may 20 aahsa town hall: health reform and employers
DESCRIPTION
Presentation to be used in conjunction with AAHSA's May 20, 2010, Health Reform Town Hall on Employer Provisions.TRANSCRIPT
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Health Care Reform Town Hall Update
What Does It Mean For You As An Employer?
Thursday, May 202:00 – 3:00 p.m. ET
Speakers
Barbara Gay, Director of Advocacy Information, AAHSA
Dave Sanders, National Tax & Erisa Practice, Aon Consulting
Thora Johnson, Partner, Employee Benefits and Executive Compensation, Venable, LLP
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Structure of Today’s Program
Introduction: Barbara Gay
Key Employer Provisions Overview: Dave Sanders
Timeline Implementation: Thora Johnson
Questions and Closing: Barbara Gay
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Implementation of Health Reform Implementation Challenges
Complex and challenging law to implement
2,400 pages plus 153 page reconciliation bill
HHS (Health and Human Services) on point for implementation
Date of enactment was 3/23/10, with 6 month effective date for some provisions (9/23/2010)
Plans in existence on 3/23/10 are exempt from many rules, if remain unchanged ("grandfathered" plan)
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Key Employer Issues – Market Reforms
Coverage of adult children up to age 26, regardless of marital or student status
– If not eligible for other group plan (this condition expires 12/31/13)
– Applies even if the child is not a tax dependent
Effective 6 months after enactment (1/1/11 for CY plans)
Dependent Coverage
No lifetime maximums permitted for overall benefits (annual/ lifetime limits on specific benefits permitted)
– Effective 6 months after enactment (1/1/11 for CY plans)
Complete elimination of annual limits beginning January 1, 2014
Restrictions on annual limits prior to 2014 TBD by regulation
– Effective 6 months after enactment (1/1/11 for CY plans)
Annual and Lifetime Maximums
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Key Employer Issues – Market Reforms
Not permitted for children under age 19
– Effective 6 months after enactment (1/1/11 for CY plans)
Not permitted for all plan enrollees
– Effective 1/1/2014
Pre-existing Conditions Exclusions
Waiting periods greater than 90 days are not permitted
Effective 1/1/2014
Must provide first dollar coverage for evidence based preventative care
Effective 6 months after enactment (1/1/11 for CY plans)
Grandfathered plans exempt
Waiting Periods
Preventive Benefits
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Key Employer Issues – Impactful Provisions
Applies to employees working 30+ hours/week
Employer pays $3,000 for each EE with coverage <60% of allowed costs or if EE pays >9.5% of their household income for health coverage
Employers not offering health coverage pay $2,000 per EE
First 30 employees not included in calculation of assessment
Effective 1/1/2014
Free Rider Provision Applies to employees working 30+
hours per week
Employers would convert health coverage subsidy to cash for any employees who would pay between 8% and 9.8% of their household income for health coverage and opts out of employer sponsored coverage for coverage in an Exchange based plan
Effective 1/1/2014
Employee Voucher
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Key Employer Issues
Applies to new hires
Employees can opt-out
Employer can choose plan for auto enrollment
Effective 1/1/11 or issuance of regulations by DOL, if later
Employers must notify employees at time of hire of the availability of Exchanges and their potential eligibility for a subsidy
Effective 3/1/2013
No requirement to offer same coverage as Exchange plans
Auto Enrollment
OTC drugs no longer reimbursable under FSA, HRA or HSA, unless prescribed by physician
– Effective 1/1/2011
Penalty on withdrawal of HSA funds for non-medical expenses increased to 20%
– Effective 1/1/2011
Annual contributions to health FSAs limited to $2,500 annually
– Effective 1/1/2013
– Indexed to CPI as of 1/1/2014
Health Accounts
Employee Notification
Key Employer Issues
Employers required to report the “value” of health benefits provided to each employee
– Value defined as COBRA cost
Effective 1/1/2011
Same HHS transparency requirements as Exchange based plans
Claims payment policies and data
Information on cost sharing and payment for OON
Information on rating policies
Effective 1/1/2014
W-2 Reporting
Annual distribution of summary of benefits and coverage
– Not to exceed 4 pages
Uniform Explanation is in addition to the SPD required by ERISA
Effective 3/23/2012
Employers with <25 employees earning < $50,000 each are eligible for tax credit
Applies to employer contributions toward cost of health insurance
Available for 2010-13 tax years
Uniform Explanation of Coverage
Transparency RequirementsSmall Employer Tax Credit
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Key Employer Issues
Employers permitted to increase employee reward for participation in wellness programs to 30% of total plan cost
– HHS may increase to 50%
Effective 1/1/2014
Grandfathered plans exempt
Insured plans are subject to same nondiscrimination rules as self-funded plans
Effective 1/1/2011
Grandfathered plans exempt
Wellness Incentives
Employer plans must have HHS approved external review process
Effective 1/1/2011
Grandfathered plans exempt
Out of pocket expense cannot exceed HSA related coverage
Deductibles cannot exceed $2,000 single & $4,000 family as indexed
Effective 1/1/2014
Grandfathered plans exempt
Appeals Process
Cost Sharing Limitations
Nondiscrimination
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Key Employer Issues
Voluntary federal LTC insurance program
EEs can purchase via payroll deductions
All auto enrolled EEs can opt-out
Lifetime benefit payments
5-year vesting period
Eligible for benefit if at least 2 ADLs for 90 days
Estimated revenue: $71 billion
Effective 1/1/2011
CLASS Act
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Other Key Provisions2010 Adoption assistance plan dollar limit
increased from $12,170 to $13,170
Nursing mothers entitled to unpaid breaks and private lactation room
2014 Medicaid expansion to 133% of FPL
Individual Mandate begins with penalties in 2015
State-based Insurance Exchanges are operational
2017 Employer plans of any size can participate in Exchanges (state approval)
2018 High cost excise tax with revised thresholds of $10,200/individual and $27,500/family
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Other Key Provisions
Adjusted gross income >$200k for individuals and >$250k for couples
Additional Medicare payroll tax on wages of 0.9% (employee-share only)
New surtax on investment income of 3.8%
New taxes on higher income individuals replaces lost revenue from delayed enactment of high cost plan excise tax (estimated $210 billion)
Effective 1/1/2013
New Taxes on High Income Individuals
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Impact on Post-Retirement Health Plans Taxation of Medicare Part D retiree drug subsidy
Temporary reinsurance program for pre-Medicare retirees (at least age 55)
– Re-insurance for claims covering 80% of costs between $15,000-$90,000 for pre-65 retirees
– Only funded up to $5 billion
Cutbacks to Medicare FFS providers and Medicare Advantage plan funding
Closure of Medicare Part D “donut hole”
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Timeline for Next Steps
Effective Date Action Items
Applies to Grandfathered
Plans?
Now
If you have 25 or fewer FTEs, work with your Finance Department to evaluate whether you are eligible for the small employer tax credit and if so, apply for credit
If you offer retiree coverage and apply for the Medicare Part D subsidy, work with your Finance Department and auditors to evaluate the current impact on your financial statements under the FASB rules because the Medicare Part D subsidy will effectively become taxable in 2013
6/23/2010 If you offer retiree coverage for retirees ages 55-65 who are not eligible for Medicare, apply for the retiree reinsurance program, work with your Finance Department and obtain claims data from your insurance company/TPA and consider appropriate plan design changes
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Effective Date Action Items
Applies to Grandfathered
Plans?
1/1/2011 for calendar year plans
Evaluate what plans you are going to offer, and determine whether any plans need to be restructured
• Determine what grandfathered plans you have
• Determine whether you have any dental and vision coverage that you want to convert to “stand-alone” plans so that they are exempt from the new rules on annual and lifetime limits
• Determine whether you have any fully-insured plans that need to be restructured to comply with the nondiscrimination coverage rules, such as executive-only plans
• CLASS Act (voluntary long-term care program)
• New wellness programs (grants available for small employers).
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Effective Date Action Items
Applies to Grandfathered
Plans?
1/1/2011 for calendar year plans
Amend medical plan documents
• Remove lifetime maximum limits for essential health benefits (and define what those are)
• Revise annual limits for essential health benefits to reflect HHS standards
• Remove pre-existing condition limits for children under age 19
• Limit right to rescind coverage only to fraud or intentional misrepresentation of a material fact
• Expand dependent eligibility to cover adult children up to age 26 (applicable to grandfathered plans only if the dependents are not eligible for coverage under another employment-based plan)
• Remove cost sharing, and implement first-dollar coverage, for preventive care (deductibles, copays, and co-insurance can't apply)
• Permit designation of any participating primary care provider
• Remove restrictions on emergency care
• Update internal and external appeals procedures
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Effective Date Action Items
Applies to Grandfathered
Plans?
1/1/2011 for calendar year plans
Amend medical plan documents (cont’d)• Any additional design changes that may be
made to offset some of the anticipated increases in costs due to limits on annual and lifetime maximums, removal of pre-existing conditions, etc.
Amend medical FSA plan documents
• Eliminate reimbursement for OTC drugs
• If small employer, consider establishing “Simple” cafeteria plan
Provide notice of changes to participants (by 11/1/2010)
• Give at least 60 days’ advance notice of changes (SMMs or new SPDs)
Negotiate insurance costs or stop-loss coverage, as applicable
• Removal of annual, lifetime, and pre-existing condition limits, and cost sharing, the addition of other restrictions, and expansion of dependent eligibility could create more expense to employers, in terms of premiums for fully-insured plans and stop-loss
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Effective Date Action Items
Applies to Grandfathered
Plans?
1/1/2011 for calendar year plans
Update contracts with TPAs/claims administrators
• Compliance with new internal and external claims processes
● Determine who will prepare HHS reporting on medical loss ratios
● Determine who will handle transparency disclosures to HHS (and public)
Implement auto enrollment (depending on
effective date)
Work with payroll to implement changes
● Payroll withholding to implement any “Simple” employer cafeteria plan; voluntary CLASS Act plan
● W-2 reporting of employer-provided health coverage
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Effective DateAction Items
Applies to Grandfathered
Plans?
1/1/2011 for calendar year plans
Provide required notices to HHS
● Reporting to HHS on medical loss ratios
• Reporting to HHS (and public) to comply with transparency provisions
Apply for available grants for small employer wellness program
1/1/2012 for calendar year plans
Amend medical plan documents
• Coordination with Medicare
Provide new required (uniform) plan summaries
Update contracts with TPAs/claims administrators
• Put systems in place to enable quality of care reports to HHS
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Effective DateAction Items
Applies to Grandfathered
Plans?
1/1/2013 for calendar year plans
Amend Medical FSA plan documents
• Impose cap on contributions
Work with payroll to implement changes
• Medical FSA caps
• Increased Medicare taxes on earned income
Work with Finance
• Taxation of Medicare Part D subsidy
• Payment of per-participant fee (premium tax)
Provide required notices by 3/1/2013 to employees regarding availability of insurance exchanges
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Effective Date Action Items
Applies to Grandfathered
Plans?
1/1/2014 for calendar year plans
Evaluate what plans you are going to offer
• Small employers have access to state insurance exchanges
• Large employers are subject to play or pay penalties, opt-out penalties, and “free choice” vouchers
• Permitted increase in employee reward to 30% for participation in wellness program
Amend medical plan documents
• Grandfathered plans must expand dependent eligibility for adult children, even if eligible for other employer-provided coverage
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Effective DateAction Items
Applies to Grandfathered
Plans?
1/1/2014 for calendar year plans
Amend medical plan documents (cont’d)
• Remove waiting periods exceeding 90 days
• Remove all annual limits on essential benefits
• Remove all pre-existing conditions (can no longer impose on individuals age 19 and over)
Mandated cost-sharing limits
• Add coverage for clinical trials for cancer or life threatening diseases
• Any additional design changes that may be made to offset some of the anticipated increases in costs due to changes on annual limits, removal of pre-existing conditions, and limits on cost-sharing
Negotiate insurance costs or stop-loss coverage, as applicable
• Removal of annual and pre-existing condition limits, cost sharing and other restrictions, and expansion of dependent eligibility could create more expense to employers, in terms of premiums for fully-insured plan and stop-loss
Reporting to IRS on employer-provided coverage 22
Effective DateAction Items
Applies to Grandfathered
Plans?
1/1/2014 for calendar year plans
Provide required notices regarding employer-provided coverage and wellness programs
1/1/2017 for calendar year plans
Evaluate what plans you are going to offer
• Large employers have access to state insurance exchanges
1/1/2018 for calendar year plans
Evaluate what plans you are going to offer
• Work with Finance and with insurance company or actuarial firm to determine if you offer a "Cadillac" plan subject to penalty tax, or whether you can restructure your plans to minimize or avoid penalty
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Questions?
Questions will be addressed by emailing:
If we cannot get to your question we will respond via email or by providing
information on the AAHSA Health Reform Hub located on aahsa.org:
http://www.aahsa.org/healthreform
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Resources
AAHSA Health Reform Information Hubwww.aahsa.org/healthreform
AON Consulting Microsite
www.aon.com/healthcarereform
Venable, LLP
www.venable.com
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Speaker Contact Information
Barbara Gay, Advocacy, AAHSA(202) [email protected]
Dave Sanders, National Tax & Erisa Practice, AON Consulting
(410) [email protected]
Thora Johnson, Employee Benefits and Executive Compensation, Venable, LLP
(410) 244-7747 [email protected]
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