Health Care Reform
Presented by
Kurt Mann
Chief Benefits Consultant
First MainStreet Insurance, LLC
Agenda
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How it is changing & how soon.
Immediate changes.
September 23, 2010 changes.
Grandfathering of plans.
January 1, 2011 changes.
January 1, 2013 changes.
January 1, 2014 changes.
How (And How Soon)
• Patient Protection and Affordable Care Act (PPACA) will
impact every business.
• The first significant set of changes will affect employer
group health plans at the start of the first plan year after
September 23, 2010 (1/1/2011 for calendar year plans).
Immediate Impact
• Small employer tax credit.
• Elimination of pre-existing condition limitations for
children (under 19).
• Temporary high risk pool for individuals.
Beginning On September 23, 2010
• Lifetime, annual benefit limit restrictions.
• Non-discrimination rules for insured plans.
• Expansion of dependent coverage rules.
• No coverage rescissions/cancellations.
Beginning in 2011
• Government long-term care insurance program (CLASS).
• New benefit summaries.
• Over-the-counter medications not permitted from FSA,
HSA, or HRA.
• Form W-2 reporting for health care cost.
Beginning in 2013
• Health flexible spending account cap.
• Changes to rules governing itemized deductions for
medical expenses.
• Increased Medicare tax.
Beginning in 2014
• Employer “Play or Pay” provisions.
• Individual mandate provisions.
• Market reforms, including elimination of pre-existing
conditions and expansion of guaranteed issue and
renewability.
Beginning in 2014 cont.
• Annual limit and waiting period restrictions.
• Additional dependent coverage expansion.
• Minimum benefit package for small group market.
• Purchasing exchanges for individual and small group
insurance.
Beginning in 2018
• “Cadillac Plan” excise tax.
2010
What to expect in 2010…
Temporary Retiree Reinsurance Program
• Employers providing coverage to retirees 55 or older ineligible for
Medicare can apply for limited claim reimbursement from government.
• Reimbursement limited to 80% of claims between $15,000 and
$90,000.
• First-come, first-serve basis – draft application forms online.
• Government budget limited to $5 billion.
• Expires when $5 billion runs out or end of 2014.
National High Risk Pool
• $5 billion has been appropriated to create a temporary high-risk
insurance pool to help adults with pre-existing conditions if they have
been uninsured for 6 months.
• Program will be effective through 2013.
• Rocky Mountain Health Plans is administrating Colorado.
• Premiums may be subsidized by Feds or State depending on status.
• Colorado website – www.covercolorado.org.
Small Business Tax Credit
• Eligibility is limited to employers with no more than 25 full-time
equivalent employees (FTEs) whose annual full-time equivalent wages
average no more than $50,000.
• The full amount of the credit is available only to employers with 10 or
fewer FTEs with annual full-time wages of less than $25,000.
• An eligible small employer must contribute on behalf of each
employee who enrolls in qualifying health insurance.
• The employer contribution must be a uniform percentage (not less than
50%) of the premium cost of the plan.
• The credit is initially available for 2010, 2011, 2012, and 2013.
Small Business Tax Credit cont.
• Amount of the credit is based on the employer’s contribution to the
health insurance premium for each covered employee.
• The credit is reduced (1) for employers whose employees’ average
wage is between $25,000 and $50,000, and (2) for employers with
more than 10 FTEs but not more than 25 FTEs.
• The amount on which the credit is based is reduced if the amount of
premiums paid by the employer exceeds the “benchmark premium”.
• The “benchmark premium” is the average total premium cost in the
small group market for employer-sponsored coverage in the
employer’s state. (Not published yet.)
Small Business Tax Credit cont.
Small Business Tax Credit cont.
Changes Taking Place After 9/23/2010
• Most of the changes you will be living with will take place
at your first renewal after September 23, 2010.
No Lifetime Benefit Limits
• Insurers and employers are prohibited from imposing
lifetime dollar limits in all health plans and insurance
policies issued or renewed on or after September 23, 2010.
Allowed Restricted Yearly Limits
• Only applies to “Essential Health Benefits”.
• Limits apply to all employer plans and all new individual market plans.
It does not apply to grandfathered individual plans.
• Schedule of annual dollar limits allowed:
Plans issued/renewed beginning:
Annual limits allowed:
9/23/2010
No lower than $750,000
9/23/2011
No lower than $1.25 M
9/23/2012
No lower than $2 M
9/23/2014
No annual limits allowed
Allowed Restricted Yearly Limits cont.
• List of Essential Health Benefits:
• Alcoholism-related services
• Ambulance services
• Bariatric surgery
• Chiropractic manipulation and osteopathic manipulation services
• Diabetic supplies
• Diagnostic services
• Durable medical equipment
• Home health care
• Hospice
• Kidney disease treatment
• Mental health/substance abuse
Allowed Restricted Yearly Limits cont.
• List of Essential Health Benefits cont.:
• Ostomy supplies
• Outpatient occupational/physical/speech therapy
• Physician office visit (diagnostic services)
• Preventive care services
• Prosthetic devices/limbs
• Skilled nursing services
• Transplant services
• Treatment of temporomandibular joint disorder (TMJD or TMJ)
* Please note that the listed services still may be subject to copays
and other cost sharing.
No Coverage Rescissions/Cancellations
• Insurers and plans will be prohibited from rescinding coverage except
for fraud or intentional misrepresentation.
• Individual and group market plans apply.
• Applies to all plans – grandfathered or not.
• Effective 9/23/2010, no insured or self-insured health plan may rescind
coverage once an enrollee has become covered.
• “Rescission” means retroactive cancellation or discontinuance of
coverage.
No Cost-Sharing for Preventive Services
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No cost sharing allowed for services provided in network.
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Do not have to provide coverage out of network.
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Effective 9/23/2010, group health plans must cover certain types of preventive care,
immunizations, child preventive services, and women’s preventive without any costsharing charges.
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Cost-sharing for these purposes includes co-payments, co-insurance charges, and
deductibles.
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HHS is required to establish a minimum interval for various types of preventive
services, which shall not be less than one year.
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Four categories of preventive care under regulations not issued yet.
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Grandfathered plans not subject to these requirements.
Dependent Coverage up to Age 26
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Health plans that provide dependent coverage must cover children to age 26.
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Grandchildren need not be covered.
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Uniformity irrespective of age (except for children who are age 26 or older).
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Opportunity to enroll. Must give adult child whose coverage ended an opportunity to
enroll for minimum period of 30 days following written notice of right to enroll.
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Notice may be provided to employee on behalf of child.
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May be included with other enrollment materials.
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Must be offered the same coverage available to similarly situated individuals who do not
lose coverage by reason of change in dependent status.
No Pre-Existing Condition Exclusions for Dependent
Children (Under 19 years of age)
• Cannot deny coverage to anyone under 19 based on a preexisting condition.
• Applies to group plans whether grandfathered or not.
• Applies to new individual plans. Grandfathered individual
plans exempt.
No Higher Out-of-Network Cost-Share for ER
• Cannot charge higher copays or co-insurance or require
prior authorization for out-of-network ER visit.
• Applies to individual and group plans.
• Grandfathered plans exempt for individual and group
plans.
Non-Discrimination Rules
• Prohibits limiting eligibility for fully insured health plans
in order to discriminate in favor of highly compensated
individuals (i.e. executive or manager carve out health
plans).
• If plans fail to comply, highly compensated participants are
taxed on all or part of plan benefits.
• Grandfathered protection important here.
Automatic Enrollment
• Employers with more than 200 full-time employees that
offer coverage must automatically enroll new and current
full-time employees in one of the plans offered with the
opportunity to opt out.
• Not effective until regulation issued.
Grandfathered Plans
What is a grandfathered plan? (“If you like your current
plan…”)
• Health coverage in effect on March 23, 2010.
• Determined by individual coverage options available
under a plan.
• New regulations were issued on June 14, 2010.
Grandfathered Plans cont.
Grandfathered plans are exempt from:
Effective 9/23/2010:
• Age 26 dependent coverage for dependent with other
employer-provided group health plan until 2014.
• Wellness services (check-ups) with no cost sharing.
• Nondiscrimination rules for fully insured plans (carve
outs).
• Expanded claims review process.
Grandfathered Plans cont.
Grandfathered Plans are NOT exempt from:
• Allowing members to add dependents up to age 26
regardless of student status in accordance with terms of
the plans.
• Eliminating lifetime limits on policies.
• Removing pre-existing exclusions for members under
age 19.
• Adjust certain other annual limits on policies.
Grandfathered Plans cont.
What changes will not affect a plan’s grandfathered status?
• Enrolling new employees, current employees or family
members.
• Employees dropping coverage or changing coverage
options.
• Changes to premiums at renewal.
• Changing the third party administrator. (TPA)
• Increasing benefits or decreasing costs to participants.
Grandfathered Plans cont.
What changes will cause a plan to lose its grandfathered status?
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Elimination of benefits to treat a particular condition.
An increase in fixed-amount cost sharing such as a deductible.
An increase in a fixed-amount copayment.
A decrease in the employer’s contribution rate.
An increase in percentage of co-insurance.
Imposing or decreasing annual or lifetime limits.
Entry into a new policy, certificate or contract of insurance.
Transition Rule:
• Employers may unwind changes that would affect grandfathered status.
• Change made between 3/23/2010 and 6/14/2010 must be revoked prior to
their next renewal.
Grandfathered Plans cont.
Why preserve grandfathering?
• Avoid benefit designs which may raise cost of
providing health care coverage for employers or
significantly raise premiums offered by insurers.
• Underwriting of new benefit designs may be uncertain
and create risk that health insurers under price their new
products.
• Avoid administrative costs and burden of effecting
changes.
• Employees and insureds like what they have now.
Grandfathered Plans cont.
Why avoid grandfathering?
• Administering health benefit designs on a myriad of platforms may
be costly, inefficient and give rise to more errors.
• Danger of adverse selection by sicker individuals into new plans,
making premium/pricing for new plans inadequate.
• No guarantee that the government will permit grandfathering
indefinitely.
• Consumer groups are putting pressure on the Administration to
narrowly construe grandfathered status to allow more
individuals access to more robust health insurance coverage.
2011
What to expect in 2011…
New Long-Term Care Program (CLASS Act)
• Establishes a new long-term care program funded through voluntary
payroll deductions.
• Employers are automatically enrolled but may opt-out.
• Employers must collect the new payroll deductions effective January
1, 2011.
• Long-term care program includes 5 year vesting period and $50 per
day benefit.
* See insert in your binder.
Industry Taxes
• Imposes new fees on health care industry, based upon
market share, including pharmaceutical manufacturers
(2011), medical device manufacturers (2013), and health
insurance companies (2014).
Medical Loss Ratios (MLR)
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Limits medical loss ratios of fully-insured plans, including grandfathered
plans, to no less than 80% (for small employers with less than 100 employees)
or 85% (for large employers with more than 100 employees), based upon
NAIC standards due by 12/31/2010.
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Purpose is to expose percentage of premium dollars spent on true
administrative expenses.
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For calendar year 2010, health insurers will report these percentages for
information purposes only.
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For calendar year 2011, if health insurers spending does not exceed MLR
requirement, then health insurers will have to rebate excess premium to their
enrollees.
Flex Plan (FSA or Cafeteria Plans) Over-the-Counter
Drugs
The change in law:
• Over-the-counter (OTC) drug expenses incurred
1/1/2011 and after will require a doctor’s prescription.
• OTC supplies and equipment remain eligible without
such supporting documentation.
• This date is effective regardless of the plan year.
Flex Plan (FSA or Cafeteria Plans) Over-the-Counter
Drugs cont.
Impact to participating employees:
• Data shows this change in OTC eligibility impacts 7% of debit card
transactions.
• Inventory Information Approval System (IIAS) merchants (typically
pharmacies and grocery stores) will be updating their systems which
govern debit card approvals. Participants must pay for OTC drugs outof-pocket starting 1/1/2011.
• Participants must submit manual claims with supporting
documentation to be reimbursed for OTC drugs incurred 1/1/2011 and
after. Participants in off-calendar plans will be impacted during the
current plan year.
HSA Distributions
• Effective 1/1/2011, the penalty for the use of funds from a
Health Savings Account for non-qualified medical
expenses will increase, doubling the additional tax on these
types of withdrawals from 10% to 20% for anyone under
the age of 65.
• Qualifying Medical Expenses under HSA’s, HRA’s, and
MSA’s, are being revised and uniform.
New “Simple Cafeteria Plans”
• The provisions for “Simple Cafeteria Plans” become
effective January 1, 2011.
• Plan shall be treated as meeting any applicable nondiscrimination requirements.
• 100 or fewer employees.
• Uniform percentage not less than 2% of employees
compensation.
• Amendment signed week after PPACA restricted simple
cafeteria to C-Corporations only. S-Corps and LLC’s not
allowed.
• Owners will now be able to participate.
W-2 Reporting Requirements
• Employers must include the aggregate cost of employer-sponsored
coverage on an employee’s W-2, starting with the 2011 tax year.
Government employees are included.
• Aggregate cost includes both employee and employer contribution.
• Employer-sponsored coverage includes health care plans such as major
medical plans and Health Reimbursement Accounts.
• Health FSA, life insurance or disability, and stand-alone dental and
vision plans are excluded from reporting.
W-2 Reporting Requirements cont.
• Law requires employers to use the rules for COBRA
Continuation Coverage in determining the value of
employer-sponsored health coverage.
• As a result of this requirement, employees should better
understand the true cost of their coverage.
• The cost of these benefits remain tax free.
2013
What to expect in 2013…
Notice of Availability of Exchanges
• Employers will need to provide all newly hired employees
with a notice of availability of coverage options,
explaining the existence of Exchanges available 2014, and
how, if plan doesn’t provide minimum level of coverage,
the employee may be eligible for federal premium
assistance. All current employees will need to receive this
notice no later than 3/1/2013.
Health FSA Limit
• Effective 1/1/2013, the law limits the amount an individual
may pre-tax under HFSA to $2,500, per individual, per tax
year.
• Prior to health care reform, employers established the
maximum amount a participant could pre-tax under the
HFSA by plan design.
• The $2,500 cap does not include employer contributions.
Health FSA Limit cont.
• Data shows the average annual election for a Health FSA is
about $1,400 with 15% of HFSA participants electing to
pre-tax an amount greater than $2,500.
• Those participants who generally elect an amount greater
than $2,500 should consider increasing their election prior
to the effective date of the cap to take advantage of higher
limits currently available.
• Employees will need to re-evaluate their HFSA expenses.
Medicare Part A Tax Increase
• Increases the employee-portion of Medicare payroll taxes from 1.45%
to 2.35% on earnings over $200,000 (or $250,000 if married filing
jointly). Income thresholds are not indexed. No increase to employerportion of Medicare payroll tax.
• Adds a new 3.8% Medicare tax on unearned income (capital gains,
interest, dividends, and other investment income) for individuals who’s
adjusted gross income (AGI) is over $200,000 (or $250,000 if married
filing jointly). Income thresholds are not indexed.
• Income threshold for claiming itemized deduction for medical
expenses increased from 7.5% to 10%.
2014
What to expect in 2014…
Big Year for Health Care Reform
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Individuals must enroll in coverage (Individual Mandate).
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50+ full-time employee (FTE) employers must offer coverage or pay a fine.
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Employer Mandate Penalty Tax.
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State health insurance exchanges to be established & operating.
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Insurers cannot discriminate based on health status – Group or Individual
Plans.
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Essential Benefit Plan Requirements.
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Pre-existing exclusions eliminated for adults – guaranteed issue.
Individual Mandate
• Imposes penalty tax on individuals who do not have
qualifying coverage.
• Individuals whose household income is less than 400% of
federal poverty level (FPL) will be eligible for federal
premium tax credits and cost-sharing subsidies. Medicaid
eligibility has also been expanded to individuals earning
less than 133% of FPL.
Employer Mandate (50+ employees)
• Employers with 50+ full-time employees (average 30 hours a week)
who do not offer affordable minimum “Bronze level” coverage to fulltime employees will pay a penalty tax.
• Bronze level (minimum) coverage must pay at least 60% of benefit
costs.
• Bronze level will be the minimum level of coverage. Silver, Gold, and
Platinum will have higher employer contribution requirements.
• Affordable coverage means that the employee cost is less than 9.5% of
household income. Not sure yet how that will be figured.
Employer Mandate Penalty Tax
• Penalty only applies if at least 1 full-time employee receives federal
premium assistance, regardless of employer size.
• If not offering at least bronze level coverage, there will be a $2,000
penalty per full-time employee, excluding first 30 employees.
• If offering coverage that is unaffordable, penalty is the lesser of $3,000
per premium assistance recipient or $2,000 per full-time employee.
• Regulations not defined yet, anticipated rules for 5 or more FTE’s
expected to be very similar.
Health Insurance Exchange (<100 Employees)
• Small employers (less than 100 employees) and
individuals will be able to purchase coverage from a statebased Health Insurance Exchange.
Essential Benefit Plan Requirements
• All plans, including grandfathered plans, must cover
children to age 26 (regardless of access to other employersponsored health coverage), remove lifetime limits,
remove annual limits on Essential Benefits, eliminate preexisting condition limitations and limit waiting periods to
90 days.
Essential Benefit Plan Requirements cont.
• Maximum deductible for fully-insured small group plans
(100 or fewer employees) is $2,000 individual and $4,000
family, unless the employer contributes to an FSA, HRA,
or HSAs in order to offset the higher deductible. Excludes
grandfathered plans.
• Maximum out-of-pocket limit equal to the annual HSA
limits (2010: $5,950 individual, $11,900 family). Excludes
grandfathered plans.
What Employers Should Be Doing Now
• Determine whether or not their plan is grandfathered.
• Assess whether any anticipated design changes will cause
loss of grandfathered status.
• Prepare for W-2 reporting for CY 2011.
• Amend all plans for adult dependent coverage (as
applicable).
• If employer intends to retain grandfathered plans, make
necessary plan amendments required of grandfathered
group plans.
• If employer will offer non-grandfathered plans, make
necessary plan amendments required for these plans.
Questions
Any questions?
For More Information…
For more information or to clarify any of the subject
matter, please consult your binder,
Or
www.healthcare.gov
Thank you for attending!