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from multiple documents and presentations. It is not intended to
contain any legal advice. Please consult with your legal advisors for
specific information that may apply to you and your company.
AN
EDITORIAL
MOMENT
Insurance
Companies
Doctors
Who’s to
Blame?
Lawyers
Consumers
Agents
The Law
• The President signed the health care legislation
into law on March 23, 2010.
• The regulations defining the law are being
written by HHS, DOL and IRS.
• IRS & OSHA have monitoring responsibility.
• CMS has responsibility for most of the
implementation, including that of the
Marketplace.
You Can Keep Your Insurance
Grandfathered Plans
Grandfathered Plan
Benefits of Retaining Status
• Exemption from rating restrictions based
on age variation.
• Ability to continue coverage based on class.
• Exemption from implementing Essential Health
Benefits (e.g. pediatric dental).
A Grandfathered Plan
•
•
•
•
Increase Deductible up to 15%.
Increase Copays up to 15%.
Increase Coinsurance more than 15%.
Decrease employer contributions by
more than 5%.
Grandfathered Plan
• Most plans have lost “Grandfather” status.
• Those who have retained status must provide a
statement to participant that it believes it is a
“Grandfathered” plan.
• Do you have your documents?
Dependents Coverage
Age 26
• Coverage for children must be available until
the child reaches age 26.
• Do you have proof of the notice to employees?
(Penalty up to $100 per day).
Minimum Loss Ratio
MLR (2011)
• The MLR is 85% for large group plans and
80% for individual and small group plans
(50 and below).
• Carriers will have to issue a premium rebate to
individuals for plans that fail to meet the
minimum MLR requirements.
Large Groups
51 or More Full-Time Employees
Play or Pay
Employer Responsibility
• Effective starting January 1, 2015.
• Employer must count all full-time employees
and part-time employees on a full-time
equivalent basis in determining if they have
50 or more employees.
Play or Pay Penalties Beginning in 2014
Does the employer have
at least 50 full-time employees?
START
Does the employer
offer coverage to
all full-time
employees?
YES
Did at least one fulltime employee
receive a premium
tax credit or costsharing subsidy
through an Exchange?
NO
YES
AFFORDABILITY TEST
Is the employee’s required
premium contribution for
single coverage for the
employer’s lowest-cost
plan 9.5% or less of the
employee’s household
income?
Does the employersponsored plan provide
minimum value?
PENALTY
APPLIES
NO
YES
NO
Do any employees
purchase coverage in an
exchange and receive a
premium tax credit or
cost-sharing subsidy?
NO
YES
NO PENALTY
APPLIES
$2,000 x
number of
full-time
employees
minus 30
PENALTY
APPLIES
EXCHANGE SUBSIDY
YES
MINIMUM VALUE TEST
NO PENALTY
APPLIES
NO
YES
Lesser of
$3,000 x
number of
employees
receiving
premium tax
credits, or
$2,000 x
number of
employees
minus 30
Calculating Full-Time Equivalent Employees
• Total number of full-time employees = 30.
• Part-time employees = 40.
• Total hours worked by each part-time employee in
a calendar month = 20 hrs / week x 40 = 3,200 hrs.
• 3,200 / 120 = 27 Full-time-equivalent employees.
• Total full-time and full-time-equivalent
employees = 57.
• Play or Pay penalties apply.
Affordable Coverage Example
•
•
•
•
Employee hourly wage $9.50 per hour
$9.50 x 40 hours = $380.00
$380 x 9.5% = $36.10 per week
Employee cost of health insurance $156.43
Tracking Time
• Start tracking part-time hours now.
• Start tracking full-time hours now.
• Learn about the safe harbor for
seasonal employees.
Miscellaneous Requirements
• If employee is covered by spouse’s plan there is
no penalty to employer unless 50+ and
employer does not provide coverage or
provides unaffordable coverage.
• Employers are not required to cover spouses.
Definition of a dependent does not include
the spouse.
Small Groups
1 to 50 Full-Time Employees
PPACA “Metal” Plans
100%
70%
60%
80%
90%
50%
0%
Bronze
Silver
Gold
Platinum
Minimum Value Standards
• Minimum value - actuarial value threshold
of 60%.
• Small group plans in the bronze level of
coverage meet minimum value requirements.
• Beginning in 2014, summaries of benefits and
coverage must indicate whether the
plan meets applicable minimum value
requirements.
Minimum Essential Coverage
• The type of coverage an individual needs to have
to meet the individual responsibility requirement.
– Individual market policies
– Job-based coverage
– Medicare, Medicaid, CHIP, TRICARE
• The law does not specify the details of what this
coverage has to be, other than it has to cover
preventive care with no cost-sharing and can’t be
dental-only or vision-only (limited benefit).
Minimum Value
Calculator
Essential Health Benefits
• The 10 categories of benefits individual and small employer plans
have to provide:
–
–
–
–
–
–
–
–
–
–
Outpatient care
Emergency room
Treatment in the hospital
Maternity
Mental health and substance use disorder services
Prescription drugs
Rehabilitative and habilitative services.
Lab tests
Preventive services
Pediatric dental and vision
Age Rated Small Group
•
Censuses must provide every dependent’s date of birth and the quotes will be lined
out with a rate for each belly button. So a quote (and the eventual billing) might
look like this on a 3-person group:
John Brown
Joe Smith
Jane Smith (wife)
Danny Smith (12)
Jennifer Smith (14)
Joey Smith (22)
Susie Smith (24)
Bobby Jones
Anna Jones (wife)
$328.95
$358.23
$429.29
$158.77
$158.77
$253.97
$260.09
$598.98
$555.23
Employee
Employee/Spouse/Children
Employee/Spouse
Health Insurance Marketplace
(The Exchange)
Community Rating
• Primary component of the law affected by
–
–
–
–
–
Age band limitations (7:1 goes to 3:1).
No health underwriting.
Cost-sharing limits (e.g. $2,000 ded).
Essential health benefits.
No pre-existing conditions.
Health Insurance Marketplace
The Exchange
•
•
•
•
Smaller provider networks.
Smaller hospital network.
No out of network benefits on some plans.
Gatekeeper plans (no open access).
Health Insurance Marketplace
The Exchange
• Federal subsidies (only available through the
Exchange) are based on:
– The premium cost of the second-lowest silver
Exchange plan.
– The household income of the applicant.
– The number of people in the tax household
Federal Subsidies
Household Income Level
(% above FPL)
Maximum Premium as
Percentage of Income
Less than 133%
2.0%
At least 133% but less than 150%
3.0% - 4.0%
At least 150% but less than 200%
4.0% - 6.3%
At least 200% but less than 250%
6.3% - 8.05%
At least 250% but less than 300%
8.05% - 9.5%
At least 300% but less than 400%
9.5%
2013 Federal Poverty Level
Persons in
Family
100% FPL
133% FPL
250% FPL
400% FPL
1
$11,490
$15,282
$28,725
$45,960
2
$15,510
$20,628
$38,775
$62,040
3
$19,530
$25,975
$48,825
$78,120
4
$23,550
$31,322
$58,875
$94,200
5
$27,570
$36,668
$68,925
$110,280
6
$31,590
$42,015
$78,975
$126,360
7
$35,610
$47,361
$89,025
$142,440
8
$39,630
$52,708
$99,075
$158,520
Individual Mandate Penalties
• For individuals
(whichever is greater)
– 2014: $95 or 1% of income
above tax filing threshold
($9,500 in 2011).
– 2015: $325 or 2% of income
above tax filing threshold.
– 2016: $695 or 2.5% of income
above tax filing threshold.
– Note: Penalty for dependents
under age 18 is one half of
the individual amount.
• For families
(whichever is greater)
– 2014: $285 or 1% of income
above tax filing threshold.
– 2015: $975 or 2% of income
above tax filing threshold.
– 2016: $2085 or 2.5% of
income above tax filing
threshold.
Community Rating
• Real Life Examples
– Family of three – 63 male, 59 female, 18 son
• Current $2500 deductible plan $819.32
• 2014 $2500 deductible plan $1,397.29
– Family of four – 49 male, 50 female, 14 son,
12 daughter
• Current $5000 deductible plan $423.93
• 2014 $2500 deductible plan $965.51
Small Business Marketplace
(SHOP)
• For a small business to qualify to purchase coverage on
a SHOP they must:
Be in a SHOP service area.
Have at least one common-law employee (not owners).
Have 50 or fewer total FTE employees.
Pay a consistent percentage or amount toward the premium (at
least 50%).
– Receive tax credit.
– An employer can use a defined contribution to pay for an
employee to purchase individual coverage only if
that coverage is purchased through a SHOP plan.
–
–
–
–
Planning is Essential
Increasing Premiums 3% to 4%
Taxes
• PCORI Tax-$2.00 per covered individual-Self Admin
HRA, per each employee and each dependent.
• Reinsurance Tax-$63.00 per year per each
employee and each dependent. Funds large claims
in the individual market.
• HIT Tax- $8B divided by premiums collected in prior
year 2014. $15B 2015, $18B 2016- Paid by insurers
to help fund health care reform.
• All are pass through taxes.
January 1, 2013
• Medicare Tax increase for high income earners
an additional 0.9 to employees earning over
$200,000 ($250,000 joint filers).
Miscellaneous Requirements
Government Initiative
• DOL ran a contest for the best software to
inform employees about labor laws.
• Award winner announced on November 4.
• $14M effort to educate employees.
1099 Independent Contractors
• Many employers have said they will move
employees to 1099 status.
• The IRS is on to this and will be conducting audits.
• An employee can contact IRS and ask about their
status and you could receive an audit notice.
• Engage an independent contractor for a year or
more.
• Be very careful with this!!
Independent Contractor
You are not an independent contractor if you
perform services that can be controlled by an
employer (what will be done and how it will be
done). This applies even if you are given freedom
of action. What matters is that the employer has
the legal right to control the details of how the
services are performed.
January 1, 2014
• Guaranteed Issue.
• State Exchanges/Federal Exchange.
• Modified Community Rating
(Groups 50 or fewer).
• Redefines Small Group at 1-100 in 2016.
• Employer Mandate.
• Waiting Periods 90 Days Max.
Miscellaneous Requirements
• Full Time Employee for health insurance
purposes-30 hours per week.
• There is no requirement to pay the health
insurance for part time employees.
W-2 Reporting
• Employers who issue 250 or more W-2s are
required to list the value of the health
insurance on the W-2.
Reporting
• Employers will report employees and the hours
worked each month. 2015.
• Exempt employees can be calculated at 8 hours
per day, 40 hours per week, or actual hours
worked.
• Form 1095-C.
• Information must also be provided
to each employee.
Flexible Spending Accounts
FSA
• Flexible Spending Accounts (FSA)-Over the
counter drugs are not eligible. $2,500 cap.
Required Notices
Summary of Benefits and Coverage
SBC
• Uniform Explanation of Benefits.
– Maximum 4 pages.
– Minimum 12 point font.
• Penalty up to $1,000 per affected individual.
Summary of Benefits and Coverage
SBC
• Developed and provided
by the insurance
company.
• Delivered during Open
Enrollment.
• At a Qualifying Event.
• 60 days prior to a plan
change during the plan
year.
• When an employee
qualifies for coverage
during the plan year.
• Upon request.
Health Insurance Marketplace
(Exchange) Notice
• Employee Notice Requirement.
• Employers must issue a notice to employees
about the Health Insurance Marketplace
(Exchanges) availability and premium assistance
by October 1, 2014.
• No penalty.
Medicare
Creditable Coverage Notice
• Distributed by October 15.
• Distributed to all employees age 65 and older.
• States the company health plan has drug
coverage equal to or better than
Medicare Part “D”.
• Online verification to CMS within
60 days of renewal.
Health Reimbursement
Arrangement (HRA)
• No stand alone, except for retirees.
Possible Strategies
Will employers drop coverage to
save cost?
• Some will and force their employees
to the Exchange.
• In some cases, the penalties are lower than the
cost of coverage, but what about the soft cost
of competition?
Early Renewals
• Keeps current plan design in place until
December 1, 2014.
• Avoids age rated plans for all groups under 50.
• Avoids community rates.
• Avoids PPACA plan designs.
Level Funded
Partially Self-Funded
• Employer liability limited to the monthly
premiums.
• Monthly claims reports.
• If plan develops a surplus the employer can
receive a refund.
• If plan runs in a deficit, no deficit recovery.
Defined Contribution
• Places the insurance buying decision in the
hands of the employee.
• Must still comply with affordability.
• Wide range of options for the employee.
• Must be equal to all.
Defined Contribution
Employer Allowance $300
Medical
Dental
Vision
Total
-$250
-$25
-$10
-$285
Employee
+$15
Summary
• You will be exposed to every concept you can
imagine.
• Some old concepts, some new.
• Some will survive, and some will cause the
employer bigger problems.
• Caveat Emptor (let the buyer beware).
• Select a trusted advisor.
Summary
• Document!
• Document!
• Document!
Websites
•
•
•
•
•
•
•
DOL.gov
HHS.gov
IRS.gov
Healthcare.gov
CMS.gov-search “minimum value calculator”
EEOC.gov
e2eresources.com
Thank You