individual market policies◦Job-based coverage◦Medicare, Medicaid, CHIP, TRICARE

The law does not specify the details of what this coverage has to be, other than it has to cover preventive care with no cost-sharing and can’t be dental-only or vision-only (limited benefit)

User Inputs for Plan ParametersUse Integrated Medical and Drug Deductible?

Apply Inpatient Copay per Day? HSA/HRA Employer Contribution? Blended Network/POS Plan?Apply Skilled Nursing Facility Copay per Day?

Use Separate OOP Maximum for Medical and Drug Spending?Grandfathered Plan?

Medical Drug Combined Medical Drug CombinedDeductible ($)

Coinsurance (%, Insurer's Cost Share)OOP Maximum ($)

OOP Maximum if Separate ($)

Click Here for Important Instructions

Type of BenefitSubject to

Deductible?Subject to

Coinsurance?Coinsurance, if

differentCopay, if separate

Subject to Deductible?

Subject to Coinsurance?

Coinsurance, if different

Copay, if separate

Tier 1

MedicalEmergency Room ServicesAll Inpatient Hospital Services (inc. MHSA)Primary Care Visit to Treat an Injury or Illness (exc. Well Baby, Preventive, and X-rays)Specialist VisitMental/Behavioral Health and Substance Abuse Disorder Outpatient ServicesImaging (CT/PET Scans, MRIs)Rehabilitative Speech Therapy

Rehabilitative Occupational and Rehabilitative Physical Therapy

Preventive Care/Screening/Immunization 100% $0.00 100% $0.00Laboratory Outpatient and Professional ServicesX-rays and Diagnostic ImagingSkilled Nursing Facility

Outpatient Facility Fee (e.g., Ambulatory Surgery Center)

Outpatient Surgery Physician/Surgical ServicesDrugs

GenericsPreferred Brand DrugsNon-Preferred Brand DrugsSpecialty High-Cost DrugsOptions for Additional Benefit Design Limits:

Set a Maximum on Specialty Rx Coinsurance Payments?Specialty Rx Coinsurance Maximum:

Set a Maximum Number of Days for Charging an IP Copay?# Days (1-10):

Begin Primary Care Cost-Sharing After a Set Number of Visits?# Visits (1-10):

Begin Primary Care Deductible/Coinsurance After a Set Number of Copays?

# Copays (1-10):Output

Status/Error Messages:Minimum Value:

Service Not Covered?

HSA/HRA Options Narrow Network Options

Annual Contribution Amount:2nd Tier Utilization:1st Tier Utilization:

Tier 1 Plan Benefit Design Tier 2 Plan Benefit Design

Tier 1 Tier 2

Calculate

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Minimum Value Calculator

Essential Health Benefits

The 10 categories of benefits individual and small employer plans have to provide:

◦Outpatient care◦Emergency room◦Treatment in the hospital◦Maternity◦Mental health and substance use disorder services◦Prescription drugs◦Rehabilitative and habilitative services.◦Lab tests◦Preventive services◦Pediatric dental and vision

Age Rated Plan Small Group

Censuses must provide every dependent’s date of birth and the quotes will be lined out with a rate for each belly button.  So a quote might look like this on a 3-person group:

John Brown $328.95 Employee Joe Smith     $358.23 Employee/Spouse/Children Jane Smith (wife) $429.29 Danny Smith (12) $158.77 Jennifer Smith (14) $167.23 Joey Smith (22) $253.97 Susie Smith (24) $260.09 Bobby Jones $598.98 Employee/Spouse Anna Jones (wife) $555.23

Health Insurance Marketplace(The Exchange)

Community Rating

Primary component of the law affected by

Age band limitations (7:1 goes to 3:1)No health underwritingCost-sharing limits (e.g. $2,000 ded)Essential health benefitsNo pre-existing conditions

Health Insurance MarketplaceThe Exchange

Smaller provider networks

Smaller hospital network

No out of network benefits on some plans

Gatekeeper plans (no open access)

Federal subsidies only available through the Exchange are based on:

◦The premium cost of the second-lowest silver Exchange plan

◦The household income of the applicant

Health Insurance Market PlaceThe Exchange

Federal Subsidies

Household Income Level (% above FPL)

Maximum Premium as Percentage of Income

Less than 133% 2.0%

At least 133% but less than 150% 3.0% - 4.0%

At least 150% but less than 200% 4.0% - 6.3%

At least 200% but less than 250% 6.3% - 8.05%

At least 250% but less than 300% 8.05% - 9.5%

At least 300% but less than 400% 9.5%

2013 Federal Poverty Level

Persons in Family

100% FPL 133% FPL 250% FPL 400% FPL

1 $11,490 $15,282 $28,725 $45,960

2 $15,510 $20,628 $38,775 $62,040

3 $19,530 $25,975 $48,825 $78,120

4 $23,550 $31,322 $58,875 $94,200

5 $27,570 $36,668 $68,925 $110,280

6 $31,590 $42,015 $78,975 $126,360

7 $35,610 $47,361 $89,025 $142,440

8 $39,630 $52,708 $99,075 $158,520

Individual Mandate Penalties

For individuals (whichever is greater)

2014    $95 or 1% of income above tax filing threshold ($9,500 in 2011)

2015    $325 or 2% of income above tax filing threshold

2016    $695 or 2.5% of income above tax filing threshold Note: Penalty for dependents under age 18 is one half of the individual amount.

For families (whichever is greater)

2014    $285 or 1% of income above tax filing threshold

2015    $975 or 2% of income above tax filing threshold

2016    $2085 or 2.5% of income above tax filing threshold

Community Rating

Real Life Examples

Family of three – 63 male, 59 female, 18 son◦Current $2500 deductible plan $819.32◦2014 $2500 deductible plan $1,397.29

Family of four – 49 male, 50 female, 14 son, 12 daughter◦Current $5,000 deductible plan $423.93◦2014 $2500 deductible plan $965.51

Small Business Marketplace (SHOP)

For a small business to qualify to purchase coverage on a SHOP they must:

Be in a SHOP service areaHave at least one common law employee (not owners)Have 50 or fewer total FTE employeesPay a consistent percentage or amount toward the premium

(at least 50%)Receive tax creditAn employer can use a defined contribution to pay for an

employee to purchase individual coverage only if that coverage is purchased through a SHOP plan.

Planning is Essential

Increasing Premiums 3% to 4%

Taxes

PCORI Tax-$2.00 per covered individual-Self Admin HRA, per employee (belly button tax)

Re insurance Tax-$63.00 per year (belly button tax) Funds large claims in the individual marker

HIT Tax- $8 B divided by premiums collected in prior year 2014. $15 B 2015, $18 B 2016- Paid by insurers to help fund health care reform

All are pass through taxes

January 1, 2013

Medicare Tax increase for high income earners an additional 0.9 to employees earning over $200,000 ($250,000 joint filers).

Miscellaneous Requirements

Government Initiative

DOL ran a contest for the best software to inform employee about their labor laws.

Award winner on November 4

$14 M effort to educate employees

1099 Independent Contractors

Many employers have said the will move employees to 1099 status.

The IRS is on to this and will be conducting audits.

An employee can contact IRS and ask about their status and you could receive an audit notice.

Engage an independent contractor for a year or more.

Be very careful with this!!!!!!!

Independent Contractor

You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

January 1, 2014

Guarantee Issue

State Exchanges/Federal Exchange

Modified Community Rating (Groups 50 or less)

Redefines Small Group at 1-100 in 2016

Employer Mandate

Waiting Periods 90 Days Max.

Miscellaneous Requirements

Full Time Employee for health insurance purposes-30 hours per week

There is no requirement to pay the health insurance for part time employees

W-2 Reporting

Employers who issue 250, or more W-2s are required to list the value of the health insurance on the W-2.

Reporting

Employers will report employees and the hours worked each month. 2015

Exempt employees can be calculates at 8 hours per day, 40 hours per week, or actual hours worked.

Form 1095-C

Information must also be provided to each employee

Flexible Spending AccountsFSA

Flexible Spending Accounts (FSA)-Over the counter drugs are not eligible. $2,500 cap

RequiredNotices

Summary of Benefits and CoverageSBC

Uniform Explanation of Benefits◦Maximum 4 pages◦Minimum 12 point font

Penalty up to $1,000 per affected individual.

SBCDeveloped and

provided by the insurance company

Delivered during Open Enrollment

At a Qualifying Event

60 days prior to a plan change during the plan year

When an employee qualifies for coverage during the plan year

Upon request

Health Insurance Marketplace(Exchange) Notice

Employee Notice Requirement

Employers must issue a notice to employees about the Health Insurance Marketplace (Exchanges) availability and premium assistance by October 1, 2014.

No penalty

Medicare Creditable Coverage Notice

Distributed by October 15th

Distributed to all employees age 65 and older

States the company health pan has drug coverage equal to or better than Medicare Part “D”

Online verification to CMS within 60 days of renewal

Health Reimbursement Arrangement (HRA)

No stand alone, except for retirees

Possible Strategies

Will employers drop coverage to save cost?

Some will and force their employees to the Exchange.

In some cases, the penalties are lower than the cost of coverage, but what about the soft cost of competition?

Early Renewals

Keeps current plan design in place until December 1, 2014

Avoids age rates plans for all groups under 50

Avoids community rates

Avoids PPACA plan designs

Level Funded Partially Self Funding

Employer liability limited to the monthly premiums

Monthly claims reports

If plan develops a surplus the employer can receive a refund

If plan runs in a deficit, no deficit recovery

Defined Contribution

Places the insurance buying decision in the hands of the employee.

Must still comply with affordability.

Wide range of options for the employee.

Must be equal to all

Defined Contribution

Employer Allowance $300

Medical $250

Dental $25

Vision $10

Total $285

Employee $15

Summary

You will be exposed to every concept you can imagine.

Some old concepts, some new

Some will survive, and some will cause the employer bigger problems

caveat emptor (May the buyer beware)

Select a trusted advisor

Document

Document

Document

Document

Websites

DOL.gov

HHS.gov

IRS.gov

Healthcare.gov

CMS.gov-search “minimum value calculator”

EEOC.gov

e2eresources.com

Thank You