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Health Care Reform:
Key Impacts Every Employer Should Know
The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association.
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The Required Disclaimer
• Health insurers continue to receive information from Health and
Human Services regarding the Patient Protection and
Affordable Care Act. Therefore, this information has and will
continue to change.
• The information provided in this presentation should not be
construed as legal advice.
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How a Bill Becomes a (Messy) Law
• Patient Protection and Affordable Care Act
• Signed into law March 23, 2010
• Later titles in law amend earlier titles
• Reconciliation Act
• Resolved critical issues between House and Senate reform bills
• Signed into law March 30, 2010
• Waiting for regulations, interpretations, state laws
• Some issued “interim final”
• “Guidance”
• Still waiting for others
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Timeline – Reform Overview
1/1/2010
3/23/2010
Plans renewed
after
2011-2013
1/1/2014
9/23/2010
Phase I small
business tax
credits
Medicare Part D
“donut hole”
rebates
Rate review
And
beyond
No-pre ex for
children < 19
HSA/FSA/HRA
changes (2011)
Individual
mandate
2018: Cadillac
Plan Tax
Coverage for
dependents <26
Medical loss ratio
rebates
Employer “pay or
play” penalty
90 days
National high
risk pool
2020: Close
Medicare Part D
donut hole
Lifetime limit
restrictions
Summary benefit
requirements
Exchanges
Early retiree
insurance
Annual max
restrictions
Quality care
reporting
June 1
HHS internet
portal Ind/small
group
No cost-sharing for
preventive benefits
Comparative
effectiveness
research fee
Grandfather
status
Subsidies
Appeal rights
Non-discrimination
Medical device
manufacturer tax
Rescissions limited
W2 reporting
Medicaid
expansion
Phase II small
business tax
credits
Insurer fee
FSA Cont. cap –
$2500 (2013)
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Reform Topics Covered
• Grandfathered Plans
• “Immediate” Reforms
• Non-discrimination
• Small Employer Tax Credit
• W2 Reporting
• FSA, HSA, HRA Changes
• Reinsurance for Early Retirees
• Retiree Drug Subsidy
• Individual Mandate
• Exchanges
• Cadillac Plan Tax
• Miscellaneous Impacts
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Grandfathering
“If you like your health care plan, you’ll be able to keep your health care plan.” –
President Obama
• Coverage that an individual or group had in place on 23 March
2010
• Special rules for collectively bargained plans
• Grandfather status avoids some, but by no means all reforms
For example:
• First dollar preventive care
• Limits on certain lifetime and annual $ maximums
• Rating limitations
Note: status does not avoid pay-or-play employer penalties
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Grandfathering (cont.)
• Easy to lose grandfather status:
• Elimination of benefit for particular condition
• Increase coinsurance at all
• Increase copayments by more than greater of:
•
• Medical inflation plus 15% points
• $5, increased by medical inflation
• Increase other fixed amount cost-sharing by more than medical
inflation plus 15% points
• Reduce employer contribution > 5% points
• Reduce or add certain annual or lifetime limits
Documentation requirements if grandfathered (notices)
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Grandfathering (cont.)
• Can make some changes without losing grandfather status:
•
•
•
•
•
To comply with state or federal law
To voluntarily comply with a PPACA change
Changes in TPAs
Changes in premiums
Benefit improvements
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Grandfathering (cont.)
• Costs of maintaining grandfather plan
• Limited benefit changes/innovations
• Cost of maintaining customized plan
• Benefits of maintaining grandfather plan
• Avoid some coverage mandates
• Avoid non-discrimination rule
• Neutral
• Don’t avoid pay-or-play penalty
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Regence and Grandfathering
• 1-99 groups: grandfathered status not maintained
• 100+ groups on Facets products (Regence Preferred (PPO),
Innova®, Engage®, ActivateSM or HSA Healthplan 2.0SM):
grandfather discussions will take place during the renewal
negotiation process
• 100+ groups not on Facets:
grandfathered status not
maintained (exception basis)
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Benefit Changes
The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association.
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Benefit Changes – “Immediate”
September 2010
• Immediate = renewal date (or first date of new policy)
• All Plans (even grandfathered)
•
No pre-ex for children <19
• Interpreted as guarantee issue for <19
•
Coverage of adult children through age 25
• Exception for group plans, if child has other group coverage
•
•
No lifetime maximum dollar limits on essential benefits
Limited annual maximums on essential benefits (until 2014)
• What are “essential benefits”? No information yet.
• Ambulatory patient services, emergency services, hospitalization,
maternity and newborn care, mental health and substance use
disorder, prescription drugs, rehabilitative and habilitative services
and devices, lab services, preventive and wellness and chronic
disease management, pediatric services including oral and vision
care
•
Rescissions/cancelations limited to fraud
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Benefit – “Immediate” (cont.)
September 2010
• Non-grandfathered plans, in addition to above:
• No cost-sharing for preventive services
• Appeal rights (including external appeal)
• Big change for self-funded groups
• Out-of-network ER
• Pediatrician as PCP for child
• Relevant only if you have HMO-type coverage
• Access to OB/GYN w/out referrals for women
• Relevant only if you have HMO-type coverage
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Benefits – 2012 and beyond
2012-2014
• 2012: quality of care reporting to HHS – no details yet
• 2013: uniform summaries of benefits – 4 pages; 12-point
• 2014:
•
•
•
•
•
•
•
Clinical trial coverage
Coverage of essential benefits
No annual limits on essential benefits
Guaranteed issue – extends to individual plans
Cost-sharing limits (deductible maximums)
No pre-existing condition waiting periods
Rating limits (3:1)
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Non-Benefit Changes
The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association.
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Non-discrimination
September 2010
The administration has announced a delay in applicability of the
new nondiscrimination rules for insured plans and related excise
taxes until plan years beginning after the IRS issues regulations
in this area.
•
•
•
•
•
PPACA extended Internal Revenue Code 105(h) to insured plans
•
•
Before this, applied only to self-funded plans
Rarely enforced, but many large plans conduct “discrimination testing”
Requirement applies to the group health plan, not insurer
Compliance testing is a series of mathematical tests
•
•
Take into account employee salaries, stock ownership, part-time/seasonal
employees, length of service, percentage of premiums paid by employer, etc.
Insurers will not be able to determine a plan’s compliance
Penalty: $100 per day excise tax
•
•
Employers with 50 or fewer employees generally exempt
Less burdensome than penalty for self-funded plans
What to do? Check with your tax or legal professional
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Small Employer Tax Credit
2010-2013
• PHASE I – 2010-2013
• Pre-requisites
•
•
•
No more than 25 full-time equivalent employees
Annual average wages ≤ $50k
Pay at least 50% of cost of premiums
•
35% of employer-paid premium or state average premium
• Credit amount
• 25% for tax-exempt orgs
•
Phase out for >10 employees
• Business expense deduction for health insurance reduced
by amount of credit
• Claim the credit on your annual tax return
• Carry back one year; carry forward 20 years
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Small Employer Tax Credit (cont.)
2014
• PHASE II – 2014
• Available only for two tax years
• Must offer qualified health plans through Exchange
• Note: cannot get tax credit after 2014 while on a grandfathered
plan because not in Exchange
• Credit amount
• 50% of employer-paid premium or state average premium
• 35% for tax-exempt orgs
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W2 Reporting
2011
• The IRS has deferred the new requirement for employers to
report the cost of coverage under an employer-sponsored
group health plan. Reporting by employers is optional in 2011.
The IRS will be publishing guidance on the new requirement
later this year.
• Value of benefits not subject to federal income tax
• Includes costs for separate plans (medical, dental, vision)
• HSA amounts are excluded (already reported on W2)
• Health FSA contributions excluded
• Cost calculation will be similar to rules for determining COBRA
premiums
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FSA, HSA, HRA Changes
2011; 2013
• Effective January 1, 2011
• OTC meds no longer reimbursable, unless prescribed
• HSA nonqualified distributions penalty increased to 20%
• Effective January 1, 2013
• $2,500 cap on FSA employee contributions (+ COL adj)
• No limit on amounts contributed by employers
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Reinsurance for Early Retirees
June 2010
• Matters to you if you have:
• Retiree health coverage
• Retirees 55 or older but not yet Medicare-eligible
• Can be reimbursed for 80% of claims between $15k and $90k
• Subsidy not included in employer’s gross income
• Must have provisions in plan to mitigate costs for chronic/high
cost conditions; must be certified by HHS; must use the funds
to lower costs of the program
• $5 billion available – likely to be depleted quickly
• Available June 23 – application and guidance from HHS still to
come
• Similar to Retiree Drug Subsidy
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Retiree Drug Subsidy
2011
• Retiree drug subsidy tax change
• Today: Employers with retiree drug plans who receive the
retiree drug subsidy exclude the subsidy from gross income,
but still deduct income costs covered by the subsidy
• Beginning January 1, 2013, subsidy amount no longer
deductible
• Still excluded from income
• May make sense to terminate retiree drug program
• Especially as “donut hole” in Part D programs are eliminated
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Individual “Mandate”
2014
• Beginning in 2014, U.S. citizens or legal residents will be
required to buy health insurance
• “Penalties” (phased in)
• $93.50 or 1% per person based on household income (2014 tax
filing)
• Increasing to $695 or 2.5% per person based on household
income (2016 tax filing)
• Penalties are 50% of the above amounts if under the age of 18
• Individual exemptions:
• Can’t find affordable coverage (as defined by the government)
• Income does not meet the federal tax-filing threshold
• 2010 thresholds for taxpayers under age 65 was $9,350 and
couples was $18,700
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Exchanges
2014
• States will establish benefits Exchanges
• Think “Expedia” or “Orbitz,” with uber-regulations
• Small employers and individuals may purchase coverage through
the exchange
• States may allow large employers to purchase beginning in 2017
• Benefit plans in exchange will cover “essential benefits”
• Platinum, gold, silver, bronze levels – “metal” plans
• Subsidies available in Exchange only
• Based on income
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Employer “Pay or Play” Penalties
2014
• Pay-or-play penalties apply if 50+ employees at 30+ hrs a week
• Free rider penalty
• No coverage offered
• At least one employee receives Exchange subsidy
• $2,000 penalty x (total # employees – 30)
• Unaffordable coverage penalty
• Coverage is offered, but employee’s cost is > 9.5% of household
income or employer pays less than 60% of total cost
• $3,000 penalty only for each employee who receives Exchange
subsidy
• Penalty does not apply if employee receives Free Choice Voucher
• Grandfathered plans not exempt from penalties
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Cadillac Plan Tax
2018
• 40% tax on high cost plans beginning in 2018:
•
•
•
•
$10,200/$27,500 (individual/family)
Retirees and high-risk professions: $11,850/$30,950 (indiv/fam)
Adjustments based on age/gender of employees
Includes both employer and employee contributions to medical,
health FSAs, HRAs, HSAs
• Does not include stand-alone dental or vision, or accident,
disability, LTC
• Tax imposed on excess over threshold amounts
• Insured plans – insurer pays tax
• Self-funded plans – group pays tax
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A Few More Impacts
• Nursing mother breaks (immediately)
• Dedicated space for nursing mothers to pump (not a restroom)
• Breaks may be unpaid
• If ≤ 50 employee, potential hardship exception
• Adoption assistance (2010)
• Increases pre-tax dollar limit $1,000 to $13,170
• Part D “donut hole” (2010)
• $250 rebate for Part D enrollees who reach the donut hole
• Donut hole gradually closed by 2020
• Matters to you if you’re providing supplemental coverage to
employees
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A Few More Impacts
• Comparative effectiveness fee (2012)
• $1/participant; $2/participant in 2013
• Increased Medicare tax on high income taxpayers (2013)
• Additional .9% tax on wages above $200k/$250 (ind/joint)
• Employer has to withhold, but can disregard spouse wages in
calculating
• Employer portion remains unchanged
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For More Information on Reform Issues
•
Regence.com
http://www.regence.com
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Federal information
http://www.healthreform.gov/
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State information
WA:
http://www.insurance.wa.gov/consumers/reform/national_health
_care_reform.shtml
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Thank you!
The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association.
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