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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 What’s been repealed, suspended, delayed? What’s ahead? State exchanges The pay-or-play penalties
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
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
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
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?
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?
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?
What’s Been Repealed, Suspended, Delayed?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)
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?
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
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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?
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”
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).
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
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
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.
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)
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%
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
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
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
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
THANK YOU