What You Need to Know on the
Implementation of the
Affordable Care Act
Presented to the WSAC
Employee Health Care Benefit Forum
June 5, 2013
DiMartino Associates
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The ACA: An Overview
 PPACA Overview
 Provider Issues/Implications for Employers
 PCORI Fees
 Transitional Reinsurance Program
 Insurer Fees
 90 Day Waiting Periods
 Minimum Essential Coverage
 Employer Shared Responsibility
 Exchange Model Notice
 HRA Impact…short introduction
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The ACA: An Overview
Objectives of the Legislation:
Lower the cost of healthcare for everyone.
Expand access to care for all.
Create mechanism for improving/measuring
quality of care.
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Provider Issues
Medicare/Medicaid:
Effective 1/2014 Medicaid eligibility will expand to
those up to 133% of the FPL (Federal Poverty Level )
from 100%...could add 30M to Medicaid enrollment.
Medicare/Medicaid moving towards episodic based
payments and less fee for service.
Whether it’s hospitals or physicians,
reimbursements will be lower in the future.
…so why is this important for employers?
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Provider Issues
Hospital Payor Mix (by admissions):

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Medicare =
Medicaid =
Charity =
Bad Debt =
Private =
51%
12%
4%
5%
28%
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Provider Issues
Likely Trends:
 Shrinking hospital margins will reduce plant
reinvestment…less capital investment!
 Physicians will continue to seek employment
models with hospitals and larger entities.
 Consolidation of hospitals/physician practices
will continue.
 Care options will likely reduce in rural areas.
…Potential cost transfer to private market!
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Provider Issues
Implications for Employers:
Initially look for insurers to battle with providers
over reimbursements.
Long run, expect different kinds of payment models
to emerge including: shared risk contracting, less fee
for service and more capitation.
Provider networks likely to become smaller and
more efficient.
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PCORI Fees
 PCORI Fees= Patient-Centered Outcome Research Fees
 Effective: plan years ending after 9/30/2012.
 Purpose: evaluate and compare outcomes and clinical
effectiveness.
 Imposed on insurers and self-funded groups.
 Plans impacted: active plans, retiree plans, FSA and HRA
plans (unless tied to a self-funded health plan).
 Fee Structure:
o PY Ending after 9/30/2012 = $1 per covered life
o PY Ending after 9/30/2013 = $2 per covered life
o PY Ending after 9/30/2014 thru 9/30/2019= TBD
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PCORI Fees
 Who pays the fees?
 Insurers will pay on behalf of their fully insured
customers.
 Self-funded plans will need to pay on the Federal Excise
Tax Form 720.
 When are they due?
 Fees are due by the end of July in the year following the
close of the Plan Year.
o Plans years ending between 9/30/12 and 12/31/12 will
file prior to 7/31/13
o Plan Years ending after 12/31/2012 will not file until
7/31/2014.
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Transitional Reinsurance Program
 Fees imposed 2014, 2015 & 2016 will raise $25 billion to:





 Fund adverse selection in the individual market
 Repay Treasury for the Early Retiree Reinsurance
Program (ERRP) from 2010
All employers with group health plans are impacted.
Insurers will pay on behalf of their customers.
Self-funded may pay HHS directly or have their TPA do so
on their behalf.
HHS estimated 2014 contribution = $63.00 “per life.”
Employee count based on 1st 9 months of calendar year.
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Insurer Fees
All Insurers will be subject to these fees beginning
January 1, 2014.
The tax is permanent and will gradually increase over
time.
It is intended to fund premium subsidies in the Exchange.
Self funded plans are exempt.
Insurers will be passing this tax on in renewal rates
beginning in 2014.
 2014 = 2.0% to 2.25%
 Subsequent years are tied to premium growth but
tax will increase to as high as 3.0%.
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90 Day Waiting Periods
 This provision is effective for Plan Years beginning on or
after 1/1/2014.
 Impacts employers regardless of number of full time (30
hour/week) employees.
 A new full time employee otherwise eligible for coverage
cannot be subject to a waiting period for entering the plan
longer than 90 days from date of hire.
 From a practical perspective, employee waiting periods will
not exceed the 1st of the month following 60 days from date
of hire.
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Minimum Essential Coverage
What does it mean for a County Employer?
MEC is the minimum level of benefits you can offer to
avoid penalty under “Pay or Play” rules.
 Must meet 60% minimum value test…a plan meets this criteria
if it is expected that it will pay at least 60% of the total allowed
costs of benefits.
 Minimum value calculator is now available on the HHS website.
 Employers need to be certain that they offer at least
one plan that meets the 60% threshold to all eligible
employees.
Note: The plan must also meet the affordability definition under the
Employer Shared Responsibility rules.
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Employer Shared Responsibility
Which Employers must comply and when:
 Effective January 1, 2014 (transition rules for non-calendar year plans apply for 2014).
 Employ 50 or more employees on a typical business day during the
prior calendar year are considered a large employer for the next year.
 Include all full-time employees for each month of the year.
 For less than full time employees, add the total number of hours (not
< than 120 hours/month) and divide by 120
 Add the Full-Time Plus FTE then divide by 12
 If > 50 then you are a large employer for the coming year.
 Seasonal employees of more than 120 calendar days per year must
also be included…more guidance to be issued.
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Employer Shared Responsibility
The Large Employer Shared Responsibility Rules (ESR):
 Employers failing to offer a MEC plan to at least 95% of their eligible
employees will be subject to a fine of $2,000/employee (disregarding
the first 30 employees) if any eligible employee:
 Enrolls in coverage on the Exchange and,
 Qualifies for a premium tax credit.
 Employers offering a MEC plan may still be subject to a $3,000 penalty
for each employee who enrolls in the Exchange and receives a
premium tax credit if:
 The Plan is determined to be unaffordable (EE Only contribution exceeds 9.5% of
household income but there is a Safe Harbor tied to 9.5% of wage).
 Fails to offer minimum value (60% level of benefits).
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Employer Shared Responsibility
Variable Hour Employees “straddle” the 30/hour/week:
 There is a complex system for determining if this type of employee is
eligible for the Plan.
 Standard Measurement Period: time frame to measure the
hours worked (may be from 3-12 months).
 Administrative Period: The period following the Standard
Measurement Period (up to 90 days).
 Stability Period: The period in which an employee’s status
cannot change…typically the Plan Year.
 If they work a 30 hour average during the Measurement Period then
they are eligible for the Plan for the following Stability Period.
 This is an annual exercise for employers (and employees!)
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Employer Shared Responsibility
Employer Strategies to Consider:
 Be sure you offer at least one MEC plan that meets the 60%
minimum value test.
 Verify your plan will meet the affordability criteria.
 Manage the use of seasonal employees to < 120 days.
 Manage hours of variable hour employees to affect plan
eligibility and budget objectives.
 Engage with payroll vendors and other advisors to begin
collecting data now!
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Exchange Model Notice
Employers are required to notify employees of the
availability of coverage through the Exchange:
Originally to be sent to employees before the end of
March 2013, this was delayed until fall 2013.
Last month the DOL released Model Notice for Employers
to use as well as instructions:
 Must be distributed to ALL employees before October 1st.
 New COBRA model election notice includes information on
health coverage alternatives offered through the Exchanges.
 New employees will need to be provided the notice within 14
days of date of hire.
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Accountable Care Act and Changes to HRA
The ACA places restrictions on how HRAs work:
The ACA prohibits health plans from imposing
lifetime or annual limits.
As defined in the ACA, HRA falls under the definition
of a health plan.
The Internal Revenue Code defines a HRA as a
limited employer contribution health plan so it has
limits.
…hence the conflict!
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Accountable Care Act and Changes to HRA
Implications for Employers and Employees:
No change for HRA plans that are fully integrated
into a health plan.
This will also apply to HRAs that provide “retiree
only” benefits.
Non-integrated (not tied to another health plan)
HRAs will be subject to the provisions of the Law.
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In Conclusion
The ACA will have far-reaching impact on providers,
insurers, employers and individuals.
Employers will see new taxes plus increased
healthcare costs due to both benefit changes and
fees imposed on insurers.
Staying in compliance will require additional time
and attention to detail.
Begin the journey early… get your staff educated!
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