» Health Care Reform 2014 - 2015 Now What?! Strategies for Tomorrow Paul Catania, CEBS, PHR Andrea Esselstein, J.D February 2014 » WHERE DOES THE LAW STAND TODAY? LEGAL RECAP KEY CONSIDERATIONS FOR EMPLOYERS MARKET IMPACT – CARRIERS, FUNDING & PROJECTIONS STRATEGIES FOR EMPLOYERS TAKE AWAYS 3 IMMEDIATE CONSIDERATIONS REMINDERS Ban on Lifetime Dollar Limits (2010) & Annual Dollar Limits for Essential Health Benefits (2014) Dependent Coverage Expansion to Age 26 for ALL, Regardless of Other Coverage Eligibility (2014) Form W-2 Reporting Requirements Employers Filing at Least 250 Forms W-2 in 2012 Must Report Aggregate Value of Health Coverage on 2013 Form W-2 Guaranteed Issued for COBRA Continuants & Pre-65 Retirees: January 1, 2014 COBRA Notices Should be Modified to Provide Notice of New Exchange Options Summary of Benefits and Coverage (SBC): 4 Page Uniform Benefits Summary Revised Template for Plan Years on/after January 1, 2014 SBCs Should Be Distributed to New Hires within 14 Days of Hire (If Eligible for the Medical Plan) Employee Exchange Notice Requirement: October 1, 2013 Notice Should be Distributed to New Hires within 14 Days of Hire (ALL Employees -- Regardless of Plan Eligibility) 4 IMMEDIATE CONSIDERATIONS REMINDERS Medicare Part D Reporting of Creditable or NonCreditable Drug Coverage Centers for Medicaid & Medicare Services (CMS) Should be Notified within 60 Days of the Beginning of the Plan Year as to the Creditable or NonCreditable Coverage Status of RX Plans 90 Day Waiting Periods Plan Years on or after January 1, 2014 Health Flexible Spending (FSA) Account : $500 Carryover Opportunity Carryover Option May Not be Used with Plans that have Grace Periods o Which has more Value to Employees? o Which is more Easily Understood by Employees? Mental Health Parity Final Rules Effective Date: Plan Years on or after July 1, 2014 No Significant Difference than the 2009 Proposed Rules 5 Employer Shared Responsibility: NEW EFFECTIVE DATE: 2016 FOR EMPLOYERS W/50-99 FTE; 2015 FOR EMPLOYERS 100+ Does your organization employ > 50 full-time employees (FTE) ? (Controlled Group Rules) No Employer NOT subject To PAY-OR-PLAY employer shared responsibility NO PENALTY Yes Does your organization offer qualified coverage to Substantially All FTEs? 30 Hrs/wk; 130 Hrs/Mo? No Has at least one employee received a federal subsidy to purchase coverage in an exchange? Yes NONDEDUCTIBLE EMPLOYER PENALTY OF Cap = $2,000 x Total FTEs Less 30 Yes Does plan cover a minimum value of at least 60% of covered expenses? No Yes Do any FTEs pay > 9.5% of Household Income* for the lowest cost employee-only coverage? No NO PENALTY Yes Qualifying FTEs may choose to purchase coverage in an exchange by receiving a federal subsidy (if household income < 400% Of FPL) NONDEDUCTIBLE EMPLOYER PENALTY OF Yes $3,000 x Number FTEs Who Purchase Coverage In An Exchange Cap = $2,000 x Total FTEs Less 30 Employee subsidy eligibility if household income < 400% of FPL and not offered affordable coverage (9.5% or 60% of covered expenses) * Household Income Affordability Safe Harbor Defined As: Employee Only W2 Income OR using an IRS-issued Calculation for Hourly Employees; OR FPL IN THE NEWS • Further delay on “Shared Responsibility” for Employers 50-99 eligible until 2016. • For Groups over 100+, must cover 70% of FTE in 2015. Full-time defined as 30 hrs/wk on average; 130 hrs/mo. • Volunteer Firefighters and others who volunteer not considered employees under the law. • Adjunct Faculty will be considered to have worked 1.5 hours for each classroom hour. (i.e.; 15 classroom hours = 37.5 worked hours) • Dependent eligibility requirement delayed until 2016. 7 INDIVIDUAL MANDATE IMPLEMENTATION NEW CONSUMER OPTIONS ALL Americans Must have Qualified Coverage, as of March 31, 2014 or Pay Penalties in 2014 8 Enrollment by December 23, 2013 for Coverage on January 1, 2014 AND March 31, 2014 to Avoid the Individual Mandate Penalties in 2014 IMPLICATIONS FOR ALL EMPLOYERS? IN THE NEWS NONDISCRIMINATION RULES: IRS CODE 105(h)) Consider Plan Design Changes if Offering Richer Benefits to Highly Compensated Employees IRS Code 105 (h) Limitations are Currently Effective for Self Funded Plans 9 Highest Paid 25% of All Employees Delayed from January 1, 2011 Effective Date Unknown (Awaiting Guidance) $100 Per Day Per Individual Affected (Discriminated Against) » STRATEGIC OVERVIEW Key Considerations for Employers “With Change Comes NEW Opportunities…” “IT’S NOT YOU , IT’S YOUR SPOUSE…” 11 SPOUSAL BENEFIT STRATEGIES – SPOUSES ARE NOT DEPENDENTS! EMPLOYER OPTIONS “Carving Out” Spouses Not offering coverage to any spouse eligible for his or her own employer coverage “Spousal Surcharge” Disincentive to take up spousal coverage by charging an average of $100/mo extra per spouse (or per spouse not eligible for his or her own coverage) 2013: 4% of Employers 2014: 12% of Employers National Benefits Study October 2013 12 2013: 20% of Employers 2014: 33% of Employers National Benefits Study October 2013 Combined, these two practices will increase from 24% in 2013 to 45% in 2014 Numbers will Rise with New Exchange Options Employers Must Avoid offering a “Magnet” Plan PREMIUM TAX CREDITS (SUBSIDIES) If an Individual has a Valid Offer of Affordable and Minimum Value Employer-sponsored Coverage…. Subsidized Coverage will Only be Available for Individuals Purchasing through an Exchange, and NOT those in an Employer Group Health Plan 13 …the Individual (and Dependents) will NOT Qualify for Federal Subsidies to Begin on January 1, 2014 » 2014 Premium Tax Credit Eligibility: Federal Poverty Level Scale Persons in Household 14 100 % 133 -138 % 400 % 1 $11,498 $15,294 $45,992 2 $15,531 $20,659 $62,126 3 $19,565 $26,024 $78,259 4 $23,598 $31,389 $94,393 5 $27,632 $36,754 $110,527 6 $31,665 $42,119 $126,660 7 $35,698 $47,484 $142,794 8 $39,732 $52,849 $158,928 For each additional person, add: $4,033 $5,365 $16,134 UNDERSTANDING COVERAGE REQUIREMENTS » 1. Does Coverage Provide MINIMUM ESSENTIAL COVERAGE? 2. Does Coverage Meet the MINIMUM VALUE STANDARD? MINIMUM VALUE: Think “Employers” If > 50 Full-time Employees (FTEs): Employer-Sponsored Plans Must Pay 60% of Covered Expenses (Cost of Benefits) to Qualify as “Minimum Value” OR Pay Penalties MINIMAL ESSENTIAL COVERAGE (MEC): Think “Individuals” Individuals Must be Enrolled in a Plan with MEC OR Pay the Individual Market Penalty Minimum Essential Coverage Minimum Essential Coverage is a Lower Standard than Minimum Value Resulting in the LOOPHOLE to Offer a Lower Value “Skinny” Plan • • • • Employer-Sponsored Plan Coverage Qualified Individual Market Coverage Grandfathered Health Plan Coverage Government Sponsored Programs (Medicare, Medicaid, CHIP & TRICARE) 15 15 INDIVIDUAL HEALTH INSURANCE COVERAGE MANDATE MINIMUM ESSENTIAL COVERAGE Individual Health Insurance Mandate Unchanged Requires All U.S. Citizens have Minimum Essential Coverage OR Pay Penalties As of January 1, 2014 16 • INDIVIDUAL INSURANCE MARKET PENALTIES GREATER OF: • 2014: $95 per Uninsured Individual or 1% of Household Income above the Filing Threshold • 2015: $325 per Uninsured Individual or 2% of Household Income above the Filing Threshold • 2016 and Beyond: $695 per Uninsured Individual or 2.5% of Household Income above the Filing Threshold TRACKING HOURS UNDERSTAND ALL OPTIONS & IMPLICATIONS IDENTIFY IF Employing “Variable Hour” “Variable Hour” Employees Typically Working Overtime Employees in 2014 CONSIDERATIONS ACA Definition of Full-time is using “Hours of Service” 17 Employers CANNOT Rely on “Regularly Scheduled” Hours, as Documented in HR Manuals Revisions to Employment Manuals, Plan Documents, Training Manuals, Hiring Posters, etc. Training of Supervisors & Communication Steps with Employees KEY CONSIDERATIONS FOR EMPLOYERS INITIATE A COMPREHENSIVE DEMOGRAPHIC ANALYSIS TO EXPLORE ALL NEW OPPORTUNITIES Track Hours of Service for Full-time Employees 18 EVALUATE ALL PLAN DESIGNS, CONTRIBUTION STRUCTURES & FUNDING OPTIONS Benchmark Plans to Avoid Becoming a “Magnet Plan” Consider Defined Contribution Options LEVERAGE DATA INTEGRATION TOOLS IN KEY DECISION MAKING Complete a Revised Compliance Checklist MAXIMIZE (AND REITERATE) THE VALUE OF YOUR PLAN Invest in Employee Education & Engagement 2014 Exchange Models & Second-Lowest-Cost Silver Plan Premium (for a Single 40-Year-Old) Rates were pulled from the rating area of the largest city in each of these states or Washington, DC (please note that rates may vary substantially across rating areas). $413 $283 $258 $154 $201 $390 $264 $271 $255 $295 $250 $295 $285 $253 $293 $328 $228 $242 D.C. $212 State-based Exchange (14 states & DC) Supported State-based Exchange (1 state - Idaho) Partnership Exchange (7 states) Bifurcated SG/Indv. Exchange (2 states) Federally-facilitated Exchange w/ Plan Mgmt (7 states) FFE [By declaration or default] (19 states) THE CONGRESSIONAL BUDGET OFFICE The Congressional Budget Office Estimates that Individual Market Premiums will Increase by 27-30% in 2014 The CBO says “[new health care law market reforms will] have a much greater effect on premiums in the nongroup [individual] market than in the small group market, and they would have no measurable effect on premiums in the large group market.” 20 Exchange Subsidies Will Only Cover Approximately 2/3 of Premiums (on average) Fifty-six percent of Individual Exchange Consumers Will Receive a Subsidy Subsidized Consumers NEW TAXES & FEES 2014 Small Group Market < 50 Full-Time Employees (FTEs) $8 Billion Large Group Market > 50 Full-time FTEs & Self-Funded Plans $8 Billion Insurer Fee 2.5%-4% of premium for PPO/0.75%-1.5% of premium for HMO 2.5%-4% of premium for PPO/0.75%-1.5% of premium for HMO Medical Device Fee $2.7 Billion 2.7 Billion Pharmaceutical Company Fee $3 Billion $3 Billion Transitional Reinsurance Fee $63 Per Covered Life To fund the Adverse Selection in the Exchanges for 3 yrs PCORI Fee To Fund the Patient Centered Outcomes Research Institute for 6 yrs Cadillac Tax (2018) 21 $5.25 per member per month. May be adjusted based on the national contribution rate$63 Per Covered Life $63 Per Covered Life $5.25 per member per month. May be adjusted based on the national contribution rate. $2 Per Covered Life $2 Per Covered Life $1 PMPY (2013) ; $2 PMPY (2014) $2 PMPY Plus Medical Inflation (2015-2019) $1 PMPY (2013) ; $2 PMPY (2014) $2 PMPY Plus Medical Inflation (2015-2019) 40% Excise Tax on High-Value (High-Premium) Plans in 2018 40% Excise Tax on High-Value (High-Premium) Plans in 2018 N/A in 2014; however, employers are preparing, in advance, by adding wellness programs and raising employee out of pocket costs N/A in 2014; however, employers are preparing, in advance, by adding wellness programs and raising employee out of pocket costs NEW TAXES & FEES 2014 Small Group Market < 50 Full-Time Employees (FTEs) Women’s Preventive Care +0.7% Total Claims Approaching 2014 No cost Sharing Community Rating Common Risk Pool +20-100% Estimated Cost Increases Large Group Market > 50 Full-time FTEs & Self-Funded Plans +0.7% Total Claims Approaching 2014 N/A Cost Shift : Transitional Reinsurance Fee: Intended to fund high claimants in exchanges Varies by Plan Design Essential Health Benefits (EHBs) State Variance Large Group Plans are Not Required to Cover all ENH; however, if covered, EHB cannot have lifetime or annual dollar limits Medical Trend +8.0 – 13.0% +8.0 -13.0% Estimated Total Per Member Per Month: $22 -$27 PPO / $9 - $13 HMO Average Estimated Total Increase: 17-23% Estimated Total Per Member Per Month: $22 -$27 PPO / $9 - $13 HMO Average Estimated Total Increase: 17-23% Total Cost Increase (Estimate) 22 +3.0 – 5.0% Small Group Plans Required to Cover all Essential Health Benefits COMMUNITY RATING: JANUARY 2, 2014 (SMALL GROUP MARKET) New New Federal FederalRules Rulesfor for Rating RatingEmployer EmployerPremiums Premiums • No Rating Based on Employee Health History • Rating for Adults Limited to 3:1 ratio (Oldest to Youngest) • One-year Age Bands from 21-63 • 63 and Older • Single Age Band < Age 21 • Geography within a State • Tobacco Use (1.5:1) • Coverage Tier Overview 23 • No Immediate Impact • Grandfathered Plans • 100+ Employees • 2014 Rates May Substantially Increase (< 50 Full-time Employees) • Employers in States Shifting to Community Rating • Largest Rate Increases for Young, Healthy Groups • Potential Decrease for Older, Unhealthy Groups Cost Control Incentive for Groups? Elephant in the Room? Right Now, Rates and Price Predictions are all Over the Map! 24 » Health Care Reform KEY 2014 CONSIDERATIONS NEW RISKS NEW OPPORTUNITIES » Survey of Employees Says… 42% 12% 7% 23% 49% Unaware that PPACA is the Law Believe it was Repealed Overturned by the Supreme Court Don’t Know the Status Don’t have Enough Information to Understand the Impact to Families (Household Impact: Financial and Medical Circumstances) Where do you get your information? 40% 36% 30% 11% - Friends and Family - Newspapers, Radio or Online - Cable News - My Employer Also at 11%: “My doctor” and “health insurer” Kaiser Family Foundation Poll [Summer 2013] 26 26 WHAT TO EXPECT NEXT? » TRENDS TO WATCH IN THE HEALTH INSURANCE INDUSTRY Increasing Employer Activism: Shared Financial Responsibility with Employees Narrowing Provider Networks: Accountable Care & Integrated Health Systems Consumerism & Consumer Driven Health Care Options: HSAs Electronic Health Records: New Data Tools Continued Focus on Prevention: Wellness Plan Incentives to Control Costs Growing Enrollment in Government-Sponsored Plans: Regulatory Oversight 27 Employer Shift to Defined Contribution Will Drive Growth in Private Exchanges Defined Benefit Defined Contribution Variable employer cost of health care; employees pay a portion for each benefit Fixed employer subsidy provided to employees who decide which benefits to purchase Uncertain annual health care cost increases Employer controls their annual cost by adjusting the subsidy Limited product options selected by employer Increased number of product options offered so employees have a wider range of choices Limited employee decisions; little focus on cost Employee has much more latitude to choose; decision making centers on how to spend the employer provided “budget” 28 Defined Contribution Value Prop Employer Value Proposition Consumer Value Proposition • Greater control over total benefit costs and annual spending increases • Expands consumer choice and control • Can reduce administrative burden and costs • Allows customized package based on employee needs, financial status and risk tolerance • Promotes increased employee awareness of costs and cost variance • Allows consumers to trade between benefit values that are more specific to their personal needs • Provides engaging, consumerfriendly channel • Delivers familiar, online consumerfriendly retail experience 29 Defined Contribution: Design Decisions • • Amount of employer contribution Benefits which can be selected with the contribution – Medical – Dental – Vision – Supplemental Life – Disability – FSA or HSA account contribution – Other? • 30 Rules for unused contributions Private Exchange Benefits • For Employers – Packaged approach to offering benefits – Administrative efficiency, simplicity – Option to offer Defined Contribution Health Plan • For Employees – Select benefits package that meets their needs – Enrollment efficiency & simplicity 31 Private Exchanges by Size of Employer Coverage choices, scope of services, and the opportunity to create customized solutions vary by employer size. Specifics are evolving rapidly. Small Mid to Large Under 100 EE’s 100 to 1,000 EE’s Limited Options Fully-Insured Single Carrier Expanded Options Fully-Insured or Self-Insured Single Carrier Multi-Carrier Uncertain Largest National Accounts Customized Options Fully-Insured or Self-Insured Multi-Carrier for Largest The <50 segment competes with Public Exchanges in 2014 and for 2016 that expands to <100 segment 32 TAKEAWAYS DISCUSSION OVERVIEW Vet All New Coverage Options for Employees & Families in 2015 Public Exchanges, Private Exchanges, Defined Contribution Alternatives Calculate Employee Contribution / Affordability Limits and a Minimum Value Plan Design to Mitigate Penalty Exposure in 2015 Estimate Employee Subsidy Eligibility with Assumptions (FTEs Earning < 400 % of FPL) INITIATE A COMPREHENSIVE DEMOGRAPHIC ANALYSIS TO EXPLORE ALL NEW OPPORTUNITIES EVALUATE ALL PLAN DESIGNS, CONTRIBUTION STRUCTURES & FUNDING OPTIONS LEVERAGE DATA INTEGRATION TOOLS IN KEY DECISION MAKING Anticipate Cultural Impact of Plan/Network Changes (Morale, Recruiting & Retention) Execute a Long-Term, Tailored Employee Communication Platform (Over-Invest in Employee Education) 33 MAXIMIZE (AND REITERATE) THE VALUE OF YOUR PLAN CONTACTS 34 • Paul Catania, CEBS, PHR pcatania@oswaldcompanies.com 330-252-2430 • Andrea Esselstein, J.D. aesselstein@oswaldcompanies.com