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The Affordable Care Act (ACA) What Now?

The Affordable Care Act (ACA) What Now?. Agenda Review Supreme Court decision Take a look back at the Act timelines What’s been implemented? What’s

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Page 1: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

The Affordable Care Act (ACA)What Now?

Page 2: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Agenda

Review Supreme Court decision Take a look back at the Act timelines What’s been implemented? What’s been repealed, suspended, delayed? What’s ahead? State exchanges The pay-or-play penalties

Page 3: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Supreme Court Decision

National Federation of Independent Business vs. Sebelius, Secretary of Health and Human Services

Arguments heard March 26-28, 2012 Decision announced June 28, 2012 Court held the individual mandate was constitutional

– Rejected the Commerce Clause argument

– Ruled mandate is constitutional under Congressionalpower to tax

Obligation of states to expand Medicaid eligibility or risk loss of all Medicaid funds was found unconstitutional

Page 4: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

A Look Back

Patient Protection and Affordable Care Act signed March 23, 2010

Amended March 30, 2010 by the Health Care And Education Reconciliation Act of 2010

Many provisions went into affect October 1, 2010, or at the following plan year renewal

Page 5: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

What’s Been Implemented?

2010 Small business tax credits offered (up to 35%) for qualified businesses

offering health insurance – most employers not eligible Early retiree reinsurance program provides $5B to subsidize 80% of costs

between $15K and $90K (indexed). Terminates December 31, 2013 or when funds are exhausted

10% tax imposed on tanning salons

2011 Over-the-counter drugs lost pre-tax status for FSA/HRA/HSA (unless

prescribed) Ineligible HSA distributions subject to a 20% (from 10%) excise tax $2.5 billion in new fees on pharmaceutical companies

Page 6: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Coverage mandates for all plans– Dependents can stay on parents’ plan up to age 26

– Elimination of pre-existing condition exclusion for children under age 19 (no pre-x for any age in 2014)

– No lifetime or annual limits on “essential health benefits”

What’s Been Implemented?

Page 7: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Grandfathered plans are exempt

No cost-sharing on preventive services (women’s preventive services expand Aug. 1)

Elimination of prior authorization for ER services. Out-of-network benefits cannot differ from in-network benefits for ER services

New internal and external appeals procedures must be defined

7

What’s Been Implemented?

Page 8: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Grandfathered plans are exempt

Choice of pediatrician as child’s primary care provider

No preauthorization for gynecological care

Can’t establish eligibility rules that favor highly compensated employees (on hold until further guidance)

What’s Been Implemented?

Page 9: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

What’s Been Repealed, Suspended, Delayed?

Delayed requirement preventing non-grandfathered plans from discriminating in favor of highly compensated individuals (December 2010)

Employers who issued fewer than 250 Form W-2s could delay reporting value of employee benefits on Form W-2 due until Jan. 31, 2014 (March 2011)

Employers not made to issue Form 1099 to any vendor where goods and services for the year exceeded $600 (April 2011)

Page 10: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Free-choice voucher repealed which would have allowed qualified employees to opt out of employer’s plan and use an employer-paid voucher to purchase insurance on the exchange (April 2011)

Implementation of long-term care entitlement program (CLASS Act) was suspended (Sept 2011)

Auto enrollment for groups of 200+ (Delayed until 2015)

What’s Been Repealed, Suspended, Delayed?

Page 11: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

What’s Ahead?

2012 Carriers must issue Medical Loss Ratio rebates to individual and

group plans by Aug. 1. Plans that do not meet the MLR (85% and 80%) are entitled to a rebate

– Most groups should not expect rebates

– Rebates will likely be issued to employer in the form of check or reduction in current year premium. (Individual plan participants will receive check)

– Rebate is to be shared proportionately based on employer contribution formula

– There could be tax implications if premiums were paid pre-tax. Bukaty Companies will advise groups on how to manage MLR

Page 12: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2012

Expansion of women’s preventive health services (First plan renewal after Aug 1, 2012)

– Religious organizations can apply for an exemption to cover contraceptive services

– One-year exemption for church-affiliated plans

What’s Ahead?

Page 13: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2012

Summary of Benefits & Coverage (SBC) required to all plan participants and beneficiaries following Sept 23, 2012– 4-page summary of plan benefits

– Carriers will prepare for fully insured groups

– Self-insured groups work with Bukaty Companies and TPA

– Must still issue the Summary Plan Description

What’s Ahead?

Page 14: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2013

FSA deduction limit set at $2,500 beginning Jan. 1

Small group employers (fewer than 250 employees) must prepare to report value of health care benefits on 2013 Form W-2s (Affects forms issued Jan 31, 2014)

Employers are required to provide notice to employees informing them of their options on an exchange (March 2013)

What’s Ahead?

Page 15: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2013

Comparative Effectiveness Fee goes into effect for plans ending on or before October 1, 2012. Fee payable by July 31, 2013. (Collected through 2019)

– $1-per-participant fee (assessed on all members of plan)

– Fees assessed against carrier for fully insured groups. Carriers will likely collect via increased premium or tax

– Self-funded plans report fee on excise tax Form 720 HRA is considered a self-funded plan

What’s Ahead?

Page 16: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2013 Increase employee portion of Medicare tax from 1.45%

to 2.35% on individual earnings over $200,000 ($250,000 for married couples)

A new 3.8% Medicare contribution tax on unearned income for highly income individuals (dividends/interest)

Tax deduction eliminated for employers who receive Medicare Part D retiree drug subsidy payments

Excise tax of 2.4% on the sale of certain taxable medical devices

Itemized medical deduction threshold increased from 7.5% to 10% of AGI

What’s Ahead?

Page 17: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014 Waiting periods for group health insurance cannot

exceed 90 days

Wellness differential allowed to increase to 30%

Self-insured plans and insurers must file an information return with the IRS identifying plan participants, coverage options and any other information requested by the Sec. of Treasury

What’s Ahead?

Page 18: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014

Employers with 50+ FTEs must file an annual report with the IRS disclosing waiting periods, cost of plan options, employers’ share of benefit costs, number of employees on plan

Medicaid eligibility expands to 133% of federal poverty level

$8 billion in new fees assessed against health insurance companies, increasing in future years

What’s Ahead?

Page 19: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014

No pre-existing condition exclusions for any age Guaranteed issue coverage Underwriting restricted in small group and individual

market to age (3:1), geographic rating, family status, tobacco use (1.5:1)

What’s Ahead?

Page 20: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014

Individual mandate requires U.S. citizens and legal residents to have qualifying health coverage of face tax penalty

2014: $95 or 1.0% of taxable income

2015: $325 or 2.0% of taxable income

2016: $695 or 2.5% of taxable income

What’s Ahead?

Page 21: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014 State Health Insurance Exchanges must be ready for

2014 plan year (open enrollment begins Oct. 2013)

Exchanges will serve small businesses up to 100 employees. States can limit pool to businesses up to 50 employees. Act allows for all businesses to have access to exchanges by 2017

What’s Ahead?

Page 22: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014

State Health Insurance Exchanges activity:– 16 states have indicated that they intend to or have

already passed health exchange legislation– 3 states announced they will not pass legislation– 14 states no significant activity (KS & MO)– 17 states are studying options– If states don’t implement an exchange the federal

exchange will be implementedState updates as of June 18, 2012

What’s Ahead?

Page 23: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014

Separate exchanges will exist for individual market and small employers - Small Business Health Options Program or “SHOP”

Carriers may have plans in one exchange and not another Exchanges must offer plans with various actuarial values

– Bronze - 60%

– Silver -70%

– Gold - 80%

– Platinum - 90%

What’s Ahead?

Page 24: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

2014

Pay-or-play penalties– Requires employers with 50 or more full-time equivalent

(FTE) employees (defined as 30 or more hours a week) to provide a minimum level of medical insurance for employees

– Large employers who do not provide health insurance will be subject to penalty, only if at least one of its full-time employees obtains coverage through an exchange and receives a premium credit

Part-time workers are not included in penalty calculations (even though they are included in the determination of a “large employer”). An employer will not pay a penalty for any part-time worker, even if that part-time employee receives a premium credit.

What’s Ahead?

Page 25: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Pay-Or-Play Penalties

Example A firm has 45 full-time employees (30+ hours). Also, the firm

has 20 part-time employees who all work 24 hours per week (96 hours per month)

Part-time employees’ hours treated as equivalent to 16 full-time employees, based on the following calculation:

20 employees x 96 hours /120 = 1920 / 120 = 16 FTEs

Full-time seasonal employees who work less than 120 days during the year are excluded. The hours worked by part-time employees (those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis, by taking their total number of monthly hours worked divided by 120.

Total FTEs 45 + 16 = 61 FTEs qualifies as a “large employer”

Page 26: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Pay-Or-Play Penalties

Example Employer with 61 FTEs that does not provide health insurance

will be subject to the penalty, but part-time workers are not included in the penalty

61 FTEs but only 45 are full-time employees

Penalty calculation: 45 (full time) - 30 (exempt) = 15 FT

15 X $2,000 = $30,000 (not deductible as a business expense)

Employer is a “large employer” but penalty only applies to 45 actual full-time employees (penalty doesn’t apply to 20 part-time employees).

Page 27: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Pay-Or-Play Penalties

If employer coverage does provide minimal insurance but coverage doesn’t provide minimal value or isn’t affordable then employer could face penalty– Minimal value: Plan is expected to pay at least 60% of allowed

charges – Affordable: Employees’ share of self-only premium cost

cannot exceed 9.5% for lowest-cost coverage of employee’s household income (Treasury indicated employers could use W-2 wages for employee wage determination -Notice 2011-73)

Employer penalty only applies if an employee goes to the exchange and receives a premium credit

Page 28: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Employee is only eligible for premium credit if:– Employee share of self-only premium for lowest-cost

coverage is greater than 9.5% of household income (i.e., employee W-2 wages -Notice2011-73)

– Employee’s income is between 133% and 400% of federal poverty level (FPL)

45 full-time employees and 4 employees qualify for premium credit on the exchange 4 X $3,000 = $12,000

Penalty for employers who do offer insurance is capped so that it can never be more than the penalty for not providing insurance.

Pay-Or-Play Penalties

Page 29: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Premium Credits

Employees eligible for premium credits will have insurance costs on exchange reduced so that premium is no more than X% of employee’s household income2012 Federal Poverty Levels

$11,170 (Ind) $23,050 (Fam)

Household income as

% of FPL

Minimum Maximum

$0-$14,856 (I)

$0-$30,656 (F)Up to 133% 2% 2%

$14,856 – $16,755 (I)

$30,656 - $34,575 (F133% - 150% 3% 4%

$16,756 - $22,340 (I)

$34,576 - $46,100 (F)150% - 200% 4% 6.3%

$22,341 - $27,925 (I)

$46,101 - $57,625 (F)200 – 250% 6.3% 8.05%

$27,926 - $33,510 (I)

$57,626 - $69,150 (F)250% - 300 % 8.05% 9.5%

$33,511 - $44,680 (I)

$69,151 - $92,200 (F)300% - 400% 9.5% 9.5%

Credit applies to cost of “silver” (70%) coverage. Premium credits are technically advanceable, refundable tax credits paid in advance, directly to the health insurer.

Page 30: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Premium Credits

Pat has an income in 2014 that is 250% of FPL (about $28,735) and is eligible for the exchange

The cost of the second lowest cost silver plan in the exchange in Pat’s area is projected to be about $5,733

Under ACA, Pat would not be required to pay more than 8.05% (250% FPL premium credit value) of income, or $2,313, to enroll in the second lowest cost silver plan

$28,735 X .0805 = $2,313 (Pat’s premiums on exchange cannot exceed)

The premium credit available to Pat would be $3,420 ($5,733 premium minus the $2,313 limit on what Pat must pay)

$5,733 – $2,313 = $3,420 (amount of Pat’s premium credit)

Page 31: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Cost-Sharing Subsidies

Provide cost-sharing subsidies to eligible individuals and families. The cost-sharing credits reduce the cost sharing amounts and annual cost-sharing limits and have the effect of increasing the actuarial value of the basic benefit plan to the following percentages of the full value of the plan for the specified income level:– 100-150% FPL: 94%

– 150-200% FPL: 87%

– 200-250% FPL: 73%

– 250-400% FPL: 70%

Page 32: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Cost-Sharing Subsidies

Out-of-pocket costs for qualified individuals cannot exceed out-of-pocket maximums that apply to high deductible health plans (HDHP)

For 2012, this is $6,050 for an individual and $12,100 for a family,

The cost-sharing subsidies considerably reduce this out-of-pocket maximum for low-to-middle income persons, – OOP limit reduced by 2/3 for persons below 200% FPL, – OOP limit reduced by 1/2 for persons below 300% FPL – OOP limits reduced by 1/3 for persons below 400% FPL

Page 33: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Advice For Employers

While there is still a lot of ambiguity and other legal challenges are expected to emerge, employers should plan to meet the upcoming notice and reporting requirements– Prepare to issue 4-page SBCs

– Adjust FSA limits to $2,500

– Work with payroll provider to collect data for Form W-2 reporting (Bukaty payroll can collect data)

– Work with Bukaty Companies to consider impact of pay-or-play penalty

Page 34: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

Advice For Employers

Consider self-funding as a means to contain costs

Make sure your house is in order – DOL, HHS, IRS audits expected to increase (Bukaty HR consulting services available)

Make sure workforce realignment plans can’t be viewed as an effort to bypass providing benefits

Page 35: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

We will continue to…– Analyze the surrounding issues and provide consultation to

our clients

– Prepare regular Health Care Reform Bulletins with updates on regulatory outcomes

– Ensure you and your employees have the answers you need

Bukaty Companies Commitment

Page 36: The Affordable Care Act (ACA) What Now?. Agenda  Review Supreme Court decision  Take a look back at the Act timelines  What’s been implemented?  What’s

THANK YOU