Impact of the Affordable Care Act
Nashville Association for Financial Professionals
February 14, 2013
James B. Bristol
615.850.8922
james.bristol@wallerlaw.com
© 2012 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.
10568079
Employee Health Benefits –
New Business Decisions For Employers
© 2012 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.
| 2
Health Law Status Before PPACA
Employer-driven based on tax incentives
ERISA – “settlor” discretion on plan design
ERISA – fiduciary claims administration
Medicare and FAS 106
EMTALA – patient anti-dumping, charity care
Universal Coverage? Cost?
| 3
Employer Obligations
Federal/state mandates – ERISA preemption
HIPAA –pre-existing condition exclusions
– Maximum exclusion is 12 months
– No exclusion if coverage break is 63 days
Non-discrimination testing for self-funded plans
Summary description of plan, notice of changes
within six months – judicial exceptions
| 4
Popular Changes - Talking Points
Employer Plans Grandfathered
Dependent care through age 26
No pre-existing exclusions – up to age 19;
universal in 2014
Community Rating – “affordable”
| 5
Supreme Court Decision
“It’s a Tax Stupid”
– No expansion of interstate commerce
Medicaid unconstitutional – Medicaid funding
cannot be withheld for states that opt out
How much tax is ok under equal protection?
| 6
Mandated Health Coverage – Pay or Play
Effective January 1, 2014
Employer Mandate
– Focused on “Large” employers
– Most larger employers are “self-funded”
– Employer as “Settlor” and “Fiduciary”
Individual Mandate
Federal and State Exchanges
| 7
Employer Mandate - Play or Pay
Large employers - 50+ FTEs
– Headcount/30 hours
Must provide “minimum essential coverage”
– Workers at 30+ hours
Employer must provide financial support
– employee premium share cannot exceed
9.5% of income
– plan’s share of benefit cost at least 60%
| 8
Employer Mandate – Tax Enforcement
Per employee tax if plan is not “affordable”
$2,000 per employee tax if no “minimum
essential coverage”
$3,000 tax for each employee enrolling in
exchange or receiving premium credit
Exclude first 30 employees in calculating tax
| 9
Individual Mandate
Must obtain “minimum essential coverage”
– Through employer or exchange
Tax subsidies assist purchase, based on income
– Employer “pay or play” tax covers subsidies
– Provider reports– W-2 for employer plan
Expands Medicaid – although states can opt out
| 10
Individual Mandate
Tax penalty to enforce individual mandate
– Minimum of $95, phased increases to $695 in 2016 –
based on income, up to 3x
– Percentage of income test, 1% phased increases
up to 2.5%
– Assistance and exceptions for lower income families
No Time Limit
– EMTALA, Pre-existing ok, Community rating
| 11
Cost Containment
Comparative Effectiveness Research
– Patient-Centered Outcome Research Institute (PCORI)
– Non-profit created by government, funded by taxes
– Compares clinical effectiveness of medical treatment
options, communications, healthcare disparity
– Designed to “pry savings” from healthcare
Preventive Care – Wellness
Managed Care?
| 12
Grandfathered Plan Status
Plans in existence on March 23, 2010
grandfathered from most requirements
Status is lost if materially modified
– Changes to cost sharing
– Changes to employer share of premiums
Employers will have continual decisions on
maintaining grandfather
| 13
New Employer Obligations to Employees
© 2012 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.
| 14
Employer Obligations
Standardized summary of plan benefits and
coverage
– Template available on DOL website – 4 pages
– Can be part of summary plan description (SPD)
– Applies now
| 15
Employer Obligations
Form W-2 report aggregate cost of coverage for
self-funded plans
– Used to determine tax credits and tax penalties
– Dept. of Labor valuation methods
• HHS MV Calculator
• Safe-harbor Checklist
• Actuarial Checklist
| 16
Employer Obligations
Submit to HHS and state insurance
commissioner policies, practices, medical loss
ratio, etc.
Additional IRS reporting requirements for
covered employers in 2014
60-day prior notice of material modifications to
plan
| 17
Employer Obligations
Accommodations for nursing mothers
– Employers must provide reasonable, unpaid break
time for one year after birth
– Location shielded from view
– Similar to many existing state laws
| 18
Employee Status
Many requirements do not apply to smaller
employers
– See over 50, over 30 mandates and penalties
– Full-time equivalent calculations – divide hours
worked by 2,080, etc.
Worker classification?
– Compare independent contractor vs. employee to
retain small employer status
| 19
Employer Obligations
“Whistleblower” Employee Protections
– Cannot retaliate against employee for reporting,
testifying about, or objecting to a reasonably believed
violation of PPACA
– Complaints investigated by OSHA
– Similar to Sarbanes-Oxley procedures
– New source of employment litigation?
| 20
Mandates for Employer Plans
© 2012 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.
| 21
Plan Design and Requirements
Healthcare reform imposes many rules for
employer plans including:
– Coverage of dependents to age 26
– New hire waiting period 90 days or less
– Universal preexisting condition coverage
Medical Loss Ratio
– Spend 85% of premium (80% small plan) or refund
| 22
Plan Design and Requirements
No lifetime limits on “essential health benefits”
Cannot rescind health benefits other than for
fraud/intentional misrepresentation
Limits on annual cost sharing
– Total $5,950 for individual, $11,500 for family
– Annual deductible $2,000 for single, $4,000 for
spouse and family coverage
| 23
Plan Design and Requirements
Automatic health plan enrollment required for
employers with 200 or more employees
– Auto for new employees, renewal for current
employees
– Employees may opt out
– Logistical issues – effective after DOL regulations
• Payroll programming, notices, etc.
| 24
Wellness Incentives – Cost Savings
Many wellness incentives – similar to
current practices
Premium discounts for wellness ok if
– Made available to all similarly situated employees
– Up to 30% discount on employee-paid cost (50% if
regulation)
– Must be reasonably designed to promote health
– Individuals may qualify at least annually
| 25
Wellness Incentives
Health plans must cover without cost sharing
– Immunizations
– Preventive care, screenings for children until
adolescent
– Screenings, preventive care for women
(mammogram, cervical cancer, genetic counseling)
– Evidence-based items or services (blood pressure,
diabetes, cholesterol test, wellness counseling, etc.)
More under development
| 26
Key PPACA Tax Changes
© 2012 Waller Lansden Dortch & Davis, LLP. All Rights Reserved.
| 27
Tax Credits
Small Employer Tax Credit (temporary)
– 25 or fewer full-time equivalents
– Plan covers at least 50% of premium cost
– Average annual wages less than $50,000
Based on average employer or small group premium
35% premium credit, 50% in 2014
– 25%/35% for tax-exempts
– Not available after 2016
– Phased out based on employees/wages
| 28
Cadillac Tax
Beginning in 2018 for High Cost Plan
– 40% excise tax on “excess benefit”
• Premiums above $27,500 family, $10,200 single
• Includes contributions to FSA, HRA, employer HSA
– Does not apply to dental, vision, long-term care,
after-tax indemnity
– Employer calculates and reports tax, must notify HHS
and providers
| 29
Revenue Enhancements
Flexible spending accounts limited to $2,500
Over-the-counter ineligible for HRA, FSA and
HSA – 2011
Penalty for ineligible HSA payments increased
from 10% to 20% – 2011
| 30
Medicare Tax Increase - 2013
Additional 0.9% - $200,000/250,000
– 2.35% or 3.8% if self-employed
3.8% on investment income $200,000/250,000
– Capital gains/dividends 20% @$400/450,000
| 31
Other Tax Highlights
Medical Device Tax
– 2.3% excise tax on gross sales (not profits)
– Items under $100 exempt
Tanning Salon Tax – 10%
Medical Expense Deduction
– Must exceed 10% of AGI – currently 7.5%
Insurance Executive Deduction Limit
– $500,000, no commission or performance exception
| 32
