Care Bears and the Land of Health
Care Reform
(or)
Federal Health Care Reform:
What’s Next
Presented by:
Amy B. Donovan, Esq.
Assistant General Counsel
Keenan & Associates
Care Bears
Health Care Reform
Introduction
Six most important aspects of Health Care Reform:
1. Compliance
2. The new definition of “Full-Time Employee”
3. The California Health Benefit Exchange
4. The requirements for providing employees “affordable”
health coverage of “minimum value” in 2014 and the
Cadillac tax in 2018
5. Grandfathering
6. Wellness/VBIC/Preventive Services Mandate
Agenda






Supreme Court Decision Recap
Compliance 2012 – 2014
2014 and Group Insurance
California Legislation
California Health Benefits Exchange
Wrap-Up
Supreme Court Decision
 Individual mandate
constitutional under taxing
power
 Medicaid expansion
unconstitutional insofar as
it would take away all
Medicaid funds for failure
to implement expansion
 Severance
Compliance for 2012 – 2014
ACA Compliance 2012
 $1.25 million overall aggregate annual dollar limit on
Essential Health Benefits
 Claims and Appeals for Non-Grandfathered Plans
 Medical Loss Ratio Rebates
 Preventive Care Services for Women
 Summary of Benefits and Coverage (“SBC”)
 Plan Audits (Grandfathering)
2012– Annual Limits on EHB
 $1.25 million overall aggregate annual dollar limit on
Essential Health Benefits
•
•
Plan must be amended to state this limit effective first
day of plan year in 2012
Interpretation of the meaning of “overall aggregate
annual dollar limit” varies greatly
2012– Claims and Appeals
 Applies to Non-Grandfathered Plans
 New right for participants to request an independent
external review
 Only for claims involving medical decision or rescission
 Plan Sponsors must have contracts with three
Independent Review Organizations
 Fuller disclosures required in explanations of benefits
(EOB), availability of non-English EOBs, language
services and appeals rights
2012– Medical Loss Ratio Rebates
 Fully-insured plans must spend 85% of their premiums
for claims, clinical services and quality improvement
 Notification by Issuer and payment, if any, by August 1,
2012
 Non-ERISA Plans can be allocated according to
contribution rate
2012– Preventive Care
 Details on preventive care services for women issued
last year
•
•
•
Plan years on or after August 1, 2012
Well-woman visits, gestational diabetes screening, HPV
testing, STD counseling, HIV counseling and
screening, breastfeeding support, supplies and
counseling, screening and counseling for interpersonal
and domestic violence
Controversy with Church Plans will be resolved in the
courts
2012– Summary of Benefits and Coverage and
Related Documents
 Summary of Benefits and Coverage
•
•
•
•
•
•
Effective for open enrollments and plan years
beginning on or after September 23, 2012
Applies to every group health plan (excluding excepted
benefits such as dental and vision)
Must be provided to eligible employees and family
members
Must be provided in a culturally and linguistically
appropriate manner
Electronic delivery permitted but paper copy must be
made available free of charge
Carve out plans have special challenges
2012– Summary of Benefits and Coverage and
Related Documents
 Uniform Glossary
•
•
•
Same model document for everyone
Found at DOL and HHS websites
Employer may post on its intranet but inform
employees by a paper copy available free of charge
 60-Day notice of material change to SBC
•
Any change to a plan during the plan year that would
cause a change to the SBC requires 60 days advance
notice before change becomes effective
2012– Plan Audits for Grandfathering
 The Department of Labor has begun conducting audits of
plans to check on compliance with the grandfather rules
•
•

Auditing GF plans to ensure they are indeed grandfathered
and have provided proper notice
Auditing NGF plans to ensure they complied with NGF
rules timely
Have an audit file ready to go
•
•
•
Plan document as of March 23, 2010 and amendments
Communications to employees about rates
Proof of plan design changes
ACA Compliance 2013
 Definition of Essential Health Benefits
 $2 million overall aggregate annual dollar limit on
Essential Health Benefits
 $2,500 contribution cap to Health Flexible Spending
Arrangements (“Health FSA”)
 Report value of health coverage on IRS 2012 Form
W-2
 Notice of Exchange
 Clinical Effectiveness Research Fee for 2012
2013– Definition of Essential Health
Benefits
 California AB 1453/SB 951 designate ACA
requirements + Kaiser small group HMO 30 as of 1Q
2012
 Self-insured plans and fully-insured large group health
plans will not be required to offer Essential Health
Benefits, but definition does apply to:
•
•
Lifetime limits
Annual limits
 Sponsors may continue to use good faith effort to
define what is, and what is not, an Essential Health
Benefit until guidance is issued
2013– Annual Dollar Limit Floor Rises
 $2 million overall aggregate annual dollar limit on
Essential Health Benefits
•
•
•
•
Effective for Plan Years beginning before January 1,
2014
Plan Amendment required
Review your definition of Essential Health Benefit
Consider converting dollar limits to visit limits
2013– Health FSA Cap
 $2,500 salary reduction cap to Health FSAs
•
•
•
Effective for plan years beginning on or after January 1,
2013
$2,500 limit applied on an employee-by-employee basis
Plan amendment required but no later than December
31, 2014 retroactive to 2013 provided that the plan is
operated in compliance for the 2013 Plan Year
2013– W-2 Reporting

Report value of 2012 health coverage by January 31, 2013
•
•

Includes employer and employee portion of:
▫ Major medical and Rx; wellness, EAP and on-site medical clinics if
COBRA; employer contribution to Health FSA
▫ Pre-tax payments for voluntary benefits, or if paid by employer
(e.g. cancer insurance)
Use unsubsidized COBRA rate to calculate value (minus administrative
fee)
Issues to address:
•
•
•
•
•
Reporting on employees who leave mid-year
Off-month payroll cycle – final payroll
Information obtained after the close of the plan year
Non-calendar year plans
Mid-month changes
2013– Notice of Exchange






Plan Sponsor must deliver to employees no later than March
31, 2013
Anticipate a model form for 2013
Informs employees of availability of health coverage on the
Exchange
Advises of the potential for government subsidies and
reduced cost-sharing
Advises of penalties for failure to have Minimum Essential
Coverage
California AB 792– requires court and health plan notice of
Exchange, but does not address employer notice requirement
2013– Clinical Effectiveness Research
 Supports federally mandated research on best practices
for most effective treatments
•
•
•
•
•
$1.00/covered life for the 2012 Plan Year
$2.00/covered life for each year thereafter to 2019
Sponsor liability for self-insured plans
Insurance carrier liability for fully-insured plans
Annual Tax Return and payment
▫
▫
Payment due no later than July 31
TPA is prohibited from submitting on sponsor behalf
ACA Compliance 2014
 Plans must offer coverage for all children to age 26
regardless of their eligibility for other coverage
 No overall aggregate annual dollar limits on Essential
Health Benefits
 No preexisting condition exclusions regardless of age
 Eligibility waiting periods limited to no more than 90
days
 Non-grandfathered plans must cover routine services
for clinical trials
 Exchange Reinsurance Program Fee imposed on plans
 Employer reporting to Exchange
2014– Dependent Coverage to age 26
 Plans must offer coverage for all children to age 26
regardless of their eligibility for other coverage
•
•
•
•
•
Covered under any parent plan
Covered under their employer’s plan
Covered under their spouse’s plan
Coordination of Benefits challenges
Mid-Year Enrollment Rights
2014– No Annual Dollar Limits
 No overall aggregate annual dollar limits on Essential
Health Benefits
•
•
•
Revisit definition of Essential Health Benefits
Take advantage of visit limits as compared to dollar
limits
No need to offer Essential Health Benefits
 No preexisting condition exclusions regardless of age
•
Certificate of Creditable Coverage
2014– Limits on Waiting Periods
 Eligibility waiting periods limited to no more than 90
days
•
•
•
•
•
If eligibility is based on time-served only
90-day period starts when all other requirements
satisfied. For example, promotion to new classification
Check collective bargaining agreements for
probationary periods longer than 90 days
Check collective bargaining agreement for work rules
for full-time employees – may need to re-define FTE
Part-Time employees may have a different rule
2014– Coverage for Clinical Trials
 Non-grandfathered plans must cover routine services
for clinical trials
•
•
Cannot prevent participation in a Clinical Trial if (1)
recommended by participant’s physician; or (2)
participant makes the case that he/she satisfies the
eligibility requirements for the Clinical Trial
Must cover all routine costs of Clinical Trial that are
covered under group health plan (e.g. blood draw)
2014– Exchange Reinsurance Program Fee
 Exchange Reinsurance Program Fee imposed on plans
•
•
•
•
•
Paid by the carrier or TPA
To U.S. Department of Health and Human Services
Additional amounts may be required of the California
Health Benefit Exchange
Carrier/TPA reports to HHS
Amount has not yet been determined
2014 and Group Insurance
What Else Happens in 2014?
 Individual Mandate
 HBEX health plans become effective
•
•
Exchange coverage issued on a guaranteed issue basis
with no medical underwriting
Premium subsidies and cost sharing reductions for lowpaid individuals who purchase Exchange coverage
 New definition of full-time employee
 Tax penalties for employers who for full-time employees:
•
•
•
Provide no coverage,
Provide unaffordable coverage, or
Provide coverage that provides less than minimum value
New Definition of Full-time Employee
 Works, on average, 30 hours per week
•
•
May use hourly equivalents for salaried individuals
FTE under ACA is only for group health coverage
▫
Doesn’t affect other work rules or overtime
• Month-by-month calculation
▫
▫
Part-time employee in one month may be a fulltime employee in another month
FTE Look-Back/Stability Safe-Harbor
New Definition of Full-time Employee
 Why is this important?
•
•
Employers are encouraged to provide affordable
medical coverage of minimum value to FTEs
Employer tax penalties are based on a number of FTEs
▫
▫
•
$2000 x number of FTEs (after the first 30) for failing
to offer coverage
$3000 x number of FTEs offered coverage who instead
gets a premium credit to purchase on the Exchange
Certain Lower-Paid FTEs are eligible for government
subsidies (triggering employer tax penalties for
employers with at least 50 FTEs)
Employer Tax Penalties
 “Unaffordable” is based on the cost of the employer’s
lowest cost single only coverage as a percentage of
an employee’s household income
•
•
More than 9.5% is “unaffordable”
How is an employer to estimate an employee’s
household income?
2014– Group Insurance Strategy
 Realign workforce using ACA definition of FTE
 Articulate a benefits philosophy (i.e. what are you trying to
accomplish with your health benefits?)
 Begin preliminary workforce analysis using ACA definition
of FTE
 Estimate potential tax exposure, if any
 Continual realignment of workforce benefits to benefits
philosophy to FTE workforce
 Consider realignment of workforce benefits to benefits
philosophy to PTE workforce
2014– Group Insurance Strategy
 Employer cost of medical coverage for the low-paid
FTEs may be significantly greater than the tax penalty
 Employee cost of medical coverage on the Exchange
may be significantly less than employer coverage when
subsidies are available
 Decision: eliminate the possibility of government
subsidies (and employer tax penalties); embrace them;
ignore them; or something else? Depends upon your
benefits philosophy, collective bargaining
2014– Group Insurance Strategy
 Evaluate impact of the Exchange
•
•
•
•
•
•
Could it change employee behavior?
Employment practices (e.g. cash-in-lieu) relative to the
Exchange
What behaviors do you want to promote/discourage?
Does the Exchange present an opportunity?
Would it impact retention of different types of
employee?
Would employees near Medicare retirement age leave
the workforce?
2014– Collective Bargaining






Definition of FTE and PTE in CBA/MOU
Probationary periods/Waiting periods
Coverage for Part-Time Employees
Opportunities for subsidy-eligible employees
Medicare retirees
Early retirees
California Legislation
2012 Legislation Impacting Group Health Plans

AB 1083


AB 1761


Would have impacted stop-loss for self-funded small groups
AB 340


Requires a formal agreement for producer to hold themselves out as selling
coverage on the Exchange
SB 1431


Rewrites CA small group rules to be consistent with ACA provisions
Impact on retiree health plans
2013 special session
California Health Benefits
Exchange
California Health Benefit Exchange
 CA first state in nation to have stand alone law
 RFPS being issued constantly
 Fully funded through 2015 – then must be self
supporting through fees and revenue
 Likely to become largest state agency
 Rolling fast to open enrollment by August 2013
September HBEX Meeting
 Premium Aggregation
 Individual Exchange Agent Payment
 Looming decisions
•
•
•
SHOP Policies
QHP and Benefit Design Policies
Service Center Options
October Meeting





Health Plan Solicitation – Finally!
Consumer Assistance/Ombudsman
Outreach and Education Grant
Program Criteria
Exchange Blueprint
•
•
•
1. SHOP Organizational Structure
2. Stakeholder Consultation Plan
3. Exchange Name and Branding
Thank You . . .
Keenan & Associates is an insurance brokerage and
consulting firm. It is not a law firm or an accounting
firm. We do not give legal advice or tax advice and
neither this presentation, the answers provided during the
Question and Answer period, nor the documents
accompanying this presentation constitutes or should be
construed as legal or tax advice. You are advised to
follow up with your own legal counsel and/or tax advisor
to discuss how this information affects you.