Risk Management for
Health Care Benefits
Including Health Care Reform By the Numbers
Presented by:
Kate Grangard, CPA, CFO
June 25, 2013
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Overview of Health Care Reform
• PPACA Passed on 3/23/10
• Goal: make coverage affordable, accessible,
and comprehensive
– Estimated 32 million additional people covered by 2019
– Florida one of six states that represents 50% of uninsured
2
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3
Ind. Mandate
MEC
Subsidy-Exchange
Age 26
Medicaid Expansion
SBC
$$$
Health
Care Costs
Medicaid Expansion
High Risk Pool
Exchange
Rate Review
EHB
1.
2.
3.
4.
5.
1. Risk based
payment models
2. PCORI
3. EHR
4. ACO/PCMH
5. Medicare Payment
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1.
2.
3.
4.
5.
6.
7.
8.
9.
Employers
State
Governments
1. Medicaid Expansion
2. Medicare Reform (Donut Hole,
PCMH, MSSP)
3. ERRP
4. High Risk Pool Funding
5. Exchange Funding
6. Credit/Subsidy Elig. – The Hub
7. Legislative Interpretation
8. FFE
Providers
1.
2.
3.
4.
5.
6.
Federal
Government
1. No Pre-ex
2. Wellness
3. Appeals
Process/Patients’ Bill
4. MLR
5. Rate Review
6. SBC
7. Max Ded/OOP
8. PCORI
9. Preventative
10.EHB/QHP
11.No Lifetime Max
12. Health Ins. Ind. Fee
Taxpayers
Insurance
Companies
Corralling Health Care Costs Through PPACA
Pay or Play
ERRP
Tax Credit (Sm. Grp.)
Wellness Rewards
Age 26/100 %
Preventive/Max. Ded. &
Max OOP
PCORI & TRF Fees
SBC
Cadillac Tax
Reporting Compliance
• W-2, Exchange,
Mandatory discl., Avail
Exchange, SBC, Monthly
Coverage
Exploring the Risks of Health Care Reform
•
•
•
•
Financial Risk
Audit Risk
Culture Risk
Legal Risk
4
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Healthcare Reform
PPACA Highlights Timeline
• Dependent coverage to age 26
• Eliminate lifetime benefit
maximums on essential health
benefits
• Restricted annual benefit
maximums
• Non-grandfathered plans must
cover preventive services at
100%
• Eliminate pre-existing condition
exclusions for children under 19
2010
• Plans must provide SBC with OE
materials
• Plans must cover additional
women’s preventive care at
100%
• Plans charged PCORI fee
2011
• Employers must report health
coverage costs on W-2
• OTC drugs are “qualified medical
expenses” for HSA/FSA/HRA
You are
here
2012
• Individual Mandate
• Employers must offer coverage to
FT employees or pay a penalty
• Health Insurance Exchanges
established
• Insurers cannot discriminate based
on health status
• Plans charged Transitional
Reinsurance Fee
• Plan waiting periods cannot exceed
90 days
• Eliminate annual benefit
maximums
• Eliminate pre-existing condition
exclusions for all adults
2013
• HCFSA contributions limited to
$2,500
• Employers must provide notice to
employees regarding Exchanges
by Oct. 1, 2013
5
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2014
2018
• Employers begin
to pay excise tax
on “Cadillac
Plans”
Exploring the Risks of Health Care Reform
•
•
•
•
Financial Risk
Audit Risk
Culture Risk
Legal Risk
6
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Financial Risk
• Employer Shared Responsibility Provision (ESRP)
a.k.a. Pay or Play
The ESRP states that “large” employers
must offer coverage that is “affordable”
and of “minimum value” to “full-time
employees” and their “dependents”.
7
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Financial Risk
Employer Shared Responsibility Provision
• ESRP is effective on the first day of the plan year
beginning on or after January 1, 2014
– Fiscal Year Plan Transition Relief available
1. Eligible employees in plan under currently eligibility terms as of
12/27/12 – no potential penalty payment until 1st day of fiscal plan year
2. No penalty payment for full time employees until month of fiscal plan
start in 2014 if:
a) Employer offered plan to 1/3 of FT and PT employees at most recent open
enrollment
b) Fiscal plan covered > ¼ of employees within specified period (point in time
test on any day between 10/31/12 – 12/27/12)
8
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Financial Risk
Employer Shared Responsibility Provision
• Penalties – Monthly Test
1.
No Coverage Penalty - $2,000 / Full-time employee



2.
Inadequate Coverage Penalty - $3,000 / Full-time employee


3.
Margin of Error Rule: Offer coverage to substantially all full-time
employees and deps., a.k.a., the 95% Rule (or 5 employees.)
Note: If Employer offers coverage under the 95% Safe Harbor,
Employer will still be subject to $3,000 penalty for those full-time
employees who receive tax credits/subsidies from the Exchange.
Also applied if coverage not offered to dependents.
Coverage is unaffordable and employee obtains federally
subsidized coverage through an Exchange, OR
Coverage does not meet “minimum value” requirements and
employee obtains federally subsidized coverage through an
Exchange.
Pay and Play penalty exposure
9
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Penalty is
calculated
monthly, not
annually.
Financial Risk
Employer Shared Responsibility Provision
Sample Employer
PAY AND PLAY PENALTY EXPOSURE CALCULATION
Employee Count and Plan Enrollment Summary
Total Full-time Employees Enrolled
Retirees Enrolled
1,000 Total Eligible Full-time Employees
50
PT, Seasonal and Variable EE's Not Offered
Coverage but now benefit eligible
Total Plan Participants
1,050 Total EE’s Not Offered Coverage
Additional Enrolled Members
1,550
Total Enrolled Lives (Belly Buttons)
2,600
1,000
70
70
Pay and Play Penalty Calculation
Total Eligible Full-time Employees (1,000 + 70)
(assuming all PT deemed eligible)
Margin of Error Breakeven Point
(5% of eligible employees)
Multiple employer plans may have to perform
Total Eligible Under ESRP
Pay or Play calculation for multiple entities.
Less ESRP Allowance
Total Subject to Penalty
Annual Penalty Amount per Employee
Total Annual Pay AND Play Penalty
10
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1,070
54
1,070
-30
1,040
$2,000
$2,080,000
Financial Risk
Employer Shared Responsibility Provision
Determining “Affordability”
• Employers may be assessed a penalty for offering
coverage to full-time employees that is not
“affordable”.
• Three Affordability Safe Harbors:
1. Form W-2 Safe Harbor – Employee contribution for
lowest cost employee only coverage does not exceed
9.5% of employee’s Box 1 W-2 wages for the applicable
calendar year.
11
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Financial Risk
Employer Shared Responsibility Provision
Determining “Affordability”
2. Rate of Pay Safe Harbor – Test using monthly salary at the
beginning of the plan year as base. Employee only cost
cannot exceed 9.5% of earnings as of the first day of the
plan year
3. “Federal Poverty Line” (FPL) Safe Harbor – Coverage will
be “affordable” if self-only coverage does not exceed
9.5% of Federal Poverty Level for single individual.

Current individual FPL is $11,170
12
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Financial Risk
Employer Shared Responsibility Provision
Determining “Minimum Value”
• 60% Actuarial Value
• Out of pocket max - $6,350 single/$12,700 family
• Essential Benefits – Large employers
–
–
–
–
Physician and mid-level practitioner care
Hospital and emergency room services
Pharmacy benefits
Laboratory and imaging services
• Exchange (Marketplace) Bronze equivalent
13
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Financial Risk
Employer Shared Responsibility Provision
Defining a “Dependent”
• PPACA indicates coverage must be made available to
employees and their dependents. Dependents defined
through this further guidance as:
 Child of an employee who has not attained age 26
 Spouse coverage not necessary to be offered – if offered, not
necessary to be “affordable”
Maximum Waiting Period
• Waiting period for coverage can be no greater than 90 days
(not three months)
14
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Financial Risk
Employer Shared Responsibility Provision
Defining a “Full-Time Employee”
• An employee who is employed on average at least 30 “hours
of service” per week or 130 hours per month
– Include compensable hours – those worked, also hours
paid when no work is performed
– Special periods of unpaid leave may not be counted
against to reduce average hours of service including:
FMLA, Military Service, Leave of absence, Jury duty, Vacation, Sick, Personal,
Holiday, Incapacity including disability
– Re-hired employees


Breaks in service greater than 26 weeks
Parity rule for breaks in services less than 26 weeks
• Qualifying part-time, seasonal and variable employees
15
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Financial Risk
Employer Shared Responsibility Provision
Determining Eligibility of Part-Time
Seasonal, & Variable Hour Employees
Safe Harbor Rule
• Seasonal, Variable and Part-time employees
– Measurement, Administrative and Stability Periods to determine
average hours of service
– All employees of all entities consistently assessed
16
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Financial Risk
Employer Shared Responsibility Provision
• Definitions
Measurement Period
A “standard” look-back period f 3-12 consecutive months used to determine
employees’ full time status for purposes of determining benefits eligibility and
employer penalty responsibility during subsequent Stability Period for
variable/seasonal employees. For new hires, this “initial” period must start no
later than the first day of the calendar month following employee start date.
Administration Period
A period of up to 90 days between the Standard Measurement Period and the
associated Stability Period to determine eligibility, notification and enrollment.
17
Stability Period
A period of time following a Measurement Period in which a variable or seasonal
employee is/is not considered a full time employee for purposes of determining
benefits eligibility and accordingly, pay or play penalty, regardless of hours worked
during this period as long as still employed.
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Financial Risk
Employer Shared Responsibility Provision
• Rules
ONGOING EMPLOYEE
NEW EMPLOYEE
Standard Measurement Period
 Must be 3 – 12 consecutive months
Administration Period
 Up to 90 days (not 3 months)
 Must overlap prior stability period (no lapse
for FT EE’s both years)
Stability Period
 Must be 6 – 12 consecutive months, but
 Not shorter than Measurement Period
 If not full-time employee, Stability Period
cannot be longer than Measurement Period
Initial Measurement Period
Must be 3 – 12 consecutive months
Must start no later than the first day of the
calendar month following employee start
date.
Administration Period
A period of up to 90 days
Administration Period plus Initial
Measurement Period cannot exceed last day
of first calendar month beginning on/after
one year anniversary of employee start date.
(13 + fraction month)
Stability Period
Must be 6-12 consecutive months
Period must be as long as Stability Period for
ongoing employees.
18
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Testing a Variable Employee
Ongoing Employee
Ongoing variable, part-time and seasonal employee assessment cycle:
EMPLOYER: Plan Year 10/1/14
Cycle 1
8/1/13
7/31/14
Standard Measurement Period
12 months
Cycle 2
Measure  Must be 3 – 12 consecutive months
Period  Uniform and consistent basis for all
employees in same category
Admin.
Period
 Up to 90 days (not 3 months)
 Must overlap prior stability period (no
lapse for FT EE’s both years)
8/1 - 9/30/14
Admin
Period
10/1/14
9/30/15
Stability Period (Plan Year)
61 days
12 months
7/31/15
8/1 – 9/30/15
Standard Measurement Period
Admin
Period
8/1/14
12 months
Stability  Must be 6 – 12 consecutive months, but
Period  Not shorter than Measurement Period
 If not full-time employee, Stability
19
Period cannot be longer than
Measurement
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to copyright and Period
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61 days
10/1/15 thru 9/30/16
Stability Period
(Plan Year)
12 months
Defining a Variable Employee
New Employee
New variable, part-time and seasonal employee assessment cycle:
Employee Start Date: 11/18/14
New Employee: Hillary Clinton – Year of Hire
12/1/14
11/30/15
Initial Measurement Period
12 months
12/1-12/31/15
1/1/16
12/31/16
Admin
Period
Stability Period (Plan Year)
1mo+13days
12 months
(44 days)
13 + fraction months
20
Initial Measurement
Period
 Must be 3 – 12 consecutive months
 Uniform and consistent basis for all employees in same category
Administration Period
 Up to 90 days (not 3 months)
 Combined with Initial Measurement Period, cannot exceed 13 + fraction month (last day of 1st calendar month beginning on
or after one year anniversary of EE start date.)
Stability Period





Must be same length as ongoing employees’
> 6 consecutive calendar months
> measurement period
FT during Measurement Per.  Benefits thru end of Stability Period
If not a FT employee, Stability Period cannot be greater than initial measurement period + 1 month
AND cannot exceed remainder of standard measurement period in which initial measurement period ends
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EXAMPLE: Transition from New to Ongoing Employee
Employee Start Date: 11/18/14 (Employer A – 10/1 Fiscal Plan)
New Employee:
12/1/14
11/30/15
Initial Measurement Period
12 months
12/1-12/31/15
1/1/16
12/31/16
Admin
Period
Stability Period (Plan Year)
1mo+13days
12 months
(44 days)
Scenario 1 – FT during
Initial & Standard
Measurement Periods:
Full time employee from
1/1/16-9/30/17
13 + fraction months
Transition to Ongoing Employee:
8/1/14
7/31/15 8/1-9/30/15 10/1/15
Standard Measurement Period
12 months
9/30/16
Admin
Period
Stability Period (Plan Year)
61 days
12 months
8/1/15
7/31/16 8/1-9/30/16 10/1/16
Standard Measurement Period
21
Scenario 2 – FT during
Initial but NOT FT
during Standard
Measurement Period:
Full time employee from
1/1/16-12/31/16
12 months
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Admin
Period
61 days
9/30/17
Stability Period (Plan Year)
12 months
Financial Risk
Employer Shared Responsibility Provision
Penalty Assessment Process
• IRS will notify employer of potential liability and provide
opportunity to respond
• Notification will be given after:
– Employees’ individual tax returns are due
– Employer has filed an informational report (more info to come)
identifying full-time employees and describing coverage offered
• If penalty deemed assessable, IRS to bill and expect
immediate payment
• Penalty to employers will not be paid on any tax return
22
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Financial Risk
Cadillac Tax
• 40% excise tax on “Cadillac Plans”
 $10,200 for single coverage (High Risk Employees: $11,850)
 $27,500 for family coverage (High Risk Employees: $30,950)
 Excludes dental and vision
 Includes health plan, FSA, HSA, HRA and supplemental
 Employers must calculate and report excess value and tax
PENDING GUIDANCE
23
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Financial Risk
Non-Compliance Penalties
• Reporting
– Form W-2
– Form 720
• Notifications
–
–
–
–
–
Plan amendments
Grandfather Plan
Exchange Availability
Updated COBRA notice
SBC
24
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Financial Risk
Non-Compliance Penalties
25
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Financial Risk
Non-Compliance Penalties
26
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Financial Risk
Non-Compliance Penalties
Summary of Benefits & Coverage (SBC)
• 2012 Culturally and Linguistically Appropriate Services (CLAS) Florida
County Data
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/clas-data.html
27
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Financial Risk
Non-Compliance Penalties
Summary of Benefits & Coverage
Compliance/Logistics: Triggers, Timing and to Whom
28
*If policy not issued by renewal date, SBC must be issued within 7 business days after the either of:
a) the date the policy is issued, or b) receipt of written confirmation of intent to renew.
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Financial Risk
Non-Compliance Penalties
W-2 Reporting of Employer Sponsored Health Coverage
General Rules
1. Reportable cost is ER contribution + EE contribution of group health coverage for
entire family – including adult dependents and domestic partners. If group health
plan includes dental & vision – report entire premium.
2. Do not report clinics, Wellness or EAP plans unless separate COBRA premium is
charged.
3. Do not include HRA, Employee contributions to FSA, HSA or Archer MSA’s.
4. Calendar year calculation
5. Three methods to calculate value:
a)
b)
c)
29
Premium charged method – Fully insured
COBRA applicable premium method – Self-insured, HDHP, Minimum Premium
Modified COBRA premium method – where employer subsidizes cost of COBRA
6. CONSISTENCY
7. Keep documentation
8. Further guidance with Q&A Notices 2012-9 and 2011-28.
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http://www.irs.gov/uac/Form-W-2-Informational-Reporting-of-the-Cost-of-Employer-Sponsored-Group-Health-Plan-Coverage
Coverage Type
Major medical
Dental or vision plan not integrated into another medical or health plan
Dental or vision plan which gives the choice of declining or electing and paying an additional premium
Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts
Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits
Health Reimbursement Arrangement (HRA) contributions
Health Savings Arrangement (HSA) contributions (employer or employee)
Archer Medical Savings Account (Archer MSA) contributions (employer or employee)
Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis
Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer
Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage
On-site medical clinics providing applicable employer-sponsored healthcare coverage
Wellness programs providing applicable employer-sponsored healthcare coverage
Multi-employer plans
Domestic partner coverage included in gross income
Military plan provided by a governmental entity
Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally
recognized Indian tribal government
Self-funded plans not subject to Federal COBRA
Accident or disability income
Long-term care
Liability insurance
Supplemental liability insurance
Workers' compensation
Automobile medical payment insurance
Credit-only insurance
Excess reimbursement to highly compensated individual, included in gross income
Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income
Other Situations
Employers required to file fewer than 250 Forms W-2 for the preceding calendar year
Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2
before the end of that year
Forms W-2 provided by third-party sick-pay provider to employees of other employers
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Report on form W-2
Do Not Report on
Form W-2
Optional
Reporting
X
X
X
X
X
X
X
X
X
X
Required if employer
charges a COBRA
premium
Required if employer
charges a COBRA
premium
Required if employer
charges a COBRA
premium
Optional if employer
does not charge a
COBRA premium
Optional if employer
does not charge a
COBRA premium
Optional if employer
does not charge a
COBRA premium
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Report
Do Not Report
Optional
X
X
30X
Financial Risk
Non-Compliance Penalties
• Benefit Plan Design
–
–
–
–
–
–
–
No annual max
No lifetime max
Max waiting period
Wellness HIPAA violation
Medical FSA
HRA
Discrimination
31
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Financial Risk
Budget Exposure
Industry Related Fees
• PCORI Fee
• Health Insurance Industry Fee
• Transitional Reinsurance Program
32
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Financial Risk
Budget Exposure
PCORI Fee
• $1 PMPY in year 1; $2 PMPY in years 2-7 (indexed for medical inflation)
• Fee applies to policy or plan years ending on or after 10/1/12 and before
10/1/2019.
• Fee is due in July of the calendar year that follows the end of applicable
plan or policy year for self-funded plans on Form 720. (Expect fee built
into rates of fully insured plan.)
• First payment due by 07/31/2013 for calendar year plans or those with
plan years ending in October, November or December of 2012.
• Plans with policy years ending after 12/31/2012, will make first payment in
July, 2014.
• Plan sponsor is responsible to file report on behalf of all participating
employer groups in plan.
• Recommend payment not made from plan assets
33
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Financial Risk
Budget Exposure
PCORI Fee
• Form 720
34
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Financial Risk
Budget Exposure
PCORI Fee
• What plans are subject to the PCORI Fee?
FEE APPLIES TO: Employer Sponsored
FEE DOES NOT APPLY TO:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Fully insured medical plans, including
minimum premium plans
Self-insured group medical plans
Individual/family plans
Stand-alone behavioral health plans
Individuals on a temporary U.S. Visa who live in
the U.S.
Medicare Surround and Medicare Expand
policies
Retiree-only plans
Health Reimbursement Accounts (HRAs)
Flexible Spending Accounts (FSAs) if the
employer contribution is > $500 and it is more
than the employee contribution
•
Health Savings Accounts (HSAs)
Stand-alone dental plans
Stand-alone vision plans
Employee Assistance Plans (EAPs)
Exempt FSA plans
Medicare Parts A-D coverage
Medicaid coverage
Expatriate coverage provided primarily for
employees who work and reside outside the
U.S.
U.S.-based “trailing dependents” of expatriate
employees who live overseas
35
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Financial Risk
Budget Exposure
PCORI Fee
• Special rules for multiple plans:
– For multiple plans running on same plan year:
All Plans Self
Insured:
(i.e. Medical & Rx,
or Medical & HRA)
If two or more self-insured plans cover the same
individuals and have the same plan year, do not
pay the fee twice.
Mixed Fully Insured
and Self Insured:
(i.e. Medical & HRA)
If major medical is fully insured and fee is paid by
insurance carrier, the plan sponsor (employer) is
responsible for payment of fee for all covered
lives in the HRA, thus double counting the
participants
36
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Financial Risk
Budget Exposure
PCORI Fee
• Three methods for determining the average number of
covered lives based on entire plan year:
Actual Count
Method
The plan sponsor counts the number of individuals covered by the
plan each day of the plan year and divides by the number of days in
the plan year.
Snapshot
Method
The plan sponsor counts the number of individuals covered by the
plan on one or more dates during each quarter of the plan year and
divides by the number of dates on which the count was made.
(Dates must be within three days of the date used in the first quarter.)
Snapshot
Factor Method
Allows employer to count all “self only” participants, and use a factor
of 2.35 for any employee with other than “self only” coverage.
Form 5500
Method
The plan sponsor uses the plan’s annual Form 5500 filed for the plan
year – adding the count of participants at the beginning of the year
and at year end to arrive at the average number of covered lives.
37
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Financial Risk
Budget Exposure
Health Insurance Industry Fee
• Fee to assist the government in subsidizing coverage for lower
income individuals and families
• Paid by the carrier providing fully insured plans
• Fee is ongoing (no planned end)
Year
2014
2015 & 2016
2017
2018
Years after 2018
Fee
$8 billion
$11.3 billion
$13.9 billion
$14.3 billion
Prior year amount indexed by rate of annual
premium growth
• Result = premium increase of 2.3 – 3.5% for 2014
38
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Financial Risk
Budget Exposure
Transitional Reinsurance Program
• Temporary program intended to stabilize premiums in the
individual market from 2014 – 2016.
• Protects insurers from uncertainty in rate setting. (PCIP and
other high risk pools to flow into Exchange(s))
• Applies to:
– Fully insured grandfathered and non-grandfathered plans

Insurance carrier pays fee
– Self insured grandfathered and non-grandfathered plans

TPA’s may make payment on behalf of plan sponsor or plans may
pay directly, although plan liable for the fee.
39
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Financial Risk
Budget Exposure
Transitional Reinsurance Program
• How much is the fee?
Year
Total Fee to
be Collected*
Fully Insured
Self Insured
2014
$12 billion
2015
$8 billion
2016
$5 billion
Built in premium or direct
pass-through at rate of $63
PMPY or $5.25 PMPM for
2014. **Estimates
expected to decrease to
$42.00 and $26.25 in years
2015 and 2016
respectively.
TPA to bill/collect/remit or
plan sponsor direct pay at
rate of $63 PMPY or $5.25
PMPM for 2014.
**Estimates expected to
decrease to $42.00 and
$26.25 in years 2015 and
2016 respectively.
*State has option to add an additional a state-level fee.
**To be confirmed through HHS Notice of Benefit and Payment Parameters 2014-2015
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Financial Risk
Budget Exposure
Transitional Reinsurance Program
• Budget Calculation Example
– 10/1 Fiscal plan year / 2600 Total Members
2013 / 2014 Impact (Applies for 9 months)
Transitional Reinsurance Fee (Per Member per Month)
January 1, 2014 – September 30, 2014 Expense
$5.25
$122,850
2014 / 2015 Impact (Applies for 12 months)
Transitional Reinsurance Fee (PMPM) – 3 Months
$5.25
Transitional Reinsurance Fee (PMPM) – 9 Months
$3.50
Annual Expense
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$122,850
Financial Risk
Budget Exposure
Transitional Reinsurance Program
• When is it due and how is it paid?
– Fee is a calendar year fee
– Fully insured: pay in/with monthly premiums starting plan years that
extend into 2014
– Self insured: likely remit to TPA monthly or annually
– Enrollment count submitted to HHS by November 15th of years 2014,
2015, and 2016
– HHS issued invoice expected by December 15th
– Payment due within 30 days of invoice
NOTE: Fee is tax deductible expense.
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Financial Risk
Budget Exposure
Transitional Reinsurance Program
• What plans are subject to the fee?
FEE APPLIES TO:
FEE DOES NOT APPLY TO:
•
•
•
•
•
•
•
All insured individual and group medical plans
(HMO, Network, PPO and OAP) regardless of
funding type (i.e., Guaranteed Cost or Shared
Returns including Minimum Premium)
TPAs/plan sponsor on behalf of self-insured
group medical plans
Taft-Hartley Plans to the extent the plans meet
the other criteria for inclusion
Stand-alone pharmacy and behavioral health
•
•
•
•
•
•
•
Stand-alone dental and vision plans
Hospital indemnity and specified disease plans
Private Medicare, Medicaid, CHIP, state and
federal high-risk pools and basic health plans
Health Reimbursement Accounts (HRAs)
integrated with a group health plan
Health Savings Accounts (HSAs)
Flexible Spending Accounts (FSAs)
Employee assistance programs, disease
management programs and wellness programs
Stop-loss and indemnity reinsurance policies
Military health benefits
Indian Health Service coverage
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Financial Risk
Budget Exposure
Transitional Reinsurance Program
• Special rules for multiple plans:
– For multiple plans running on same plan year:
All Plans Self
Insured:
(i.e. Medical & Rx,
or Medical & HRA)
Mixed Fully Insured
and Self Insured:
(i.e. Medical & HRA)
If two or more self-insured plans cover the same
individuals and have the same plan year, do not
pay the fee twice.
If integrated major medical is fully insured and
HRA or Rx plan self-insured – treat as a single
group health plan to calculate fee.
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Financial Risk
Budget Exposure
Transitional Reinsurance Program
• Three methods for determining the average number of covered lives
based on entire plan year:
Actual Count
Method
The plan sponsor counts the number of individuals covered by the plan
each day of the first 9 months of the applicable year and divides by the
number of days in the first 9 months of the year.
Snapshot
Method
The plan sponsor counts the number of individuals covered by the plan
on one or more dates during the first three quarters of the plan year
and divides by the number of dates on which the count was made.
Snapshot Factor
Method
(Dates must be within three days of the date used in the first quarter.)
Allows employer to count all “self only” participants, and use a factor of 2.35 for
any employee with other than “self only” coverage during first three quarters of
the year. (Not available for groups with both fully insured and self insured options)
Form 5500
Method
Add the total count of participants at the beginning of the year and at
year end, as reported on 5500, and divide by two.
(May not be used if plan sponsor has multiple self insured plans or both fully
insured and self insured plans.)
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Financial Risk
Budget Exposure
Trend and Plan Design Impact
• “Too good to be true” renewals
• Under 100 market manual rate increases
– Guaranteed issue, guaranteed renewability, but no credible experience
•
•
•
•
•
•
•
•
Small group composite rate elimination
Specialty drug rising costs / Clinical trials
Medical trend
Max out of pocket limits
Elimination of lifetime/annual maximums
Smoker surcharge/Wellness rewards
Adverse risk entering small group market
Special change in election/marketplace enrollment
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Financial Risk
Budget Exposure
Trend and Plan Design Impact
• Special Change in Election Amendment – Section 1.125-4
– Availability of Exchange is NOT a change in status
– Transition Relief


Large Employers
Fiscal Plan Years Starting in 2013
– Section 125 Plan doc amendment


Accident & Health plans only
Allows 1 change prospectively to
o
o
Revoke, change current election (go to exchange)
Make salary reduction election for fiscal plan that began in 2013 (go in ER plan)
– Must incorporate rules into Section 125 plan doc by 12/31/14 and
must be retro to first day of fiscal plan year started in 2013.
47
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Financial Risk
Budget Exposure
48
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Audit Risk
Regulatory Agencies
• Internal Revenue Service
– Pay or Play Penalty / ESRP
– FSA; $2,500 max
– Form W-2 reporting of
employer sponsored
health coverage
– Form 720
– Elimination of stand alone
HRA
– Imputed Income
49
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Audit Risk
Regulatory Agencies
• Department of Labor - Compliance
–
–
–
–
Mandatory disclosures
MLR rebate distribution
Max waiting period
Summary of Benefits and Coverage (SBC)

Content and distribution
– Amended plan documents


FSA, $2,500 max
Special change in election amendment
50
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Audit Risk
Regulatory Agencies
• Department of Labor - Compliance
– Non-discrimination


Eligibility & benefits
Wellness rewards
– Pay or play transitional guidance requirements met
– Anti-abuse rules
– Notice of Exchange availability
51
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Audit Risk
• Model Exchange Notice
Due to employees by October 1, 2013
52
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Culture Risk
Align Expectations
• Management
– Staffing
– Ownership of timekeeping
• Employee
–
–
–
–
–
–
Marketplace media blitz
Medicaid expansion
Access to care
Wellness programs
Special change election / 2 deductibles & 2 OOP
Private exchanges / Defined contribution
53
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Culture Risk
Align Expectations
• Managing authority
– Position recommendation
– Comparative entity survey
• Collective bargaining units
– Representation among leadership
– Clear communication and education for buy-in
– Balancing benefits expectations & potential wage
suppression
54
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Legal Risk
• Wellness plan discrimination
• Benefits classification and eligibility
• ERISA / Reduction in hours / Anti-abuse
55
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Legal Risk
Other Looming Legislation & Guidance
•
•
•
•
•
•
DOMA legislation
Lawsuit - Exchange subsidy from FFE
Non-discrimination rules
Final ESRP guidance
Medicaid expansion
The Hub
56
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Emerging Trends
• ACO’s
• Local hospital/physician group issuers
• Innovative product offerings & plan design strategies
–
–
–
–
–
–
–
–
–
–
–
57
Smaller “designated” networks
Telemedicine
Specialty procedures at “centers of excellence”
Outcome-based Wellness programs – 30%/50%
Planning around “substantially all” eligible employees
60% actuarial value with buy-up
Stratified plans w/in discrimination – Culture/reporting/economics
Non/limited offering of spousal coverage
Early renewals
HDHP with Gap plan
Skinny plans (MEC but not Minimum Value)
This document is subject to copyright and may not be transmitted or reproduced without express written permission from Gehring Group.
Emerging Trends
• Clinics
–
–
–
–
Employee health and wellness center
Urgent Care
Primary Care
Prescription dispensing
• Access to care
–
–
–
–
Telemedicine
Interlocal agreements
Concierge
Minute clinics and similar
58
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Emerging Trends
• Private Exchanges
– Florida Health Choices



4-50 employees
Single Carrier
Minimum employer contribution – 50%
– Single Carrier exchange
– Multiple Carrier exchange
• Public Exchange
–
–
–
–
–
–
Notification requirement
Subsidy qualification
Florida FFE
Essential Health Benefits – QHP
Metal Levels: Bronze – Platinum
The Hub
59
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Emerging Trends
• Exchange Applications
Individual Short Form
Family Application
60
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Individual Without
Financial Assistance
Balancing Risks, Costs & Rewards
I don’t know if you know this,
but I’m kind of a big freaking deal.
61
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Balancing Risks, Costs & Rewards
• Budget for fees and, mitigate exposure through safe
harbors, assess and update processes and systems,
and be forward thinking in planning.
• Stay abreast of emerging compliance and reporting
mandates and legislation and document, document,
and maintain those documents.
• Collaborate and communicate to organizational
decision makers, leaders, and employees.
62
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Balancing Risks, Costs & Rewards
• Beware of HIPAA and ERISA that does apply including
forthcoming discrimination rules – as well as in
house practices and pending legislation that may
impact your plan
• Stay updated on emerging products and trends and
consider them in relation to your dynamics, industry,
and culture.
• Ask questions.
63
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Questions
64
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Contact Information:
Copy of presentation: cindy.thompsom@gehringgroup.com
Questions: Kate Grangard, CPA, CFO
kate.grangard@gehringgroup.com
(561) 626-6797
This document is subject to copyright and may not be transmitted or reproduced without express written permission from Gehring Group.