AA: Developments, Observations &… The Electionnews-info.gcgfinancial.com/acton/attachment/13579/f-054e...Peter Marathas [email protected] 617.830.5456 AA: Developments, Observations

Peter Marathas [email protected] 617.830.5456

ACA: Developments, Observations &…

The Election

Slides are current as of September 30, 2016. © 2016. Marathas Barrow Weatherhead Lent LLP. All rights reserved.

Agenda

The Election: November 2016—Musings Recent Developments 6 for 16—Some Observations

Agenda

November 2016: Musings

Trump: 164 174 Clinton: 200

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270 Needed to Win

The Senate of the 114th Congress

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46 Democrats* 54 Republicans 5 Seats Shift Control

Michael Bennet (Colorado) Richard Blumenthal (Connecticut) Barbara Boxer (California) retiring in 2016 Patrick Leahy (Vermont) Barbara Mikulski (Maryland) retiring in 2016 Patty Murray (Washington) Harry Reid (Nevada) retiring in 2016 Brian Schatz (Hawaii) Charles Schumer (New York) Ron Wyden (Oregon)

Kelly Ayotte (New Hampshire) Roy Blunt (Missouri) John Boozman (Arkansas) Richard Burr (North Carolina) Dan Coats (Indiana) ret. Mike Crapo (Idaho) Chuck Grassley (Iowa) John Hoeven (North Dakota) Johnny Isakson (Georgia) Ron Johnson (Wisconsin) Mark Kirk (Illinois) James Lankford (Oklahoma)

Mike Lee (Utah) John McCain (Arizona) Jerry Moran (Kansas) Lisa Murkowski (Alaska) Rand Paul (Kentucky) Rob Portman (Ohio) Marco Rubio (Florida) Tim Scott (South Carolina) Richard Shelby (Alabama) John Thune (South Dakota) Pat Toomey (Pennsylvania) David Vitter ret. (Louisiana)

DEMOCRATS (10) REPUBLICANS (24)

Recent Developments

More reporting

More exposure to liability

This means bad news for employers

$12 billion to $30 billion provided to ineligibles

Average subsidy value: $3,000 to $5,000 per person

Estimated 4 million to 6 million (40% to 60%) were ineligible

Approximately 10 million received subsidies for coverage in 2015

Epic Fail & HHS Subsidy Notifications

In a waiting period/unable to enroll in coverage

Offer, but not affordable or did not provide minimum value; or

No offer of health care coverage;

Cryptic: noting only that individual said he/she worked for the employer and either:

Inform employer that employee certified eligible for a premium subsidy

June 21: HHS Sends Thousands of Subsidy Letters to Employers

HHS Subsidy Notification Letters to Employers

Epic Fail & HHS Subsidy Notifications

Government says: No need for appeal part-time, terminated while in a waiting period for coverage, or notifications naming spouses or family members as recipients of a subsidy

Bears & Woods

Should employers appeal?

Penalty notices will come from the IRS after ACA reporting is processed

Subsidy notification letters are not penalty notifications!

HHS Subsidy Notification Letters to Employers

Epic Fail & HHS Subsidy Notifications

Subsidy notification letters are not penalty notifications!

Penalty notices will come from the IRS after ACA reporting is processed

Summary of Benefits & Coverage (SBC)

HHS has updated its SBC templates for first open enrollment beginning on or after 4/1/17

Existing 8 page SBCs to be slimmed down to 5 pages in most cases

Many requirements remain the same: Plans must use 12-point font and replicate all symbols, formatting, bolding

and shading However, plans and issuers may use different fonts and adjust margins as necessary to maintain the

page limit

Definitions added to the Uniform Glossary, which plans may link to: https://www.healthcare.gov/sbc-glossary/

Summary of Benefits & Coverage (SBC)

Examples of changes include: Explanation of the SBC and how to obtain more information

Certain language for embedded vs. non-embedded deductibles

Changing “person” to “individual”

Disclosing if copays for certain services may not be included in OOP limit

Expanding “Limitations & Exceptions” column to disclose other info: If all or a substantial portion of a particular service category is excluded;

When in-network cost sharing does not factor into the OOP limit;

Visit or dollar limits; and

When services require prior authorization

SBC Distribution Reminder

Employers must provide an SBC at specified times at no charge, such as: With enrollment materials; By the first day of coverage, if there are any changes to the initial SBC; Within 90 days from enrollment for any special enrollee after a special enrollment

event (i.e. marriage, etc.); and Within 7 business days after receipt of request

60-day advance notice of material modifications required, unless changes are being made in connection with the plan’s renewal of coverage

Electronic delivery of SBCs is permitted for those enrolling online or who are notified that it’s available online (e.g., via postcard or email)

Failure to comply may result in $1,000 fine per occurrence Recently increased to $1,087

EHB Benchmark for Self-Insured Plans

Employers that sponsor self-insured plans should identify which benefits are Essential Health Benefits (EHBs) if they wish to impose annual or lifetime limits on non-EHBs, or excluded non-EHBs from the ACA’s out-of-pocket limit

Large group and self-insured plans are not required to offer any particular category of EHB under the ACA; however, once a plan covers EHBs then the annual limit and OOP rules apply to those benefits

A self-insured plan can adopt any HHS-approved EHB package for purposes of determining which benefits offered under the self-insured plan are EHBs

Employers should consider how the election of a particular EHB package as a benchmark should be documented (e.g., plan document, SPD, administrative policy)

Opt-Out Benefits

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Opt Outs in 2017 under Proposed Regulations Released in July

Opt Out Must be “Conditional” or it will Increase Employee Cost of Coverage

To be conditional, employees must attest that their “tax family” will have Minimum

Essential Coverage (MEC) other than through the individual market

Tax family: Anyone for whom the employee reasonably expects to claim a

personal deduction that year

Other acceptable forms of MEC can include:

Employer-sponsored coverage

Medicare

Medicaid

Tricare

Be cautious of Medicare/Tricare Secondary Payer rules – they generally require opt-

outs to be offered to all employees as part of a nondiscriminatory cafeteria plan

For example, a plan subject to these requirements must cover a hysterectomy that is considered medically necessary to treat gender dysphoria if the plan otherwise covers hysterectomies

Excluding all services related to gender dysphoria or gender transition will be prohibited

Rules prohibit discrimination on the basis of race, color, national origin, sex, age or disability under a health program or activity receiving federal funds

Generally effective for Plan Years beginning on or after January 1, 2017

ACA Section 1557 Final Regulations

Gender Nondiscrimination Regulations

Think Before You Act & Be A Tiger

Refusal to dismiss the claim does not mean success

The court found sufficient evidence that a store manager and assistant manager at the company’s Times Square location announced at a staff meeting that work hours were cut because the employer determined that, without limiting the work schedules of its staff, the ACA could impose as much as $2 million of new expense in 2015

Feb. 9, 2016: The court in Marin denied a defense motion to dismiss under ERISA

Employees allege that the reduction violates ERISA section 510

Class action involving potentially 10,000 employees whose hours were involuntarily reduced, resulting in a loss of health coverage

Marin v. Dave & Buster’s, Inc.

Cases Worth Watching

Court found government’s arguments to be “most curious and convoluted”—its “mother was undoubtedly necessity”

May 12, 2016: Judge Collyer Rules in Favor of House

House alleges Executive Branch acted unconstitutionally Challenges billions of dollars in payments to health insurance

carriers

House of Representatives Sues Administration Over Insurer Payments Historic lawsuit

House v. Burwell

Cases Worth Watching

6 for ‘16

Tax is paid by insurer or administrator, not by participant

Proposed FY2017 Federal Budget modifies the threshold to equal the average premium for a gold Exchange plan in each State

Tax based on total cost of coverage, plus employer and pre-tax employee contributions to HRAs/FSAs/HSAs

Thresholds are $10,200 Single, $27,500 Family

40% tax on the cost of health coverage exceeding certain thresholds

PATH also makes payment of the Cadillac Tax a deductible business expense

Intended to be effective in 2018, delayed until 2020 under PATH Act

It’s Big, It’s Bloated, and It’s Headed Your Way

The Cadillac Tax 6

75% of the revenue will come from employers who shift compensation from an employer sponsored plan to taxable wages

Only 25% of the revenue is estimated to come from this tax

The Congressional Budget Office originally estimated this tax will generate $149 billion in revenue between 2018 – 2025 (Revised Estimate: $80 billion)

Cadillac Tax Policy: Revenue Generation and Backdoor Reduction of Tax Preference for Health Insurance

It’s Big, It’s Bloated, and It’s Headed Your Way

The Cadillac Tax

Increase use of wellness incentives

Eliminate pre-tax benefits programs

Reference pricing

Narrow provider networks

Eliminate spousal coverage

Private exchanges for active employees (?)

Eliminate or implement private exchange options for pre- and post-65 retirees

Higher out-of-pocket costs

Reduce richness of plan design

Getting Out of the Way of The Cadillac Tax!

The Cadillac Tax

“Some people would choose to work fewer hours; others would leave the labor force entirely or remain unemployed for longer than they otherwise would.”

“The reason for the reduction in the supply of labor is that the provisions of the ACA reduce the incentive to work for certain subsets of the population.”

2 million fewer workers over the next 10 years.

CBO Has Bad News

Future Hiring

CBO estimates “ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor.” will choose to supply less labor

almost entirely because workers

2 million fewer workers over the next 10 years.

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Is this the opportunity for re-alignment?

Do you have a back-up plan?

Have you performed modeling for the future?

Available

Inexpensive &

Does your business depend on labor being:

Plan for the Future

Future Hiring

Risk for “A” and “B” Penalties Leased Employees: Contractual Protections

1099 Employees—An Oxy Moron

Does your business use independent contractors?

Independent Contractors

Independent Contractors 4

Opt Outs Push Outs Pay Outs

Beware Easy Fixes

Caveat Emptor 3

Work with Trusted Advisors Hire Well

Caveat Emptor

Reporting Eligibility Coverage

Be Compliant & Prove It

Focus on ACA Compliance 2

Reporting Documentation Testing & Don’t Forget HIPAA

Best Offense is a Good Defense

Focus on ERISA Compliance 1

Questions?