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

and your company.

ANEDITORIALMOMENT

Who’s to

Blame?

Insurance Companie

s

Doctors

Lawyers

Agents

Consumers

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 InsuranceGrandfathered 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 Copays up to 15%.• Increase Coinsurance more than 15%.• Decrease employer contributions by

more than 5%.

Grandfathered Plan• Most plans have lost “Grandfather” status.• Those who have retained status 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 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 Groups51 or More Full-Time Employees

Play or Pay

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.

Play or Pay Penalties Beginning in 2014START Does the employer have

at least 50 full-time employees?

NO

NO PENALTY APPLIES

YESDoes the employer offer coverage to all

full-time employees? NO

Did at least one full-time employee receive a premium tax credit or cost-sharing subsidy

through an Exchange?

NO

YES

PENALTY APPLIES$2,000 x

number of full-time

employees minus 30

YESAFFORDABILITY

TESTIs the employee’s required premium

contribution for single coverage for the

employer’s lowest-cost plan 9.5% or less of the employee’s household

income?

NO

EXCHANGE SUBSIDY

Do any employees purchase coverage in

an exchange and receive a premium tax credit or cost-sharing

subsidy?

YES

PENALTY APPLIESLesser of $3,000 x

number of employees receiving

premium tax credits, or $2,000 x

number of employees minus 30

YES NO

NO PENALTY APPLIES

MINIMUM VALUE TEST

Does the employer-sponsored plan provide

minimum value?

YES

NO

Calculating Full-Time Equivalent Employees

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

calendar month = 20 hrs / week x 40 = 3,200 hrs.• 3,200 / 120 = 27 Full-time-equivalent employees.• Total full-time and full-time-equivalent

employees = 57.• Play or Pay penalties apply.

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 spouse’s 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 Groups1 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).

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 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 (and the eventual billing) might look like this on a 3-person group:

John Brown $328.95 EmployeeJoe Smith $358.23 Employee/Spouse/ChildrenJane Smith (wife) $429.29Danny Smith (12) $158.77Jennifer Smith (14) $158.77Joey Smith (22)$253.97Susie Smith (24) $260.09Bobby Jones $598.98 Employee/SpouseAnna 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 underwriting.– Cost-sharing limits (e.g. $2,000 ded).– Essential health benefits.– No 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).

Health Insurance MarketplaceThe Exchange

• 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.– The number of people in the tax household

Federal SubsidiesHousehold 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 $5000 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 area.– Have at least one common-law employee (not owners).– Have 50 or fewer total FTE employees.– Pay a consistent percentage or amount toward the premium (at

least 50%).– Receive tax credit.– An 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 each employee and each dependent.• Reinsurance Tax-$63.00 per year per each employee

and each dependent. Funds large claims in the individual market.

• HIT Tax- $8B divided by premiums collected in prior year 2014. $15B 2015, $18B 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 employees about labor laws.• Award winner announced on November 4.• $14M effort to educate employees.

1099 Independent Contractors • Many employers have said they 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 ContractorYou 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• Guaranteed Issue.• State Exchanges/Federal Exchange.• Modified Community Rating

(Groups 50 or fewer).• 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 calculated 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.

Required Notices

Summary of Benefits and Coverage

SBC• Uniform Explanation of Benefits.– Maximum 4 pages.– Minimum 12 point font.

• Penalty up to $1,000 per affected individual.

Summary of Benefits and CoverageSBC

• Developed 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 15.• Distributed to all employees age 65 and older.• States the company health plan 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 rated plans for all groups under

50.• Avoids community rates.• Avoids PPACA plan designs.

Level Funded Partially Self-Funded

• 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 ContributionEmployer Allowance $300Medical -$250Dental -$25Vision -$10Total -$285Employee +$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 (let the buyer beware).• Select a trusted advisor.

Summary• Document!• Document!• Document!

Websites• DOL.gov• HHS.gov• IRS.gov• Healthcare.gov• CMS.gov-search “minimum value calculator”• EEOC.gov• e2eresources.com

Thank You