health care reform impact of...2012/07/18 · email questions to [email protected] • generally,...

Health Care Reform –

What Do We Do Now?

Webinar – July 18, 2012

Email questions to [email protected]

Today’s Presenters

Danny Miller, Attorney, Conner & Winters, LLP, Washington, DC

SUPREME COURT DECISION


Breakdown of Decision

Court has jurisdiction to decide case now – Anti‐Injunction Act does not apply

Unanimous

Mandate is unconstitutional under Commerce Clause and “Necessary and Proper” Clause

5 for (Roberts, Scalia, Kennedy, Thomas, and Alito) 4 against (Kagan, Breyer, Sotomayor and Ginsberg)

Individual mandate is tax and is constitutional under Congress’ taxing authority

5 for (Roberts, Kagan, Breyer, Sotomayor and Ginsberg) 4 against (Scalia, Kennedy, Thomas, and Alito)


Breakdown of Decision

Medicaid expansion is unconstitutionally coercive . . .

7 for (Roberts, Scalia, Kennedy, Thomas, Alito,Kagan, Breyer) 2 against (Sotomayor and Ginsberg)

. . . but expansion survives –HHS cannot withhold federal Medicaid funds from non‐complying states

5 for (Roberts, Scalia, Kennedy, Thomas, and Alito) 4 against (Kagan, Breyer, Sotomayor and Ginsberg)

PREVENTIVE CARE COVERAGE


• Effective for plan years beginning on or after 9/23/2010, plans must:

– Provide coverage for designated preventive care services; and

– Cover such services without the imposition of any cost‐sharing requirements (such as a copayment, coinsurance or deductible).

• Not applicable to grandfathered plans.

Preventive Care


• Evidence‐based items/services rated A or B in U.S. Task Force recommendations.

• Immunizations for routine use.

• Preventive care and screenings for infants, children and adolescents.

• Preventive care and screenings for women.

For a complete list of covered services, see: www.healthcare.gov/center/regulations/prevention.html

Covered Preventive Care Services


• Effective for plan years beginning on or after August 1, 2012, preventive care services that must be provided to women without imposition of cost‐sharing includes contraceptives.

• Regulations exempt certain “religious employers” from the requirement to provide contraceptives without cost‐sharing.

Coverage for Contraceptives


“Religious employer” for purposes of exemption must meet four requirements. The employer must:

• have the inculcation of religious values as its purpose;

• primarily employ persons who share its religious tenets;

• primarily serve persons who share its religious tenets; and

• be a church or integrated auxiliary of a church.

Note: There is no explicit exemption for a church.

Exemption for Religious Employers


Temporary Enforcement Safe Harbor

One year delay in effective date of rule for certain religious organizations not entitled to the exemption:

• Must be nonprofit entity; • From 2/10/2012 onward, must not have provided some

or all of the contraceptive coverage otherwise required at any time because of religious beliefs of organization;

• Must provide notice to participants; and• Must self‐certify that it meets the above requirements.



Notice of Proposed Rulemaking:

• Expressed intent is to address objections of many religious organizations not otherwise covered under religious employer exemption.

• Two primary goals:

– Maintain provision of contraceptive coverage without cost‐sharing to individuals covered through religious organizations in simplest way possible; and

– Protect such religious organizations from having to contract, arrange, or pay for contraceptive coverage.



Notice of Proposed Rulemaking (cont’d)

• Seeking comments on proposals:

– Insurance companies would cover contraceptives free of charge if the religious organization chooses not to.

– In case of self‐funded plan, TPA would provide contraceptive coverage at no cost to participants.

– Religious organizations will not be required to subsidize cost.



• Congress is considering legislation to broaden religious conscience exemption:o Rubio‐Blunt attempt to enact legislation allowing all

employers (not just church‐related employers) to decline to cover medical services that are contrary to their religious beliefs was defeated in Senate.

o Churches and religious organizations are working with members of Congress to secure legislation to broaden the definition of religious employer.

• A number of lawsuits have been filed challenging the religious conscience exemption.


SUMMARY OF BENEFITS AND COVERAGE


• Group health plans must provide participants with a summary of benefits and coverage (“SBC”).

• The following benefits are not subject to the SBC requirement:– Excepted benefits (e.g., stand‐alone dental or vision plans and

certain health FSAs).– HSAs. (However, an SBC for a high deductible health plan

associated with an HSA can explain the effects of employer contributions to HSAs.)

• HRAs are generally subject to the SBC requirement:– Standalone HRA generally must have a separate SBC.– The effects of an HRA integrated with major medical coverage

can be incorporated into the SBC for the medical coverage.

Types of Plans


• Plans must provide participants with SBC by the first day of the first open enrollment period that begins on or after September 23, 2012 for participants who enroll or re‐enroll for coverage through an open enrollment period (including re‐enrollees and late enrollees);

• For participants who enroll for coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), SBCs must be provided effective with the first day of the first plan year that begins on or after September 23, 2012.

Effective Date


• SBC template provided (with instructions, sample language and guide for coverage examples calculations).

• The template should be completed in manner “as consistent with the instructions as possible, while still accurately reflecting the plan’s terms.”

Template


• Obligation to provide SBC generally rests with plan administrator; in case of insured plan, joint‐responsibility for insurer and plan administrator.

• Paper or electronic format are permissible.

Providing SBC


Initial enrollment:• Must be provided as part of written material distributed for initial enrollment; if plan does not distribute written material, must be provided by first day the participant (or beneficiary) is eligible to enroll.

• Must be provided to each eligible participant and beneficiary.• If there is any change to the information included in the SBC, then a new SBC must be provided before first day of coverage.

• Must be provided with respect to each “benefit package.”• For HIPAA special enrollees, must be provided within 90 days of enrollment.

When to Provide SBC


Re‐enrollment:

• New SBC must be provided upon re‐enrollment.

• If a plan requires participants to actively elect to maintain coverage during a re‐enrollment period or provides them with the opportunity to change coverage options, SBC must be provided at the same time as the re‐enrollment materials.

• If re‐enrollment is automatic (i.e., there is no requirement to renew or opportunity to change coverage options), SBC must be provided no later than 30 days prior to first day of the new plan year.

When to Provide SBC


• Generally, same penalties as would otherwise apply under Code for purposes of health reform (i.e., Code excise tax of $100/day per individual).

• In case of “willful” violations, there is new penalty of up to $1,000/day for each affected individual.

• But no penalties during first year of applicability if plans are working diligently and in good faith to provide the required SBC content in an appearance that is consistent with regulations.

Penalties for Failure to Provide

SMALL EMPLOYER TAX CREDIT


• Qualified small employers may be eligible for a tax credit for their contributions to purchase health insurance for employees.

• Tax credit also available to self‐insured denominational health care plans.

• Tax credit available beginning in 2010.

• Tax credit applies on fiscal year basis, not calendar year basis.

Small Employer Tax Credit


• For tax‐exempt employers, this is refundable credit applied to following payroll tax obligations:– Federal income tax withholding.

– Employer and employee portions of Medicare taxes.

• Use Form 8941 to calculate tax credit; claim credit on Line 44f of Form 990‐T.

Applying for Tax Credit


• The maximum credit for 2010‐2013 is 25% of lesser of:– Actual cost; or– Maximum costs (based on average premium for small group market in the state) – See IRS Form 8941 for list of state average premiums for small market.

• The credit increases to 35% for 2014‐2016, but only for coverage purchased from an exchange.

• Credit phases out for employers paying average wages to employees between $25,000 and $50,000 and for employers with between 10 and 25 FTEEs.

• Obama Administration has proposed expanding and simplifying credit.

Amount of Tax Credit

Enhancing Trust Email questions to [email protected]

Small Business Tax Credit, Nonprofit Firms in 2010‐2013Average wage

Firm size Up to $25,000 $30,000 $35,000 $40,000 $45,000 $50,000

≤ 10 25% 20% 15% 10% 5% 0%11 23% 18% 13% 8% 3% 0%12 22% 17% 12% 7% 2% 0%13 20% 15% 10% 5% 0% 0%14 18% 13% 8% 3% 0% 0%15 17% 12% 7% 2% 0% 0%16 15% 10% 5% 0% 0% 0%17 13% 8% 3% 0% 0% 0%18 12% 7% 2% 0% 0% 0%19 10% 5% 0% 0% 0% 0%20 8% 3% 0% 0% 0% 0%21 7% 2% 0% 0% 0% 0%22 5% 0% 0% 0% 0% 0%23 3% 0% 0% 0% 0% 0%24 2% 0% 0% 0% 0% 0%25 0% 0% 0% 0% 0% 0%

W‐2 REPORTING


• PPACA requires employers to report aggregate cost of “applicable employer‐sponsored coverage” on 2012 Form W‐2 (Report in box 12 using Code DD).

• Exemptions:

– Self‐insured plans that are not subject to COBRA (e.g., self‐insured church plans).

– Employers who filed fewer than 250 Forms W‐2 for the previous year

Note: This is “transitional relief.” In future, IRS could require self‐insured church plans to comply with reporting requirements.

W-2 Reporting Requirements


W-2 Reporting Requirements

Aggregate cost of applicable employer sponsored coverage = total cost of coverage under all applicable employer plans.• Determined under rules similar to COBRA rules. • Includes both employer and employee contributions• Employers not required to include:

– Contributions to Archer MSA, HSA or HRA;– Contributions to EAP, wellness program or on‐site medical

clinic if employer does not charge premium for that coverage under COBRA;

– Salary reduction contributions to health FSA;– Cost of dental or vision plan that is not integrated into health

plan.

FSA CONTRIBUTIONS


• Effective 1/1/2013, contributions to health FSAs limited to $2,500/year.

• Dollar limit will be indexed for inflation.

• Employers whose FSA plans have higher limits will need to amend plans.

FSA Contributions

MARKET REFORMS


• By 1/1/2014, each state is supposed to establish an “exchange.”

• Only “qualified health plans” can be offered on exchange –such plans must be offered by licensed health insurers.

• Small employers (≤ 100 employees) will be able to offer coverage through exchange.

• States may allow large employers to offer coverage on exchange beginning 1/1/2017.

NOTE: Federal government can establish and operate an exchange if a state fails to do so

State-Based Exchanges


Exchanges must offer four coverage levels – difference based on “actuarial value” (share of health care expenses a “qualified health plan” covers for a typical group of enrollees).

Coverage

Coverage Level Actuarial ValueBronze 60%Silver 70%Gold 80%

Platinum 90%


• Subsidies available for coverage on exchange for following individuals with income between 138% and 400% of FPL if:

– Employee contribution to employer plan > 9.5% of household income;

– Employer pays < 60% of covered health expenses; or

– Employer does not provide a health care plan.

State-Based Exchanges


Subsidies for Individuals in Exchanges

Income Level(in terms of

FPL)

Max. % of Income PaidToward Health CareCoverage

Up to 138% 2%

138 ‐ 150% 3% ‐ 4%

150 ‐ 200% 4% ‐ 6%

200 ‐ 250% 6.3% – 8.05%

250 ‐ 300% 8.05% ‐ 9.5%

300 ‐ 400% 9.5

Income Level (interms of FPL)

Out‐of‐pocketspending limits(Indiv./Family)

100 ‐ 200% $1,983 / $3,967

200 ‐ 300% $2,975 / $5,950

300 ‐ 400% $3,987 / $7,973

Income Level (interms of FPL)

Cost Sharing Limit

150 ‐ 200% 6%

200 ‐ 250% 13%

250 ‐ 300% 27%

300 ‐ 400% 30%


• Effective 2014, there are penalties for large employers that offer no coverage or provide inadequate/unaffordable coverage.

• “Large employer” = one with ≥ 50 full‐time equivalent employees.

• Penalties apply only if at least one employee participates in and receives subsidies from an exchange.

Employer Mandate


• Penalties for large employers that fail to offer “minimum essential coverage”:– Must pay excise tax for each FTE (after subtracting first 30 FTEs).

– Excise tax = 1/12 of $2,000 for each month in which at least one FTE receives subsidies from exchange.

• “Minimum essential coverage” includes coverage under an “eligible employer‐sponsored plan.”

• Preamble to proposed subsidy regulations indicates self‐insured plans can be “eligible employer‐sponsored plans.”

Employer Mandate


• Penalties for large employers that offer “inadequate” or “unaffordable” coverage.

• Excise tax = lesser of:

– $3,000 for each FTE receiving subsidy; or

– $2,000 for each FTE (not including first 30 FTEs).

Note: Part-time employees are not included in penalty calculation even though they are counted for purposes of determining if employer meets the 50 FTEE threshold.

Employer Mandate


NoPenalty

Do you have more than 30 FT employees?

Pay monthly penalty, lesser of:1/12 x $2,000 x (number of FT employees – 30)

1/12 x $3,000 x (number of FT employees receiving credits for exchange coverage)

Are any of your FT employees receiving premium credit for exchange coverage?

Pay monthly penalty 1/12 x

$2,000 x (number of FT employees –

30)

NoDo you provide health

insurance?

Are you a large employer?at least 50 FT equivalent workers

Including FT (30+ hours/week) and PT workers (prorated)Excluding seasonal workers (up to 120 days per year)


Beginning 2014, penalty applies to individuals:• Who have income above threshold level ($9,350 –

single; $18,700 – married filing jointly); and• Who do not enroll for health care coverage.Penalty =• 2014: greater of $95 or 1% of income.• 2015: greater of $395 or 2% of income.• 2016: greater of $695 or 2.5% of income.For family, penalty capped at 300% of individual rate

Individual Mandate


Kaiser Family Foundation “Reform Subsidy Calculator”

http://healthreform.kff.org/subsidycalculator.aspx

• Illustrates premiums and government subsidies based on:– Income– Age– Family type (e.g., single person, family of 4)– Regional cost factor

Calculator


Employee age 40; family of 4; annual income of $45,000 (192% of FPL ); higher regional cost factor:

Example One

Unsubsidized health insurance premium $14,556

Maximum % of income person must pay to be eligible for subsidy 5.94%

Actual required premium payment $2,672

Government tax credit $11,885

Maximum out‐of‐pocket costs $4,167


Employee age 40; family of 4; annual income of $45,000 (192% of FPL ); lower regional cost factor:

Example Two







Employee age 30; single; annual income of $25,000 (217% of FPL ); higher regional cost factor:

Example Three







Employee age 30; single; annual income of $25,000 (217% of FPL ); lower regional cost factor:

Example Four








Example Five








Example Six








Example Seven


Maximum % of income person must pay to be eligible for subsidy None


Government tax credit $0



Employee age 55; family of 4; annual income of $95,000 (406% of FPL ); lower regional cost factor:

Example Eight


Maximum % of income person must pay to be eligible for subsidy None


Government tax credit $0



Today’s Presenters

Danny Miller, Attorney, Conner & Winters, LLP, Washington, DC


For More Information:

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Health Care Reform –

What Do We Do Now?

Webinar – July 18, 2012

health care reform impact of...2012/07/18 · email questions to [email protected] • generally,...

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