Post-Election: What are the Impacts? Ellen Feeney, Vice President, Legal Counsel

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Post-Election: What are the Impacts?Ellen Feeney VP, Legal Counsel


Disclaimer

This presentation is not:

• Legal advice

• The final word on today’s topics

• A political opinion

Before taking any actions on the information containedin this presentation, employers should review thismaterial with internal and/or external counsel.

Before Taking Any Actions


Agenda• ACA Repeal & Replace

• Reconciliation• Administrative Actions• Regular Order Bills

• The American Health CareAct (AHCA)• Changes to tax credits,

health savings accounts,and ACA taxes

• Paid Sick Leave Movement


ACA Repeal and Replace


Health Care ReformWhat is changing? What must employers do to comply?

2010 Affordable Care ActPlan Design ReformsIndividual MandateEmployer MandateEmployer ReportingPremium Tax Credits

Change inParty

2017 Repeal and Repair?Plan Design ReformsIndividual MandateEmployer MandateEmployer ReportingHealth Savings AccountsTax Credits


ACA Repeal & Replace Strategy

• Republicans have said theywill need to take severalsteps to fully repeal andreplace the ACA (“threebuckets”)


Repeal & Replace – Reconciliation• “Bucket One”

– Reconciliation• Mirrors ACA’s passage• Only can address revenue

items through reconciliation– Not a true “repeal”– Address as much

“replacement” as possiblethrough reconciliation

– Timing:• Now• GOP leadership hopes to

complete by early April


Repeal Using Reconciliation

BUDGET PASSAGEThe budget legislation directsfour committees, two in eachchamber, to recommend howrepeal shouldproceed.

COMMITTEES WRITE BILLSOnce the committees havemade their recommendations,the budget committee in eachchamber will draft a repeal bill.

MERGING THEBILLSAfter undergoing the debate and amendment proceess, the twobills will first receive an up-or-down vote in their respectivechambers. Because reconciliation only requires a simple majority ineach chamber, Republicans can afford 23 defections in the Houseand two defections in the Senate. Once both bills pass, they will bemerged and passed again.


Repeal & Replace – Administrative Action• “Bucket Two”

– Administrative/regulatoryactions

• Executive Order• HHS/IRS/DOL regulations

– Administration will attempt to takesteps to stabilize insurance marketthrough this process

– Timing:• As key confirmations in place:

– Tom Price (HHS)– Steven Mnuchin (Treasury)– Seema Verma (CMS)– Alexander Acosta (DOL)


Repeal & Replace – Regular Order• “Bucket Three”

– Regular Order• Requires 60 votes in

Senate• Bi-partisan cooperation

necessary– Only way to address non-

revenue provisions in ACA– Consensus shifting toward

piecemeal replace ratherthan one comprehensivereplacement bill

– Timing:• Later this year?• Never?


American Health Care Act (AHCA)


AHCA Ways & Means Provisions:Replace Subsidies, Repeal Most Taxes

• Employer and individual mandate penalties would be repealed

• ACA subsidies to be replaced with refundable tax creditsbeginning in 2020

• Health savings accounts (HSAs) would be expanded beginningin 2018

• Most of ACA’s taxes and fees would be repealed beginning in2018– 40 percent “Cadillac” tax on high-cost plans delayed until 2025, from 2020


ACA Subsidies Basedon Income, Costs

AHCA Fixed CreditAmount Based on Age

ACA subsidies are based on thefederal poverty level (FPL):

One taxpayer can claim credits forthemselves and four family members,with a $14,000 limit


AHCA Health Care Savings Accounts

RefundableTax

Credit

§ In addition to depositing their ownsavings, individuals can opt tohave any leftover funds fromtheir age-based tax credit sentto the HSA.

§ The plan also makes a host of otherchanges to health savingsaccounts to improve their use,including expanding the size ofallowed contributions and a reductionof the penalty for non-health-relatedwithdrawals.

§ The bill would also allow individualsto pay for over-the-countermedication with their HSA funds.

InsurancePremiums

HealthSavingsAccounts


AHCA Energy & Commerce Provisions:Change Coverage Rules, Provide New Grants• Some health insurance coverage rules would be changed

– “Continuous coverage” requirement replaces the individual mandate– Insurance plan metal tier system would be repealed– Older people could be charged five times as much as younger

people, increased from three times

• “Patient and State Stability Fund” would be created

• Federal funding for Planned Parenthood would be prohibitedfor one year from the bill’s enactment date


AHCA “Continuous Coverage” Requirement

How the “continuous coverage” requirement would work

If coverage is continuously maintained throughcalendar year ... ... the individual can

re-enroll or enrollin a new plan at thestandard price fornextyear.Individuals can freely enroll in

insurance plans for 60 daysfollowing a qualifying life event,such as:§ Loss of existing insurance

coverage§ Marriage or divorce§ Adoption or birth of a child§ Major change in place of

residence or employment

+30%PENALTY

If there is a gap in coverageduring the calendar year lastingat least 63 continuous days ...

... insurers are allowedto impose a 30 percentincrease in premiums forone year.


Actuarial Requirements RepealedEssential Benefits Remain

§ The bill repeals the ACA’s actuarialrequirements — which required insurers toclassify their plans as “bronze,” “silver,” or“gold” depending on the share of healthcosts covered by the plan.

§ Without these requirements in place,insurers are free to offer cheaper planswith higher out-of-pocket costs, similar tothe “catastrophic coverage” plans onlyavailable to younger individuals under theACA.


New Fund to Incentivize States toImprove Costs, Coverage

The AHCA appropriates $15 billion annually for the creation of a “Patient and State StabilityFund” that would be awarded to state programs for any of the purposes below.

Provide financialassistance to

high-risk individuals

Stabilize premiumsin the individual

insurance market

Reducecoverage

costs

Promote insurer participationfor high-risk individuals in

the individual market

Promote access topreventive services

Provide paymentsto providers forcertain services

Reduce out-of-pocketcosts for insurance

enrollees


Other Provisions and Differences FromEarlier Drafts

The AHCA repeals many of thetaxes that funded the ACA, but

does not include a newfunding mechanism that was

included in prior drafts — a capon the tax exemption for

employer-sponsoredinsurance beyond the

90th percentile of currentpremiums, which would have

operated similarly to the ACA’sCadillac tax.

ACA TAXES REPEALED:Tanning tax

Prescription drug tax

Health insurance tax

Net investment income tax

Taxes on employer-based premiums

Over-the-counter medication tax

Medical device excise tax

Medicare tax on unearned income

Additional hospital insurance tax on

high earners


What Remains?• Prohibition on lifetime and

annual dollar limits• Adult child coverage

mandate• Limit on out-of-pocket

maximums• Insured plan income

nondiscrimination standard(to the extent the IRS lifts itsenforcement moratorium,which seems unlikely before2020 at the earliest)

• Required coverage forroutine costs for clinical trials

• ACA reporting standards

• Preventive servicemandate

• Ban on pre-existingcondition exclusions

• Provider nondiscriminationrequirements

• Section 1557nondiscriminationstandards

• Ban on rescissions• Excise tax on high-cost

plans a/k/a Cadillac tax(eligible for repeal throughreconciliation, but retainedin the AHCA)


AHCA Proposed Reporting Standard• Current ACA reporting to continue through 2019

– Reporting obligations (and penalties) would continue inabsence of relief until new tax credit is effective

• Effective 2020 and beyond, “simplified” reportingof an offer of coverage on the Form W-2

• Question remains: How do you do this “simply”?


Best PracticesWhat Does This Mean?

You will continue to hear news about the future of the ACAand about its repeal

Stay focused on meeting key compliance milestones

Continue to closely monitor legislative and regulatorydevelopments

StatusQuo


Best PracticesOutlook / Issues

Some parts of ACA may stay but what survives and what does not isnot clear; employers should comply with existing law

New rules could emerge to determine the value of all health benefits

New systems to report the value of health benefits for eachemployee


Paid Sick Leave Movement


Paid Leave Benefits Are Growing

New paid leave laws being introducedMore large companies extending paid leave policiesMaternity/PaternityAdoptionFertility treatmentsMore paid leave will attract the “sandwich generations”and dual-income familiesFacebook:

Up to 20 days’ bereavement for immediate family, 10 days’ forextended family3 paid family sick days for short-term illness such as a child with fluUp to 6 weeks’ paid family sick days to care for a family member peryear


How Confident Are You That Your WorkforceCompletely Understands Your Benefits?

Source: ADP/HR.com webcast, Employment & Benefits Trends and the New Administration,February 15, 2017, Polling Question Results


State Paid Sick Leave Laws Paid Sick andFamily LeaveChallenges

Laws vary significantlyby jurisdiction:

How is paid leave accrued?Which workers are covered?How can such leave be used?How much notice is required?Are there notice posting ordisclosure requirements?Is there a maximum amount?Does it roll over to subsequentyears?When can it be used?

CACACA

OROROR

VTVTVT

MAMAMA

CTCTCT

WA

AZ

(eff. 1/1/18)

(eff 7/1/17)


Paid Sick Leave – Federal, States, and Local• San Francisco, California (eff. 02/2007, amended eff. 01/2017)

• Seattle, Washington (eff. 09/2012, amended eff. 01/2016)

• Long Beach, California hotel workers, hotels with 100 or more rooms (eff. 11/2012)

• Portland, Oregon (eff. 01/2014)

• New York City (eff. 04/2014)

• Newark, New Jersey (eff. 05/2014)

• Connecticut (amended eff. 01/2015)

• Irvington, New Jersey (eff. 01/2015)

• Passaic, New Jersey (eff. 01/2015)

• East Orange, New Jersey (eff. 01/2015)

• Paterson, New Jersey (eff. 01/2015)

• Trenton, New Jersey (eff. 03/2015)

• Montclair, New Jersey (eff. 03/2015)

• Oakland, California (eff. 03/2015)

• Philadelphia, Pennsylvania (eff. 05/2015)

• Bloomfield, New Jersey (eff. 06/2015)

• California (eff. 01/2015)

• Massachusetts (eff. 07/2015)

• Emeryville, California (eff. 07/2015)

• Eugene, Oregon (eff. 07/2015 – preempted by state law 01/2016)

• Oregon (eff. 01/2016)

• City of New Orleans city contractors and grant recipients (eff. 01/2016)

• Santa Monica, California (02/25/2016)

• Elizabeth, New Jersey (eff. 03/2016)

• Pittsburgh, Pennsylvania (eff. 03/2016; on hold pending legal appeal)

• Los Angeles, California (eff. 07/01/2016)

• San Diego, California (eff. 07/11/2016, amended eff. 09/2016)

• Plainfield, New Jersey (eff. 09/2016)

• Montgomery County, Maryland (eff. 10/2016)

• Federal Contractors (eff. 01/2017)

• Spokane, Washington (eff. 01/2017)

• Morristown, New Jersey (eff. 01/2017)

• Vermont (eff. 01/2017 most employers)

• Arizona (eff. 07/2017)

• Minneapolis, Minnesota (eff. 7/1/2017)

• St. Paul, Minnesota (eff. 07/2017)

• Chicago, Illinois (eff. 07/2017)

• Cook County, Illinois (eff. 07/2017)

• Berkeley, California (eff. 10/2017)

• Washington State (eff. 01/2018)


Paid Sick Leave – Federal Contractors> Minimum of 7 Days for employees of Federal Contractors

> Earn at least one hour for every 30 hours worked

> Must be provided upon oral/written request of employeemade 7 days in advance or soon as practicable

> Employer may only require certification from health careprovider for employee absences of 3 or more consecutive workdays

> Paid sick leave must carry over from one year to next

> Employer may not set a limit of paid sick time accrualof less than 56 hours

> Order does not require payment of unused time upontermination – but may be reinstated upon rehire

ExecutiveOrdereffective

January 1, 2017


Best PracticesOutlook

Understand the leave laws that apply to your business

Create written policies addressing leave entitlements andthe interplay with related laws

Monitor President Trump’s proposal that guarantees sixweeks of paid maternity leave by amending unemploymentinsurance (UI) laws

Monitor the status of paid family leave legislation

Business

Post-Election: What are the Impacts? Ellen Feeney, Vice President, Legal Counsel