Intecare PPACA Webinar 11/20/12

PPACA: What Every Employer Needs to

Know Now. A Comprehensive Guide to

Healthcare Reform

November 20, 2012

© 2012 Proskauer. All Rights Reserved.

Intercare Insurance Solutions • Private & Confidential • CA Insurance Lic #0D80830 • intercaresolutions.com

Today’s Presenters

LINDA KELLER

EVP, Consulting & Account Management

Intercare Insurance Solutions

pg. 2

SHANNON TAYLOR

EVP, Sales, Health & Performance

Intercare Insurance Solutions


PPACA: What Every Employer Needs to Know Now! A Comprehensive Guide to Healthcare Reform

pg. 3


Agenda

Current Law Reminders

New Taxes & Fees

The Individual Mandate

PPACA and the Exchanges

Pay or Play

Strategies

4



Poll

How confident are you in your understanding of the

provisions of the Affordable Care Act?

pg. 5

Current Law Reminders

Questions #2

How many employees at your company?


Medical Loss Ratio Rebates

Rebate < 85% (large groups)

Rebate <80% (small groups or

individuals)

MLR = % of premium revenue spent Claims/Medical Care



Preventive Care Rules

NOW!

August 2012

Initially Immunization

Screenings & preventative care for infants, children & adolescents

Additional care for women

Later expanded by HHS to include all FDA approved contraceptives Intrauterine devices

“Morning-after pill"

Newer forms of long-acting implantable hormonal contraceptives


Summary of Benefits and Coverage

Distributed first open enrollment following September 23, 2012

Not exceed 4 double-sided pages

“Culturally and linguistically appropriate“



Timing - Summary of Benefits and Coverage

Open Enrollment – Before the 1st day on/after September 23, 2013

For participant who enroll other than open enrolment – 1st day of plan year on/after September 23, 2013 SBC must be provided at the following times:

Upon request - no later than 7 days

Within 90 days of enrolling under a HIPAA special enrollment

With open enrollment materials

If the SBC cannot be timely provided because the plan terms have not been finalized, the SBC must be provided within 7 days of finalizing the plan terms


2012 Forms

Small Employer Exception

Entire cost of the coverage

Determined under rules similar to COBRA premiums

W-2 Reporting of Health Costs

$2,500 Health FSA Limit

Effective for plan years beginning in 2013

Limits annual employee contributions to $2,500

Indexed to the CPI starting in 2014

Does not limit employer contributions


Medicare Payroll Tax Increase

0.9% FICA & SECA tax on wages over $200,000

Employer withhold on wages over $200,000

pg. 15

Private & Confidential • TX Insurance Lic #18311 • intercaresolutions.com16

90 Day Requirement

Plan year on or after January 1, 2014

90 days within the 1st day they are eligible

If employees can elect within 90 days but fail to elect within 90 days it is not a violation


Mandates Still Requiring Guidance

NOTICE! Availability of Health Insurance Exchange

Effective March 23, 2013


Non Discrimination Rules

Prohibits discrimination in favor of “highly compensated employees” with respect to eligibility & benefits

Fully-insured plans after release (already apply to self-insured)

Penalty: up to $500,000 Under ACA



Employer Auto Enroll

Employers must automatically enroll all full time eligible employees in the default medical plan

Must provide adequate notice to employees and opportunity to opt out


Taxes & Fees


WhoWhatWhen

How Much

Comparative Effectiveness Research Fee

Annual fee on insured & self-insured plans beginning on/after

10/2/11

HRA/FSA nuances, etc.

Annual fee of $1, then $2 indexed, per

participant until 2019

First payable July 2013Sunset after 2019

Health Insurance Industry Fee

Annual fee on all insured plans beginning

2014

Includes Dental/VisionExcludes ASO

Estimated costs:2 – 2.5% of premium

in 2014

Increasing to 3 – 4% in future years

Reinsurance Assessment

Annual fee on insured & self-insured plans, 2014

– 2016

Excludes Dental/Vision

Estimated costs:

2014 - $60 - $90 PMPY2015 - $40 - $60 PMPY2016 - $25 - $35 PMPY

New Taxes & Fees with Employer Impact

The Individual Mandate

Beginning 2014

Individual Mandate

Individuals must maintain health insurance

24

Those who do not maintain minimum essential coverage, and who are not exempt from the mandate, will be required to pay a penalty for noncompliance



Individual Mandate – Exceptions:

pg. 25

Not lawfully present in the U.S Incarcerated Residing outside of the U.S HHI is less than the federal income tax filing

threshold

Determined by HHS to have suffered a hardship

Health care sharing ministry Members of Indian tribes Bona fide residents of any possession of the

U.S

No penalty imposed without coverage for > 3 months - Only one 3-month period allowed in a year

Individual Mandate Penalty

The penalty for noncompliance is the greater of either:

26

A. percentage of the amount by which HHI exceeds the personal exemption amount ($5,950 in 2012, doubled for joint filers) plus the standard deduction amount ($3,800 in 2012),

• Percentage is 1% in 2014, 2% in 2015, and 2.5% thereafter, or

Individual Mandate Penalty

27

B. A flat dollar amount assessed on each taxpayer and any dependents.• The annual flat dollar amount is phased in—$95 in 2014, $325 in 2015, and $695 in

2016 and beyond (adjusted for inflation)

• Reduced by one-half for children under 18, and

• For families, capped at 300% of the annual flat dollar amount

Penalty cannot exceed national average for bronze exchange plans


Sample Calculation of Individual Penalty

pg. 28

Personal exemption is $5,950 in 2012 (doubled for joint filers)The standard deduction amount is $3,800 in 2012

PPACA and the Exchanges

PPACA & Exchanges

All states to establish an Exchange by January 1, 2014

• The American Health Benefit Exchange

• Small Business Health Options Program (SHOP) Exchange for individuals and small businesses

Types of Exchanges:• State Exchange

• Partnership Exchange

• Federally Facilitated Exchange

30


Will The State Be Ready?

31Source: Kaiser Family Foundation; Accurate as of 11/16/2012

PPACA & Exchanges

Qualified Health Plans:• Certified as qualified by an Exchange;

• Provides the essential health benefits package; and

• Offered by a licensed insurer that agrees to offer at least one “silver” and one “gold” level plan in the Exchange

Essential Health Benefits: Defined by a Benchmark Plan selected by each

State; Benchmark would serve as reference plan to

determine if employers plan meets minimum requirements

32


33

Essential Health Benefits

PPACA & Exchanges

Prior to 2016, small employers are 100 or less but states may limit to 50 employees or less

Prior to 2017, only small employers (100 employees or fewer) can participate

Starting in 2017 and thereafter, states may allow all employers

Initial open enrollment period: October 1, 2013 through March 31, 2014.

For benefit years in 2015 or later, the annual open enrollment period will be from October 15 to December 7

Special enrollment provisions will be included

34


The Metals

Exchanges to Offer Four Levels of Coverage:

35


Pay or Play?


Poll

Will healthcare reform law require all businesses, more

than 50 employees, to provide health insurance?

pg. 37

Employer “Pay-or-Play” Mandate

In 2014, the pay-or-play mandate requires employers of 50 FTE (Full Time Equivalents) or more to offer quality, affordable health insurance coverage to full time employees (those working on average at least 30 hours per week) and their families

Failure to offer such coverage potentially subjects the employer to a tax penalty for a given month if a full time employee receives a federal premium tax credit or cost-sharing reduction and is enrolled in coverage through a health insurance exchange

38



When is an Employer Subject to Pay-or-Play?

FTE employees are determined by taking the sum of the employer’s full time employees (using a 30 hour per week standard) and the number determined by dividing the hours of service of employees who are not full time employees by 120

Employer employs 40 full time employees and 20 part-time employees who each work 60 hours per month.

50 FTE: 40+(20×60÷120)=50

Employer employees 35 full time employees and 20 part-time employees who each work 96 hours per month

51 FTE: 35+(20×96÷120)=51

39


Determining Full Time Employee Status For Purpose of the Pay or Play Tax

Proposed “Look-back/stability period safe harbor” method

The employer selects a 3-12 month “measurement” period to determine which employees averaged at least 30 hours per week

40

Nov 2012

Look-Back

May 2013May

2012© 2012 Proskauer. All Rights Reserved.


What are the Pay-or-Play Penalties?

Employers who “opt out” of providing benefits

Employers who do not provide quality health coverage to all full time employees (and their dependents) are penalized If at least 1 full time employee is eligible for, or

receives, a tax credit and enrolls in exchange coverage, the employer is subject to an annual penalty of $2,000 × all full time employees (except for the first 30) applies

Penalty is assessed monthly (i.e., $167.67 per full time employee per month)

41




Example 1: No full time employee receives a tax credit No penalty assessed

Example 2: One or more full time employees receive a tax credit The annual penalty is calculated by taking the number of full time

employees minus 30, multiplied by $2,000

If there are 50 full time employees, the penalty would not vary if only one employee or all 50 employees received the credit; the employer’s annual penalty would be (50-30) × $2,000, or $40,000

42




Employers who provide “unaffordable” coverage

Coverage is affordable only if the premium for single coverage under the employer’s lowest cost plan with at least a 60% “actuarial value” does not exceed 9.5% of individual W-2 wages

Annual penalty is the lesser of $3,000 for each full time employee who receives a tax credit and enrolls in exchange coverage, or $2,000 multiplied by all full time employees (subtracting first 30) Penalty is assessed monthly (i.e., $250 per

subsidy-receiving full time employee per month)

43




Example 1: No full time employee receives a tax credit

• No penalty assessed

Example 2: One or more full time employees receive a tax credit

For an employer with 50 full time employees, annual penalty is lesser of:

• the number of full time employees minus 30, multiplied by $2,000, or

• the number of full time employees who receive tax credits multiplied by $3,000

Assuming 10 full time employees received tax credits, the potential annual penalty on the employer would be $30,000

However, if the employer had 30 full time employees who received tax credits, then the potential annual penalty on the employer would be capped at $40,000 (20 employees × $2,000) rather than $90,000 as calculated (30 employees × $3,000)

44



Affordability

pg. 45

133%

100%

Contribution as a % of Household Income

Hou

seh

old

In

com

e a

s a

% o

f FP

L

Affordable (Income exceeds 400% of FPL)No Penalty to Employer

Potential Penalty to Employer(Income is 100-400% of FPL and employee contributes more than 9.5% of W-2 wages

State Medicaid Expansion

Medicaid (At or below 100% of Federal Poverty Level)No Penalty to Employer

(100-138%*)

9.5% and above

400%

0%

*Medicaid expansion by State and interpretation


Impact of Medicaid Decision on Employers

Medicaid Expansion Requirements States must cover all individuals under age 65 with income below 133% of

the poverty line

"Essential benefits" must be provided to all Medicaid recipients



Impact of Medicaid Decision on Employers



Premium Credit Eligibility

Must be a part of a tax filing unit

Must be enrolled in a public exchange

Cannot be eligible for Medicare, Medicaid, CHIP, coverage related to military service, an employer-sponsored group health plan, a grandfathered plan, and other coverage recognized by HHS

Employer doesn't have minimal essential coverage

48


Sample Calculation of Credit

a) Federal Poverty Level 200%

b) Family Size 4

c) Maximum Premium $2,778

d) Actual cost of Insurance Plan $5,000

e) (d) minus (c) is tax credit $2,222

pg. 49


What Comes Now?

Evaluate your company culture and align incentives accordingly

Don’t just focus on 2014 – think beyond

Ramp up your communication plan – there’s a lot more to come!

Poll

How likely are you to terminate your medical plan in or

after 2014?pg. 51

Shannon Taylor, EVP of Sales, Health & Performance

Strategies

pg. 53


Financial Impacts of PPACA

pg. 54

As a result, we are focused on solutions in 3 core areas with our clients:

1. Optimized PPACA and benefits strategy

2. Integrated Health & Performance program

3. Active promotion of consumer accountability


Elements of the Perfect Storm P

lan

Cost

Per

En

rollee*

2011 2012 2013 2014 2015 2016 2017 2018 $5,000

$10,000

$15,000

$20,000

The chart is for informational purposes only and is intended as an aid in understanding and analyzing impacts of the changing aspects of current health care regulations and requirements. *Employer Cost per Enrollee for a PPO Plan (2011–2018) Source: Kaiser Family Foundation (premium data)

• PPACA effective

• MLR compliance

• Medical utilization trends slow

The Calm Before the Storm

Kaiser Family Foundation predicts health care costs per enrollee will increase

+26% from 2013–2014


Elements of the Perfect Storm P

lan

Cost

Per

En

rollee*

2011 2012 2013 2014 2015 2016 2017 2018 $5,000

$10,000

$15,000

$20,000

The chart is for informational purposes only and is intended as an aid in understanding and analyzing impacts of the changing aspects of current health care regulations and requirements. *Employer Cost per Enrollee for a PPO Plan (2011–2018) Source: Kaiser Family Foundation (premium data)

• Declining Population Health

• Employer Requirements

• New Industry Taxes & Fees

• Cost Shifting

The Perfect Storm - 2014


Key Questions to Answer - PPACA

1. What is the estimated household income distribution of your employee population?

2. How many employees may qualify for Medicaid or significant premium subsidies in the state or federal exchange?

3. How many employees will elect to enroll in Medicaid or purchase an individual policy in the exchange using a premium subsidy?

4. Will the number of employees and dependents covered change significantly beginning in 2014?

5. What is the actuarial value of your benefit plans in relation to the plans offered in the health insurance exchanges?

6. How does modifying required employee contributions or benefit designs change estimated future plan costs?

7. How will employer penalties, affordability requirements, individual mandate penalties, and premium tax credit percentages change over time?

8. Will any plans be subject to the excise tax on high cost health plans beginning in 2018?

9. What steps can employers take to minimize the financial impact of healthcare reform?

10.How will your plans be impacted if your state(s) do not carry out the Medicaid expansion?

11.Are there other non-financial considerations related to your health plans that make them a valuable employee retention tool?

pg. 57


Navigating The Perfect Storm

pg. 58

Develop a Multi-Year Benefit Strategy

ImprovePopulation Health

Create Better Healthcare Consumers


Develop a Multi-Year Benefit Strategy

Develop a benefits strategy that complies with regulations, minimizes adverse cost impacts by phasing in the right solutions over time and delivers the best return on your investment

pg. 59


Improve Population Health

pg. 60

Implement an integrated health & performance program to mitigate health risks, lower utilization and improve employee health and productivity


Create Better Healthcare Consumers

pg. 61

Create a consumer accountability strategy to increase employee ownership of health expenditure decisions and develop a culture of awareness, appreciation and employee engagement


The Perfect Storm Survival Guide

pg. 62

The information provided in this slide presentation is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the firm, our lawyers or our clients. No client-lawyer relationship between you and the firm is or may be created by your access to or use of this presentation or any information contained on them. Rather, the content is intended as a general overview of the subject matter covered. Proskauer Rose LLP (Proskauer) is not obligated to provide updates on the information presented herein. Those viewing this presentation are encouraged to seek direct counsel on legal questions. © Proskauer Rose LLP. All Rights Reserved.

Q & A


Documents

Intecare PPACA Webinar 11/20/12