RISK INVESTMENTS COMMUNICATIONS CONSULTING OUTSOURCING

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Health Care Reform Legislation:

“What just happened and how will it impact you.”

RISK INVESTMENTS COMMUNICATIONS CONSULTING OUTSOURCING

President Obama Signed Two Bills into Law

• Patient Protection & Affordable Care Act (PPACA)

• –Signed into law on March 23, 2010

• Health Care & Education Reconciliation Act (H.R. 4872)

– Signed into law on March 30, 2010

• 2,900 pages will be followed by thousands of pages of regulations, possibly expanding the requirements

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PPACA: We now see the 1/8 above the surface

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Employer Health Plan Mandates

• Lifetime and annual benefit limitations eliminated• Coverage of adult children to age 26• Pre-existing condition exclusions prohibited• Community Rating for Insurance Companies (2014,

2016)• Employer Certification to the US Dept of Health

regarding meeting “minimum essential coverage.”• Increase in wellness incentives up to 30% in 2014, and

up to 50% in 2016• Guaranteed availability and renewability of insured group

health plans• Mandated Benefit Limitations• Employer play or pay provisions

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Employer “Play or Pay” Mandate

• Employers with >50 employees who do not offer coverage:

–If even one F/T employee gets coverage from health insurance exchange

–Free Rider penalty of $2,000 X the number of full-time employees

–Employers must assume that Free Rider penalty will rise as subsidies rise

• Employers with >50 employees who do offer coverage, but coverage is not “affordable,”

–Assessment of $3,000 X the number of employees receiving subsidies–“Affordable” defined as plan’s share of the cost is less than 60% of

actuarial value OR employee’s share of the premium is greater than 9.5% of income

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Tax Policy Changes

• Effective 2011– Over-the-counter medicines purchased after December 31, 2010, will

not be eligible for reimbursement from an FSA/HSA/HRA

• Effective 2013– For taxable year beginning after Dec 31, 2012, FSA contributions

capped at $2,500– New Medicare tax of 3.8% on unearned income, e.g., rent, interest,

dividends, for persons with AGI of $200K individual/$250K joint filers– New Medicare payroll tax increase of 0.09% for high income individuals

• Effective 2018– 40% excise tax on high-value health plans– Threshold $10,200/$27,500; Higher for early retirees and high-risk

occupations– Exempts dental and vision coverages– Includes value of health plan, FSA, HSA, HRA and supplemental– Employers must calculate and report excess value and tax

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Employer Reporting & Notifications Cont.

• Effective 2014

–Health insurance coverage information to F/T employees and to IRS

–Effective January 1, 2014, employer must report minimum essential coverage certification, number and names of F/T employees, waiting periods, lowest cost option, monthly premium, employer’s share of total allowed costs, etc.

–Insurers and self-insured employers must also report names and addresses of the insured, dates of coverage, whether it is a qualified health plan through the exchange, and the amount of any tax credit subsidy for the individual

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How does this affect the State of ND

• Three areas to consider:

– Medical Assistance

– Individual Mandate

– Federal Insurance Exchange

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Expansion of Medical Assistance

• Medicaid expansion to 133% of Federal Poverty Level and early expansion of Medicaid,

• Individuals making up to $14,859 per year.

• 100 percent of costs will be paid by federal government for 3 years; moving to 90 percent after that.

• Individuals up to 400% of FPL that are not eligible for MA, tax credits will be available.

• Federal Maintenance-of-Effort (MOE). Requires that the State of ND, maintain a 275% FPL for children in ND.

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Individual Insurance Mandate

• Exceptions: Income for IRS filing limit, Veterans, Native Americans, Undocumented Illegal Alien, 8% of household income.

• Penalty for 2014– $95 per adult and $47.50 per child up to $285 for a family (or 1% of

Household Income)

• Penalty for 2015– $325 per adult and $162.50 per child up to $975 for a family (or 2% of

Household income)

• Penalty for 2016– $695 per adult and $347.50 per child up to $2,85 for a family (or 2.5% of

Household income)

• Insurance must meet Essential Health Benefit mandate, and be provided by employer, insurance company or insurance exchange.

• “Does this mean small employers drop coverage?”

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State-Based Health Insurance Exchanges

• Effective 2014: States must establish an “American Health Benefits Exchange”Or a federal exchange will be offered.

• Brings health insurance buyers and sellers together via Web-based standardized enrollment applications and processes

• To pool risk and offer individuals access to “group” rates

• Allows only “qualified benefit plans” to be marketed

• Exchange would replace the individual insurance market

• Tight regulations on insurance underwriting practices

• Subsidize insurance premiums at 400% of poverty or $88,000

• Private sector plans only; no new Medicare-type govt plan, though OPM will offer two qualified multi-state plans

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Insurance Exchange in ND

• State of ND is not actively pursuing it’s own exchange

• Federal Exchange will be offered in ND

• Details of the program are available at

www.healthcare.gov

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What can you as an Employer do…

• Need for education: What do the new laws mean to your employees and their coverage?

• Prepare for open enrollment and the implementation of requirements scheduled to take effect for your next plan year

• Put in place a mechanism to track the value of employer-provided coverage so you can report it on W-2s

• Have Bearence provide a HCR Benefit Cost Analysis

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Five Things you might not Know about HCR??

• Fake tanners will have a 10% tax at purchase• Smokers can be charged up to 50% more for health

insurance in 2014.• Employers to provide a private, non-bathroom location

for employees (Moms) who are breastfeeding their children.

• Calorie / Nutritional information must be displayed by all restaurants with 20 or more locations.

• Service industry costs to go up. Papa Johns estimates a price of Pizza will go up 20 cents per order.

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• For further information contact:

Gary Helm

Director of Employee Benefits

Bearence Management Group

Direct Dial: 651-379-7906

ghelm@bearence.com

Impact, Analysis & Transition Strategies Pat Bellmore, Regional Manager

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What are Employers Thinking About?

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Reform law could fuel self-funding - Business Insurance

Reform law could fuel self-funding - Business Insurance

Employer Impact

Employers weighing whether to drop health

benefits, studies show

-Associated Press

Employers weighing whether to drop health

benefits, studies show

-Associated Press

To Cap Costs, Employers Considering

Defined Contribution Health Insurance Plans

-Bloomberg BNA

To Cap Costs, Employers Considering

Defined Contribution Health Insurance Plans

-Bloomberg BNA

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Refining Benefit Strategy

As employers develop their post-reform benefits strategies, it is important to consider key factors for sponsoring coverage

• Financial incentives to sponsor group healthcare coverage

• Talent acquisition, retention, and employee engagement

• Company culture and the nature of the social contract with employees

• Industry trends and competitor positioning

• Employee health and wellness

There are many important considerations to choosing the right benefit strategy:

There are many important considerations to choosing the right benefit strategy:

Employer Impact

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Evaluating Economic Factors

Changes in consumer incentives to purchase in the individual market may change employers’ value proposition to offer coverage

Post-ReformPre-Reform

Employer Impact

Emerging Individual Market Incentives

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Understanding Employer Impact

The economic impact of reform to employers will vary depending on existing benefit solutions and characteristics of the workforce

Factors that Impact Decisions around Healthcare ReformFactors that Impact Decisions around Healthcare Reform

Employer Specific:

• Employer size

• Employer premiums

• Premium cost sharing levels

• Employee participation rate

• Grandfather Status

Employer Impact

Employee Specific:

• Average employee incomes

• Workforce demographics (e.g., family structure and age)

Market Based:

• Individual premiums

• Penalties and subsidies

Calculating Financial Incentive

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An employer’s net financial incentive to offer coverage reflects the savings or costs of dropping benefits while making employees “whole”

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Non-Monetary Factors

An employer’s decision to offer benefits will be informed by both financial and non-monetary considerations

• What are the reasons why your company has decided to offer benefits?

• What do your employees value most about employer sponsored benefits and would a change be disruptive to your employees and workplace?

• How would a change in benefits impact your recruitment and retention outcomes?

• Would you be affected by your industry’s dynamics and competitors’ approach to post reform benefit strategies?

Important Considerations:

Employer Impact

Employer Decision Points

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Book of business modeling can be used to evaluate employers’ propensity to adopt certain benefits strategies in the post-reform market

Employer Benefits Strategy Options

Employers may respond by taking action to reorganize their workforce structure or to incentivize certain employee populations to opt-out of group coverage

Maintain/Update Current Benefit

Strategy Shift from Risk to

ASOShift to Defined

Contribution

Drop Coverage For All Employees

Analysis & Transition

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For More Information

Please reference the materials below for more information regarding healthcare reform

1. Blue Cross and Blue Shield of North Dakota: Health Reform Facts https://www.bcbsnd.com/healthreform/

2. Ask Blue Healthcare Reform: Interactive Toolhttp://www.askbluereform.com/

3. Kaiser Family Foundation: Implementation Timelinehttp://healthreform.kff.org/timeline.aspx

4. Additional Health Reform Informationhttp://healthcare.gov

Wrap-Up