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Care Bears and the Land of Care Bears and the Land of Health Care ReformHealth Care Reform
(or)(or)Federal Health Care Federal Health Care Reform: What’s NextReform: What’s NextPresented by:Amy B. Donovan, Esq.Assistant General CounselKeenan & Associates
Care Bears
Health Care Reform
Introduction
Six most important aspects of Health Care Reform:
1.Compliance 2.The new definition of “Full-Time Employee”3.The California Health Benefit Exchange4.The requirements for providing employees
“affordable” health coverage of “minimum value” in 2014 and the Cadillac tax in 2018
5.Grandfathering6.Wellness/VBIC/Preventive Services Mandate
Supreme Court Decision Recap Compliance 2012 – 2014 2014 and Group Insurance California Legislation California Health Benefits Exchange Wrap-Up
Agenda
Individual mandate constitutional under taxing power
Medicaid expansion unconstitutional insofar as it would take away all Medicaid funds for failure to implement expansion
Severance
Supreme Court Decision
Compliance for 2012 – Compliance for 2012 – 20142014
$1.25 million overall aggregate annual dollar limit on Essential Health Benefits
Claims and Appeals for Non-Grandfathered Plans
Medical Loss Ratio Rebates Preventive Care Services for Women Summary of Benefits and Coverage (“SBC”) Plan Audits (Grandfathering)
ACA Compliance 2012
$1.25 million overall aggregate annual dollar limit on Essential Health Benefits• Plan must be amended to state this limit
effective first day of plan year in 2012• Interpretation of the meaning of “overall
aggregate annual dollar limit” varies greatly
2012– Annual Limits on EHB
Applies to Non-Grandfathered Plans New right for participants to request an
independent external review Only for claims involving medical decision or
rescission Plan Sponsors must have contracts with
three Independent Review Organizations Fuller disclosures required in explanations of
benefits (EOB), availability of non-English EOBs, language services and appeals rights
2012– Claims and Appeals
Fully-insured plans must spend 85% of their premiums for claims, clinical services and quality improvement
Notification by Issuer and payment, if any, by August 1, 2012
Non-ERISA Plans can be allocated according to contribution rate
2012– Medical Loss Ratio Rebates
Details on preventive care services for women issued last year• Plan years on or after August 1, 2012• Well-woman visits, gestational diabetes
screening, HPV testing, STD counseling, HIV counseling and screening, breastfeeding support, supplies and counseling, screening and counseling for interpersonal and domestic violence
• Controversy with Church Plans will be resolved in the courts
2012– Preventive Care
Summary of Benefits and Coverage • Effective for open enrollments and plan years
beginning on or after September 23, 2012• Applies to every group health plan (excluding
excepted benefits such as dental and vision)• Must be provided to eligible employees and
family members• Must be provided in a culturally and
linguistically appropriate manner• Electronic delivery permitted but paper copy
must be made available free of charge• Carve out plans have special challenges
2012– Summary of Benefits and Coverage and Related Documents
Uniform Glossary• Same model document for everyone• Found at DOL and HHS websites• Employer may post on its intranet but inform
employees by a paper copy available free of charge
60-Day notice of material change to SBC• Any change to a plan during the plan year that
would cause a change to the SBC requires 60 days advance notice before change becomes effective
2012– Summary of Benefits and Coverage and Related Documents
The Department of Labor has begun conducting audits of plans to check on compliance with the grandfather rules• Auditing GF plans to ensure they are indeed
grandfathered and have provided proper notice• Auditing NGF plans to ensure they complied with
NGF rules timely Have an audit file ready to go
• Plan document as of March 23, 2010 and amendments
• Communications to employees about rates• Proof of plan design changes
2012– Plan Audits for Grandfathering
Definition of Essential Health Benefits $2 million overall aggregate annual dollar
limit on Essential Health Benefits $2,500 contribution cap to Health Flexible
Spending Arrangements (“Health FSA”) Report value of health coverage on IRS
2012 Form W-2 Notice of Exchange Clinical Effectiveness Research Fee for
2012
ACA Compliance 2013
California AB 1453/SB 951 designate ACA requirements + Kaiser small group HMO 30 as of 1Q 2012
Self-insured plans and fully-insured large group health plans will not be required to offer Essential Health Benefits, but definition does apply to: • Lifetime limits• Annual limits
Sponsors may continue to use good faith effort to define what is, and what is not, an Essential Health Benefit until guidance is issued
2013– Definition of Essential Health Benefits
$2 million overall aggregate annual dollar limit on Essential Health Benefits• Effective for Plan Years beginning before
January 1, 2014• Plan Amendment required• Review your definition of Essential Health
Benefit• Consider converting dollar limits to visit
limits
2013– Annual Dollar Limit Floor Rises
$2,500 salary reduction cap to Health FSAs• Effective for plan years beginning on or after
January 1, 2013• $2,500 limit applied on an employee-by-
employee basis• Plan amendment required but no later than
December 31, 2014 retroactive to 2013 provided that the plan is operated in compliance for the 2013 Plan Year
2013– Health FSA Cap
Report value of 2012 health coverage by January 31, 2013• Includes employer and employee portion of:
▫ Major medical and Rx; wellness, EAP and on-site medical clinics if COBRA; employer contribution to Health FSA
▫ Pre-tax payments for voluntary benefits, or if paid by employer (e.g. cancer insurance)
• Use unsubsidized COBRA rate to calculate value (minus administrative fee)
Issues to address:• Reporting on employees who leave mid-year• Off-month payroll cycle – final payroll• Information obtained after the close of the plan year• Non-calendar year plans• Mid-month changes
2013– W-2 Reporting
Plan Sponsor must deliver to employees no later than March 31, 2013
Anticipate a model form for 2013 Informs employees of availability of health
coverage on the Exchange Advises of the potential for government
subsidies and reduced cost-sharing Advises of penalties for failure to have
Minimum Essential Coverage California AB 792– requires court and health
plan notice of Exchange, but does not address employer notice requirement
2013– Notice of Exchange
Supports federally mandated research on best practices for most effective treatments• $1.00/covered life for the 2012 Plan Year• $2.00/covered life for each year thereafter to
2019• Sponsor liability for self-insured plans• Insurance carrier liability for fully-insured plans• Annual Tax Return and payment
▫ Payment due no later than July 31 ▫ TPA is prohibited from submitting on sponsor
behalf
2013– Clinical Effectiveness Research
Plans must offer coverage for all children to age 26 regardless of their eligibility for other coverage
No overall aggregate annual dollar limits on Essential Health Benefits
No preexisting condition exclusions regardless of age
Eligibility waiting periods limited to no more than 90 days
Non-grandfathered plans must cover routine services for clinical trials
Exchange Reinsurance Program Fee imposed on plans
Employer reporting to Exchange
ACA Compliance 2014
Plans must offer coverage for all children to age 26 regardless of their eligibility for other coverage• Covered under any parent plan• Covered under their employer’s plan• Covered under their spouse’s plan• Coordination of Benefits challenges• Mid-Year Enrollment Rights
2014– Dependent Coverage to age 26
No overall aggregate annual dollar limits on Essential Health Benefits• Revisit definition of Essential Health Benefits• Take advantage of visit limits as compared to
dollar limits• No need to offer Essential Health Benefits
No preexisting condition exclusions regardless of age• Certificate of Creditable Coverage
2014– No Annual Dollar Limits
Eligibility waiting periods limited to no more than 90 days• If eligibility is based on time-served only• 90-day period starts when all other requirements
satisfied. For example, promotion to new classification
• Check collective bargaining agreements for probationary periods longer than 90 days
• Check collective bargaining agreement for work rules for full-time employees – may need to re-define FTE
• Part-Time employees may have a different rule
2014– Limits on Waiting Periods
Non-grandfathered plans must cover routine services for clinical trials• Cannot prevent participation in a Clinical Trial
if (1) recommended by participant’s physician; or (2) participant makes the case that he/she satisfies the eligibility requirements for the Clinical Trial
• Must cover all routine costs of Clinical Trial that are covered under group health plan (e.g. blood draw)
2014– Coverage for Clinical Trials
Exchange Reinsurance Program Fee imposed on plans• Paid by the carrier or TPA • To U.S. Department of Health and Human
Services• Additional amounts may be required of the
California Health Benefit Exchange• Carrier/TPA reports to HHS• Amount has not yet been determined
2014– Exchange Reinsurance Program Fee
2014 and Group 2014 and Group InsuranceInsurance
Individual Mandate HBEX health plans become effective• Exchange coverage issued on a guaranteed issue
basis with no medical underwriting• Premium subsidies and cost sharing reductions for
low-paid individuals who purchase Exchange coverage
New definition of full-time employee Tax penalties for employers who for full-time
employees:• Provide no coverage,• Provide unaffordable coverage, or• Provide coverage that provides less than minimum
value
What Else Happens in 2014?
Works, on average, 30 hours per week• May use hourly equivalents for salaried
individuals• FTE under ACA is only for group health
coverage▫ Doesn’t affect other work rules or overtime
• Month-by-month calculation▫ Part-time employee in one month may be a
full-time employee in another month▫ FTE Look-Back/Stability Safe-Harbor
New Definition of Full-time Employee
Why is this important?• Employers are encouraged to provide affordable
medical coverage of minimum value to FTEs• Employer tax penalties are based on a number of
FTEs▫ $2000 x number of FTEs (after the first 30) for
failing to offer coverage▫ $3000 x number of FTEs offered coverage who
instead gets a premium credit to purchase on the Exchange
• Certain Lower-Paid FTEs are eligible for government subsidies (triggering employer tax penalties for employers with at least 50 FTEs)
New Definition of Full-time Employee
“Unaffordable” is based on the cost of the employer’s lowest cost single only coverage as a percentage of an employee’s household income• More than 9.5% is “unaffordable”• How is an employer to estimate an
employee’s household income?
Employer Tax Penalties
Realign workforce using ACA definition of FTE Articulate a benefits philosophy (i.e. what are
you trying to accomplish with your health benefits?)
Begin preliminary workforce analysis using ACA definition of FTE
Estimate potential tax exposure, if any Continual realignment of workforce benefits to
benefits philosophy to FTE workforce Consider realignment of workforce benefits to
benefits philosophy to PTE workforce
2014– Group Insurance Strategy
Employer cost of medical coverage for the low-paid FTEs may be significantly greater than the tax penalty
Employee cost of medical coverage on the Exchange may be significantly less than employer coverage when subsidies are available
Decision: eliminate the possibility of government subsidies (and employer tax penalties); embrace them; ignore them; or something else? Depends upon your benefits philosophy, collective bargaining
2014– Group Insurance Strategy
Evaluate impact of the Exchange • Could it change employee behavior?• Employment practices (e.g. cash-in-lieu)
relative to the Exchange• What behaviors do you want to
promote/discourage?• Does the Exchange present an opportunity?• Would it impact retention of different types of
employee?• Would employees near Medicare retirement
age leave the workforce?
2014– Group Insurance Strategy
Definition of FTE and PTE in CBA/MOU Probationary periods/Waiting periods Coverage for Part-Time Employees Opportunities for subsidy-eligible employees Medicare retirees Early retirees
2014– Collective Bargaining
California LegislationCalifornia Legislation
2012 Legislation Impacting Group Health Plans AB 1083
Rewrites CA small group rules to be consistent with ACA provisions
AB 1761 Requires a formal agreement for producer to hold
themselves out as selling coverage on the Exchange SB 1431
Would have impacted stop-loss for self-funded small groups AB 340
Impact on retiree health plans
2013 special session
California Health California Health Benefits ExchangeBenefits Exchange
CA first state in nation to have stand alone law RFPS being issued constantly Fully funded through 2015 – then must be self
supporting through fees and revenue Likely to become largest state agency Rolling fast to open enrollment by August
2013
California Health Benefit Exchange
Premium Aggregation Individual Exchange Agent Payment Looming decisions• SHOP Policies• QHP and Benefit Design Policies• Service Center Options
September HBEX Meeting
Health Plan Solicitation – Finally! Consumer Assistance/Ombudsman Outreach and Education Grant Program Criteria Exchange Blueprint• 1. SHOP Organizational Structure• 2. Stakeholder Consultation Plan• 3. Exchange Name and Branding
October Meeting
Keenan & Associates is an insurance brokerage and consulting firm. It is not a law firm or an accounting firm. We do not give legal advice or tax advice and neither this presentation, the answers provided during the Question and Answer period, nor the documents accompanying this presentation constitutes or should be construed as legal or tax advice. You are advised to follow up with your own legal counsel and/or tax advisor to discuss how this information affects you.
Thank You . . .