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Health Care Reform
Play or Pay?
Presented by:
Jim Casadaban, MBA
Employee Benefit Specialist
HUB International Gulf South
April 2, 2013
Navigating PPACA
As we move through 2013, employers
are navigating a “perfect storm” of
challenges. Four key elements exist
today that have not existed to this
extent in the past.
• Employer requirements
• New taxes and fees
• Cost shifting due to changes in
Medicare/Medicaid reimbursements
• Employee health and accountability
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Effective Now
All Plans Must Comply
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No Lifetime Limits (PY > 10/1/10)
Dependent age 26 (PY > 10/1/10)
Guarantee issue under 19 years old (PY > 10/1/10)
No rescissions of Coverage (PY > 10/1/10)
Small business tax credit (2010 tax year)
FSA Max deferral $2,500 (PY>1/1/13)
No reimbursement for over the counter drugs (gone in flex plans) (1/1/11)
No annual limits (PY > 10/1/10)
Minimum Loss Ratios (1/1/11)
Additional Requirements if Ungrandfathered
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No higher out of network cost-share for ER Services (PY > 10/1/10)
Discrimination Rules (delayed)
Preventive Services – first dollar coverage (PY> 10/1/10)
Coverage of Clinical Trials
The Employer Responsibility Requirement
Pay or Play Basics
• Employers have less than one year
to prepare for the arrival of the core
of the PPACA
• Requires employers with 50 or more
FT (or equivalent) employees to offer
affordable medical coverage or pay a
penalty
• While the “pay” option might be
worth considering, there are strong
reasons why you should look
carefully at all of your options
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Employer Mandate
Source: Kaiser Family Foundation, 2012
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Individual Mandate
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Play or Pay
1. Lost Tax Advantages
• Employer tax breaks lost (as will their
employees).
• Employer contributions for health
care coverage are not considered
taxable income to the employee.
• Section 125 plan for medical
premiums lost (employer and
employee).
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Play or Pay
2. Reporting Burdens Remain
• Employers that don’t offer health care
coverage will still face federal reporting
requirements, in part so the penalty
amount can be determined.
• Employees who are not offered
coverage are likely to go to the
exchanges for coverage.
– These exchanges will require a variety of
employee data from employers, particularly
for employees who may be eligible for the
premium tax credit
– Employers may have to deal with a
significant number of inquiries from
exchanges (staff time, effort, costs).
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Exchange Marketplace
• Exchange: Online
marketplace for
health insurance
• Employees Qualify
for Subsidy Based
on Income Level
100% - 400% of
FPL
• Groups under 100
in Louisiana
• Other Options –
Private Exchanges
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Play or Pay
3. Recruitment and Retention Challenges
• Employers who opt not to offer health
care coverage could be doing longterm damage to their employment
brands, making it difficult to attract top
talent in the future.
• And the damage to the brand could be
even greater for employers that once
offered coverage but elect to eliminate
it in favor of paying penalties.
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• Employees who are forced to use
exchanges — especially untested or
insufficiently staffed exchanges —
could feel undervalued or abandoned
by their employers.
Play or Pay
4. Counting Employees Can Be Complex
• What constitutes a FT employee?
• Answering this question can be tricky;
in late August 2012 the IRS issued 18
pages of rules that only partly answer
the question.
• Employers that believe they won't
face penalties for dropping or not
offering coverage because they have
fewer than 50 employees may have
calculated incorrectly. If that happens,
the results could be costly.
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Play or Pay
5. Cost of Coverage Can Be Adjusted
• While employers may have to
cover more people, they do
have options for reducing the
costs of this coverage.
• For example, employers could
reduce their lowest-cost
coverage to stay just above the
60% minimum value threshold;
they could reduce workers’
hours below the “FT employee”
level; and they could consider
paying targeted penalties.
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Play or Pay
6. Other Financial Implications
• Employees may demand
additional compensation from
employers that elect to drop
coverage to cover the cost of
health care they must now
purchase with their own, after-tax
dollars.
• Employers who haven't properly
budgeted for nondeductible
penalties may compound their
financial burdens, especially if they
don't make long-term plans for
penalty increases.
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Play or Pay
7. Carriers Will Address Plan Designs
• Insurance carriers will become
experts on coverage requirements
out of sheer necessity, so the
myriad of plan design criteria won't
likely be a burden on many
employers.
• In addition, carriers will implement
a variety of tools to communicate
with employees, helping to keep
business disruptions to a
minimum.
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Actions to Take NOW
Sample to do List (non-exhaustive)
1. Determine whether subject to law (over 50 FT EEs in 2013)
2. Decision on maintaining EEs in FT versus part-time roles
3. Determine whether you will use the maximum 90-day waiting
period as well as new measurement period and stability period
4. Track all hours worked, especially for any EE at less than 30 hours
per week on average in a month or with variable hours
5. Modeling of participant contributions for affordability (9.5% rule)
6. Coordination with vendors/carriers for delegation of admin tasks
7. Make required 2013 EE exchange disclosures
8. Be prepared to file reports with federal agency on who is covered
9. Assess grandfather status value
10. Determine “value” of current plan (CMS.gov website)
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11. Evaluate Wellness stance
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Employee Health and Accountability
Embrace Wellness as a Business
Strategy
• Attack like you would workplace
injuries and illnesses
• 25-35% of medical claims are
preventable or delayable
• Increased risk = increased premium
• Take advantage of PPACA provisions
• Leadership must first “get it” and then
embrace
• Develop 3-5 year plan
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Plan Ahead
1. Analysis
• Penalty Projections
• Affordability Compliance of your
plan today
• What actions to take to ensure the
basic level of insurance is offered
• Maintain group plan
or go to exchange
• Contribution options
2. Cost Projections
• Cadillac Tax Projections
• 3-5 Year Strategic Plan
3. Wellness Coordination
Services
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Thank You!
Jim Casadaban, MBA
Employee Benefit Specialist
HUB International Gulf South
jim.casadaban@hubinternational.com
www.hubinternational.com
504-620-4473
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