How to Successfully Navigate
Through Health Care Reform
County and Local Governments Workshops
April 30 – May 2, 2013
Jackson, Franklin and Knoxville, TN
Presented by:
Andrea Bailey Powers
205.244.3809
apowers@bakerdonelson.com
AGENDA
8:30 - 8:45
8:45 – 9:45
9:45 – 10:00
10:00 – 10:45
10:45 - 11:00
11:00 – 12:30
Welcome and Announcements
ACA Provisions 2010 – 2013
◦ Health Plan Requirements
◦ Grandfathered v. Non-grandfathered Status
◦ Nondiscrimination Rules
◦ W-2 Reporting
BREAK
ACA Provisions 2014 & Exchanges
◦ Waiting Periods
◦ Reinsurance Fees
◦ Exchange
BREAK
Shared Responsibility Provisions
◦ Pay or Play Rules
◦ FTEs
◦ Hypotheticals and Examples
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The Affordable Care Act (ACA)
• The Patient Protection and
Affordable Care Act (H.R. 3200)
• The Health Care Education and
Reconciliation Act (H.R. 4872)
• Totals more than 2,000 pages
• Became effective March 23,
2010
• Most provisions upheld by the
U.S. Supreme Court on June 29,
2012
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Select ACA Provisions Affecting Employers
2011 Plan Year
2011
2012
2013
2014
Lifetime dollar limits on
Essential Health Benefits
(EHB) prohibited*
OTC medicines not
reimbursable under Health
FSAs, HSAs, or HRAs
without prescriptions, except
insulin
Employer distribution of
SBCs to participants*
Notice to inform employees
of coverage options on
health exchanges
(DELAYED)
Individual mandate to purchase
insurance or pay penalty
Preexisting condition
exclusions prohibited for
children under 19*
Limits on annual dollar
limits on EHB*
HSA Excise Tax increase
Medical Loss Ratio
rebates (insured plans
only)*
Employer reporting of
health coverage on Form
W-2 (due 1/31/13) (only
for employers with > 250
W-2s)
Limit of health Care FSA
contributions to $2500
(indexed)
Medicare tax on high income
(employers begin withholding
on wages over $200,000)
State Insurance exchanges
Addition of women's
preventive health
requirements to no cost
sharing and coverage for
certain in-network preventive
health services**
Preexisting condition
exclusions prohibited*
Extension of adult child
coverage to age 26*
Enhanced appeals
procedures**
Excise tax on high-cost
coverage
Employer responsibility to
provide affordable minimum
essential health coverage****
No cost sharing and
coverage for certain innetwork preventive health
services**
Annual dollar limits on EHB
prohibited*
Nondiscrimination rules on
fully-insured health plans**
(DELAYED)
Limit of 90-day waiting period
for coverage
*Denotes changes applicable to all group health plans
** Denotes changes NOT applicable to grandfathered health plans
***This requirement applies to "full time employees"(discussed below)
2018
Increased cap on rewards for
participation in wellness
program**
Limits on deductibles and outof-pocket maximums**
Transitional reinsurance
contributions (approx.. $63 per
participant)
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ACA– Requirements That Are Currently Effective
• Reporting of aggregate cost of health coverage on W-2s for
calendar year 2012.
• For insured plans, proper handling of any medical loss ratio rebates
for 2011 (to be distributed by insurers by August 1, 2012).
• Coverage of employees' adult children up to age 26 (for plans that
allow coverage of dependents) (limited exception for employed
children in grandfathered plans until January 1, 2014).
• Prohibition on preexisting condition exclusions for children under 19.
• First-dollar coverage of preventive care services (grandfathered
plans excepted).
• Patient protection provisions (e.g., choice of primary care provider,
coverage of out-of-network emergency services) (grandfathered
plans excepted).
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ACA Requirements That Are Currently Effective
• Prohibition on health FSA reimbursements for over-the-counter
drugs and medicines without a prescription, except insulin.
• Prohibition on lifetime limits and restrictions on annual limits for
essential health benefits (grandfathered plans excepted from some
restrictions).
• Enhanced requirements for claims and appeals, including the
addition of external review, the treatment of eligibility decisions as
subject to claims and appeals and external review in many
instances, and inclusion of notices of availability of non-English
language services and documents depending on the county to
which the claim or appeal information is sent (grandfathered plans
excepted).
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ACA Provisions Taking Effect in 2014
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Transitional Reinsurance Program
• The Transitional Reinsurance Program is a three year program that
begins in 2014 and continues through 2016.
• It will reimburse carriers in the individual market for high claims
costs.
• The program is funded through fees to be paid by employers (for
self-insured plans) and insurers (for insured plans).
• The fees for 2014 will be $5.25 a month(or $63 for the year) for each
individual covered under a health care plan.
• The fee may be paid from plan assets.
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Workplace Wellness Programs
• Defines "participatory wellness programs" and "health-contingent
wellness programs.”
• For health-contingent wellness programs − Frequency of opportunity to qualify – at least once a year
− Size of reward - size of the reward increased from 20%of the
total cost of employee-only coverage under a health plan to 30%
except tobacco cessation programs, which can be 50%.
− Reasonable alternative standards - A waiver or a reasonable
alternative standard must be made available.
− Reasonable design - The wellness program and the ability to
earn incentives must be of reasonable design, not be overly
burdensome, and not be highly suspect in method.
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Ninety Day Maximum Waiting Period For Coverage
• For plan years beginning on or after January 1, 2014, a group health
plan or health insurance issuer offering group health insurance
coverage is barred from applying any waiting period that exceeds 90
days.
• A waiting period is defined as “the period that must pass before
coverage for an employee or dependent who is otherwise eligible to
enroll under the terms of a group health plan can become effective.”
• For newly-hired employees, a plan may take a reasonable period of
time to determine whether the employee meets the plan’s eligibility
condition, including a measurement period.
• The measurement period can be no later than 13 months from the
employee’s start date (or, if the employee’s start date is not the first
day of a calendar month, the time remaining until the first day of the
next calendar month).
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Waiting Periods -- Example
1. County uses temporary staffing company for hiring data processing
employees. If temporary employee is satisfactory and is hired on
by county as regular employee, when does waiting period begin for
employee?
2. Local city hires firefighter who has worked for neighboring city for
several years. When does waiting period begin?
3. County health plan provides that coverage is effective on the first
day of the month following the waiting period. If the waiting period
is 90 days, will this comply with the new rules?
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Federal Rating Rules
• For plan years beginning after January 1, 2014, carriers are required
to adhere to premium rating rules for the individual and small group
market (grandfathered plans are exempt).
• The following rating factors are permissible:
− Self-only or family enrollment;
− Geographic area;
− Age (except the rate cannot vary by more than 3 to 1 for adults);
and
− Tobacco use (except the rate cannot vary by more than 1.5 to 1).
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Health Insurance Exchanges:
Anticipating the Future
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Big Picture of the ACA- All Goes Together
Individual mandate
Employer pay or play
Tax credits for small employers
Insurance market regulation
Insurance exchanges
Premium subsidies
Medicaid expansion
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Promoting Health Coverage
Universal Coverage
Medicaid
Coverage
(up to 133% FPL)
Individual
Mandate
Exchanges
(subsidies 133400% FPL)
Employer-Sponsored Coverage
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What is an Exchange?
• Online marketplace
• Individuals and small groups
• Will allow individuals and businesses to apply
for premium subsidies and tax credits
• An individual can also apply and have eligibility
determined for Medicaid and the Tennessee
state Children's Health Insurance Program
(CHIP)
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Health Reform by the Numbers, 2010-2019
Patient Protection and Affordable Care Act
Enrolled in Exchange
24 million
Subsidized in Exchange
19 million
Premium Subsidies Cost
$464 billion
Additionally Covered by Medicaid/CHIP
Medicaid Expansion Cost
16 million
$434 billion
Remaining Uninsured
23 million
Total 10-Year Cost of Coverage
Provisions
$938 billion
10-Year Federal Deficit Savings
$124 billion
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SOURCE: Congressional Budget Office, 2010.
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Implementation Challenges
States
New administrative and financing responsibilities
New private insurance responsibilities
Creation/definition of Essential Health Benefits
Creating Exchanges (state/federal/partner)
Enforcing new regulations on insurers and employers
Medicaid expansion, Supreme Court allows flexibility
Outreach and enrollment
Integrating Medicaid with the Exchanges
Access and building provider networks
Increasing infrastructure and capacity, including primary care
Consumers
Affordability of premiums and cost-sharing
Scope of benefits, adequacy of coverage (EHB’s)
Understanding new rules and options, enrolling in coverage
Access to care
Enforcement of individual mandate
Providers
Understanding and meeting new requirements
Increased demand
Possible payment reductions (though increases for some)
Reorganizing how care is delivered
Federal
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Government
Regulatory burden and capacity
Oversight requirements
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Health Insurance Exchange Timeline
Dec.
2014
2013
2012
Jan. Feb.
December 14
State-Based
Exchange
Blueprint Due
January 1
HHS Approved or
Conditionally
Approved
State-Based
Exchanges
Mar.
Apr.
May June July Aug. Sept
March 1
HHS Approves
Partnership
Exchanges (on rolling
basis)
Oct.
Nov. Dec.
October 1
Exchange Enrollment
Begins in Every State
Jan.
January 1
Exchanges are
Operational
February 15
Partnership
Exchange Blueprint
Due
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Figure 1
State Decisions For Creating Health Insurance
Exchanges
VT
WA
MT
ND
NH
MN
OR
MI
WY
PA
IA
NE
IL
UT
CO
CA
NY
WI
SD
ID
NV
ME
OH
IN
WV
KS
MO
KY
VA
MA
CT RI
NJ
DE
MD
DC
NC
TN
AZ
NM
OK
SC
AR
MS
TX
AL
GA
LA
FL
AK
HI
Declared State-Based Exchange (18 states + DC)
Planning for Partnership Exchange (7 states)
Default to Federal Exchange (25 states)
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As of January 4, 2013
SOURCE: Data compiled through review of state legislation and other exchange documents by the Kaiser Family Foundation
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Essential Health Benefits
• Beginning in 2014, all plans in the exchange and non-grandfathered plan in
the individual and small group markets outside the exchange must offer a
standard set of benefits, referred to as essential health benefits (EHB)
• States must select a benchmark plan to define the EHB
• Benchmark plans include:
• Three largest small group plans
• Three largest state employee health plans
• Three largest federal employee health plan options
• Largest commercial, non-Medicaid HMO
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Essential Health Benefit (EHB) Benchmark Plan
Selections, December 2012
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What is a Navigator?
•
Education and assistance to individuals and small businesses
•
Public or private entities or individuals
•
Maintain expertise in eligibility, enrollment and program specifications and
conduct public education activities
•
Facilitate selection of a QHP
•
Referrals to (1) health insurance consumer assistance, (2) health insurance
ombudsman, or (3) any other state agency or agencies
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SHARED RESPONSBILITY:
EMPLOYER OBLIGATIONS
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Employer Shared Responsibility Payment
(Commonly Called “Pay or Play” Penalty Tax)
•
Beginning January 1, 2014, employers with 50 or more
employees are required to provide health insurance or pay
penalty tax:
− If employer doesn't offer health coverage and at least
one low income FTE enrolls in health coverage on an
exchange and obtains a premium credit, employer must
pay an annual penalty of $2,000 multiplied by all FTEs,
disregarding the first 30
 The penalty is payable on a monthly, pro-rata basis
− If employer does offer health coverage but it is not
"affordable" or is not of "minimum value" and a low
income full-time employee enrolls in health coverage on
the exchange and obtains a premium credit, employer
must pay an annual penalty of $3,000 for each exchange
enrolled FTE (Penalty capped at $2,000 multiplied by all
FTEs, disregarding the first 30)
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Understanding the Penalties
1. What if our County offers coverage to all FTEs, but it is not
affordable for everyone?
2. What if the employee-only premium IS affordable for all FTEs, but
the family coverage is too expensive for some of our FTEs?
3. What if the coverage does not provide minimum value?
4. How do we determine if the coverage is of minimum value?
5. Can we continue to offer our same coverage and limit who is
eligible?
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Shared Responsibility Rules (continued)
What Does It Mean to "Offer Coverage"?
•
Employer that provides at least 95% of FTEs with health coverage, or if
greater, coverage to all but five of its full-time employees, is
considered to offer health coverage for purposes of the pay or play penalty
•
So, if an employer offers health coverage to 98% of its full-time
employees:
− Not subject to the $2,000 penalty
− But is subject to the $3,000 penalty with respect to each low income
FTE who isn’t eligible for the employer's health plan and who enrolls in
health coverage on the exchange and obtains a premium credit. (This
is in addition to the penalty with respect to each low income FTE who
is eligible for the employer's health plan but where the plan isn't
"affordable" or not of "minimum value")
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Shared Responsibility Rules (continued)
What Does It Mean to “Affordable"?
Health coverage must be "affordable" and of "minimum value" in order to avoid
the $3,000 penalty
There are 3 safe harbors for "affordability" test:
1. W-2 safe harbor: Employee's contribution for single coverage under the
lowest cost medical option does not exceed 9.5% of employee's Box 1 W-2
pay for that year
2. Rate of pay safe harbor: Take an hourly employee's hourly pay rate in
effect at the beginning of the year and multiply by 130 (the benchmark for
FTE status for a month under the pay or play penalty). If employee's
contribution for single coverage under the lowest cost medical option does
not exceed 9.5% of employee's monthly wage amount, the affordability test
is satisfied. A similar safe harbor is available for salaried employees based
on the employee's monthly salary in effect at the beginning of the year
3. Federal poverty line safe harbor: Test met if employee's cost for single
coverage does not exceed 9.5% of the federal poverty line for a single
individual as in effect as of the beginning of the year
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Shared Responsibility Rules (continued)
Minimum Value Test
A plan will satisfy minimum value test if it covers 60% or more of the cost of covered
benefits
Proposed regulations offer three methods of determining minimum value:
1. Calculator Method HHS and the IRS will, in the future, offer a calculator. The plan
will enter information about the plan's cost-sharing to determine whether the minimum
value test is satisfied
2. Safe Harbor Checklists Method The safe harbors will be published by HHS and the
IRS in the form of checklists to determine whether a plan provides minimum value.
Each checklist will describe cost-sharing attributes of a plan in four categories of
benefits:
• Physician and mid-level practitioner care
• Hospital and emergency room services
• Pharmacy benefits; and
• Laboratory and imaging services
3. Actuarial Certification Method If the plan contains non-standard features that aren't
suitable for the calculator or do not fit the safe harbor checklists, the plan's minimum
value can be determined by an actuarial certification
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Shared Responsibility Rules (continued)
Who is a Full-Time Employee (FTE)?
ACA defines FTE as an individual who works, on average, at least 30 hours per
week. IRS guidance provides permissible safe harbor methods for applying rule:
•
•
•
New Hires. Only count new hires as FTEs if employee is reasonably expected to
work full-time as of date of hire
Variable Hour and Seasonal Employees. Can generally exclude, unless the
employee actually works, on average, at least 30 hours per week during a
"measurement period" of between three and 12 months. If employee works the
required number of hours during the measurement period, the worker must be treated
as FTE during a subsequent "stability period" which must be a period of at least six
months, and no shorter than the initial measurement period
On-Going Employees. Can apply a measurement period/stability period test similar
to above. An employee is treated as an ongoing employee (vs. a new hire) after the
initial measurement period. If an on-going employee doesn't satisfy the "on average,
at least 30 hours per week" test for a measurement period, employer will not be
subject to penalty if it does not offer the employee health coverage for the
subsequent stability period (which can't be longer than the measurement period).
This is true regardless of the employee's actual hours of work during the stability
period
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Shared Responsibility Rules (continued)
Measurement Periods/Administration Period/Enrollment
•
Measurement Periods
− Standard Measurement Period



Applies to all on-going employees classified as variable hour employees.
Set period of 3-12 months.
Calculate average hours worked during measurement period for all variable hour
employees employed as of first day of measurement period.
− Initial Measurement Period



•
Administration Period
−
−
•
Applies to variable hour (including seasonal) employees hired after start of standard
measurement period.
Number of months in period is same as for standard measurement.
Initial measurement period calculated from employee's date of hire. If employee not an
FTE after initial measurement period, calculate under standard measurement period
thereafter.
Period commences after end of measurement period and is used to conduct enrollment of
eligible FTEs.
Period cannot exceed 90 days.
Enrollment
− FTEs must be eligible for coverage for period > measurement period, but not less
than 6 months.
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Shared Responsibility Rules (continued)
Summary of Tax
• $3,000, adjusted for inflation after 2014, multiplied by the number of
FTEs who receive premium tax credits or cost-sharing assistance
(this number is not reduced by 30)
• Penalty tax is capped at $2,000 multiplied by total number of FTEs,
reduced by 30
• If an employee is offered affordable minimum essential coverage,
employee generally ineligible for a premium tax credit and costsharing reductions for insurance purchased through an Exchange
• Employer reporting requirements (plan, type of coverage, number of
full time employees)
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Penalty Determination Chart
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Subsidy Eligibility
Beginning in 2014, consumers with incomes less than 400% of the
Federal Poverty Level (FPL) and who purchase insurance on their
own may qualify for federal subsidies.
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2010 Federal Poverty Level
48 Contiguous States and the District of Columbia
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Putting It All Together – Practical Examples
1. City has 20 salaried personnel and 40 part-time employees. Is City
subject to Shared Responsibility Rules? (Use FTE rules to
determine how many of the 40 part-time employees average 30 or
more hours per week during "determination period."
2. What if 10 of the City's part-time workers are seasonal and work
only from May – September in the publics works department?
3. What is the difference in the "initial" measurement period and the
"standard" measurement period?
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Putting It All Together – Practical Examples
4. What is an "administration period" and how long can it be?
5. If we use a 90-day administration period and have a calendar year
plan, when must the standard measurement period end? (Beware
that 90 days is NOT the same as 3 months!)
6. What if an FTE reduces hours during the year or goes on leave?
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QUESTIONS?
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