VACO
What does your business need to know?
Nancy Grasso
Digital Benefit Advisors
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Health Care Reform
Discussion Topics
1. The first years
A. 2010- 2012
A.
Age 26
B.
Preventive Care
C.
No pre-x for children
D.
Non discrimination ( 105H)
E. Supreme Court Ruling
F. Expansion of Women’s Health
G. Essential Benefits Defined
H. Medical Loss ratio rules and rebated
I.
Summary of /benefits and Coverage
J.
Increased Taxes
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Health Care Reform
Discussion Topics
2. Now and in the future
A. 2013
A.
Expanded W-2 reporting
B.
Essential Benefit Established
C.
Plan Actuarial Value Determination
D.
Open Enrollment to the Exchanges
B. 2014
A. 90 Day waiting period implementation
B. Guarantee Issue- Community Rating
C. Mandate to Purchase
D. Pay or Play
E. Affordability testing with Safe harbor rules
F. Penalties Assessed
G. Reporting Requirements
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Health Care Reform
Implementation –2013
Patient Protection and Affordable Care Act of 2010
(PPACA)
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Minimum Actuarial Value
(IRS Notice 2012-31 -Issued 4/26/12 )
• What is this?
• The methodology to calculate whether
an employer-sponsored plan provides
the required minimum essential value
• Determines employee’s eligibility to
receive a premium tax credit through
the Exchange
• Proposal
Determination of type of method to use
• HHS and Treasury develop an
actuarial value calculator (AV) or a
minimum value calculator (MV)
• Checklists to determine minimum
value
• Certification by a certified actuary
utilizing approved methods
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Healthcare Exchanges open for enrollment
• October 2013
• Effective dates of Jan 2014
• Does not constitute Open Enrollment
• Model Notice Requirement
• Subsidies to those under 400% FPL
• No subsidies for dependents who are eligible for an affordable
plan.
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Health Care Reform
A New Age-2014
Patient Protection and Affordable Care Act of 2010
(PPACA)
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105H Written and Enforced
•
•
•
•
•
Cannot discriminate in favor of Highly Compensated employees (
top25%)
Cannot apply different methods of contribution for classes, tenure or
position
Cannot apply different waiting periods
Must offer coverage to all 30 hour employees
In the case of fully insured plans, the nondiscrimination rules are
enforced through the imposition of an excise tax of $100 per day per
individual discriminated against under IRC 4980D(d). This excise tax is
the penalty that generally applies under the IRC for failure to comply
with IRC requirements relating to group health plans
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Guarantee Issue and
Rate Increases
All Plans Guarantee Issue
No Pre – X’
No Declines
No additional Rate for health individual on small group
Insurance and individual
• Rating Bands Narrowed / Eliminated
• Complete Community Rates 2-99
– Average age of the group
– Geographic Region
– Plan Design Purchased
– Network
– Insurance Carrier
•
•
•
•
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Rating Rules and Methodologies
(HHS and CMS: PPACA; Health Insurance Market Rules;
Rate Review 11/26/12 proposed rule)
1. Issuers = individual member ratings
Employers = individual or composite rating
2. Age rating – limited to 3:1
3. Tobacco rating – limited to 1.5:1
Apportioned
to each
family
member
4. Family size – individual v family
a. Maximum of 3 oldest family members under age
21
b. No cap for family members over age 21
Applies to nongrandfathered health
insurers (not self-funded)
Will apply to nongrandfathered large group if
state permits coverage to be
offered through an
Exchange in 2017
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5. Geographic region
a. States or CMS can establish one or more rating
areas
b. Maximum of 7 rating areas
c. One rating area for state, county-based or 3-digit
zip codes, or metropolitan statistical areas (MSAs)
and non-MSAs
6. Re-underwriting is prohibited
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Rate Action is Imminent
Why? How?
• Compression of underwriting age bands and no health risk
adjustments
• Upward cost pressure from new benefits and increased demand
• Impact of currently uninsured
• New fees and taxes (approaching 4-6% for full year!)
11
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PPACA Mandate to Purchase
•
•
•
The keystone of the Patient Protection and Affordable Care Act (PPACA)
is an unprecedented individual mandate tax requiring virtually all U.S.
citizens and legal residents to either have health insurance or pay a tax
Taxes begin in 2014 and rise in years following. In each year, the tax
consists of the higher of a dollar amount or a percentage of household
income. For a given household, the tax applies to each individual, up to a
maximum of three. Following is the schedule of taxes:
2014: The higher of $95 per person (up to 3 people, or $285) OR 1.0% of
taxable income.
•
2015: The higher of $325 per person (up to 3 people, or $975) OR 2.0% of
taxable income.
•
2016: The higher of $695 per person (up to 3 people, or $2,085) OR 2.5%
of taxable income.
•
After 2016: The same Digital
as 2016,
annually
for cost-of-living
Insurance but adjusted
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increases
Employer Mandate
IRS Notices 2011-36, 2011-73, 2012-17 and IRS 4980H
What does this mean:
Certain employers will be required to provide coverage to its fulltime employees and dependents.
Who does this apply to:
“Applicable large employers” with 50 or more full-time
equivalent employees
• Entity that is an employer of an employee under commonlaw test
• All entities are treated as a single employer
• All employees of a controlled group are taken into account
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Employee Definitions
(Proposed amendments to Employer Sharing Responsibility
REG-138006-12; pub. 1.2.13)
Employees included in calculations:
• All full-time employees with, on average, 30 hours or more of service per week;
130 hours if using a monthly standard
• Part-time, variable, or seasonal employees
• Hours for services performed outside the U.S. for which an individual receives U.S.
source income
Special rules:
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•
Teachers and employees of educational
organizations – traditional breaks in academic
school year will often be periods of paid leave so
would be counted as hours of service
•
Commission-based employees, transportation
employees, adjunct faculty and analogous
employment positions – non-standard employees
paid on commission or subject to safety regulations,
e.g. airline pilots – under review. In interim
consider all hours necessary to perform work
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Affordability Test and Safe Harbor Rules
•
$3,000 penalty per year for each employee whose health insurance
premium contribution for single coverage exceeds 9.5% of their annual
household income
•
Affordability safe harbor -an employer will not be subject to the $3,000
penalty as long as the employee portion of the self-only premium for the
employer's lowest cost plan that provides the minimum value required is
not more than 9.5% of the employee's current W-2 wages from the
employer.
•
The IRS also confirmed that the affordability test applies only to
individual coverage, meaning employers can charge disproportionately
more for family coverage.
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Employer Mandate
IRS Notices 2011-36, 2011-73, 2012-17 and IRS 4980H
What are the penalties associated with non-compliance?
Employers may be assessed fees for any month they:
1. Fail to offer employer-sponsored minimum essential coverage to FTEs
and their dependents
a.
b.
AND at least one person enrolls for coverage, from the Exchange, and receives
a subsidy
Assessment = 1/12 of $2,000, or $166.67 per month, for each FTE, less the
first 30 employees
2. Offer employer-sponsored minimum essential coverage to FTEs and their
dependents but the employee contribution is deemed unaffordable
a.
b.
AND 1 or more employees enroll for coverage, from the Exchange, and receive
a subsidy
Assessment = the lesser of:
i.
1/12 of $3,000, or $250 per month, for FTE receiving a subsidy OR
ii. 1/12 of $2,000, or $166.67 per month, for each FTE, less the first 30
employees
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Compliance with §4980H(a), (b)
(Proposed amendments to Employer Sharing Responsibility
REG-138006-12; pub. 1.2.13)
Assessment penalties can be avoided if the employer offers minimum essential coverage under an
employer-sponsored plan to its full-time employees and their dependents.
• Minimum Essential Coverage (MEC): to be defined in a future regulation
• Definition of dependent: An employee’s child under age 26 – does not include
spouse
•
Employers will not face a tax penalty if not offering coverage to spouses, who will
be able to seek a federal premium tax credit to purchase health insurance in an
Exchange if other minimum essential coverage is not available.
• Offer of coverage in case of non-payment: Employer will not be deemed as not
offering coverage if employee fails to pay their portion of the premium – this regulation
adopts the COBRA 30-day grace period rule
• Offer of coverage: Employer will satisfy requirement as having offered if they offer to
95% of their employees
• Assessment payments: These are not tax deductible
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Reporting requirements
Employer Plan Reporting
New IRS Notice 2012-32, issued 5/14/12
Who must report?
Comments taken through 6/11/12
•
Any entity that provides minimum essential coverage
•
Those employers required to meet the shared
responsibility, i.e. employer mandated coverage
What is to be reported and how often?
•
Annual returns required
•
•
Fully insured group health plan = provided by the health
insurance issuer
•
Full demographic and coverage information on each
individual participant
•
Identification if a qualified health plan offered through an
Exchange and any advance premium payment
Employer required to offer coverage:
•
Terms and conditions of health care coverage provided to
full-time employees for the year
•
Employee information for those full-time employees who
received it and when they received it
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Fines and fees for the upcoming year
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What is your responsibility in helping employees
As mandated by the Patient Protection and Affordable Care Act
(PPACA), employers are required to provide notice to their
employees regarding the availability of the Health Insurance
Marketplace, and explain how the exchanges will operate and
the criteria to obtain a federally funded subsidy to help offset
the cost of premiums
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Health Care Reform
Resources
Healthcare Reform References
• Dept. of Health and Human Services
www.hhs.gov
www.healthcare.gov
• Kaiser Family Foundation
http://healthreform.kff.org
• America’s Health Insurance Plans
www.ahip.org
• National Association of Health Underwriters
• Internal Revenue Service
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www.nahu.org
www.irs.gov
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Health Care Reform
Q&A