All Rights ReservedDigital Insurance VACO What does your business need to know? Nancy Grasso Digital Benefit Advisors.

All Rights ReservedDigital Insurance

VACO

What does your business need to know?

Nancy Grasso

Digital Benefit Advisors


Health Care Reform Discussion Topics

1. The first years

A. 2010- 2012

A. Age 26

B. Preventive Care

C. No pre-x for children

D. Non discrimination ( 105H)

E. Supreme Court Ruling

F. Expansion of Women’s Health

G. Essential Benefits Defined

H. Medical Loss ratio rules and rebated

I. Summary of /benefits and Coverage

J. Increased Taxes


Health Care Reform Discussion Topics

2. Now and in the future

A. 2013

A. Expanded W-2 reporting

B. Essential Benefit Established

C. Plan Actuarial Value Determination

D. Open Enrollment to the Exchanges

B. 2014

A. 90 Day waiting period implementation

B. Guarantee Issue- Community Rating

C. Mandate to Purchase

D. Pay or Play

E. Affordability testing with Safe harbor rules

F. Penalties Assessed

G. Reporting Requirements


Health Care ReformImplementation –2013

Patient Protection and Affordable Care Act of 2010

(PPACA)


Minimum Actuarial Value(IRS Notice 2012-31 -Issued 4/26/12 )

• ProposalDetermination of type of method to

use

• HHS and Treasury develop an actuarial value calculator (AV) or a minimum value calculator (MV)

• Checklists to determine minimum value

• Certification by a certified actuary utilizing approved methods

• What is this?• The methodology to calculate

whether an employer-sponsored plan provides the required minimum essential value

• Determines employee’s eligibility to receive a premium tax credit through the Exchange


Healthcare Exchanges open for enrollment

• October 2013

• Effective dates of Jan 2014

• Does not constitute Open Enrollment

• Model Notice Requirement

• Subsidies to those under 400% FPL

• No subsidies for dependents who are eligible for an affordable plan.


Health Care ReformA New Age-2014

Patient Protection and Affordable Care Act of 2010

(PPACA)


105H Written and Enforced

• Cannot discriminate in favor of Highly Compensated employees ( top25%)

• Cannot apply different methods of contribution for classes, tenure or position

• Cannot apply different waiting periods • Must offer coverage to all 30 hour employees

• In the case of fully insured plans, the nondiscrimination rules are enforced through the imposition of an excise tax of $100 per day per individual discriminated against under IRC 4980D(d). This excise tax is the penalty that generally applies under the IRC for failure to comply with IRC requirements relating to group health plans


Guarantee Issue and Rate Increases

• All Plans Guarantee Issue• No Pre – X’• No Declines• No additional Rate for health individual on small group

Insurance and individual • Rating Bands Narrowed / Eliminated• Complete Community Rates 2-99

– Average age of the group– Geographic Region– Plan Design Purchased– Network– Insurance Carrier


Rating Rules and Methodologies(HHS and CMS: PPACA; Health Insurance Market Rules; Rate Review 11/26/12 proposed rule)

1. Issuers = individual member ratings Employers = individual or composite rating

2. Age rating – limited to 3:1

3. Tobacco rating – limited to 1.5:1

4. Family size – individual v familya. Maximum of 3 oldest family members under age

21b. No cap for family members over age 21

5. Geographic regiona. States or CMS can establish one or more rating

areasb. Maximum of 7 rating areasc. One rating area for state, county-based or 3-digit

zip codes, or metropolitan statistical areas (MSAs) and non-MSAs

6. Re-underwriting is prohibited

Will apply to non-grandfathered large group if state permits coverage to be offered through an Exchange in 2017

Applies to non-grandfathered health insurers (not self-funded)

Apportioned to each family member


Rate Action is Imminent

Why? How?•Compression of underwriting age bands and no health risk adjustments •Upward cost pressure from new benefits and increased demand•Impact of currently uninsured•New fees and taxes (approaching 4-6% for full year!)

11


PPACA Mandate to Purchase

• The keystone of the Patient Protection and Affordable Care Act (PPACA) is an unprecedented individual mandate tax requiring virtually all U.S. citizens and legal residents to either have health insurance or pay a tax

• Taxes begin in 2014 and rise in years following. In each year, the tax consists of the higher of a dollar amount or a percentage of household income. For a given household, the tax applies to each individual, up to a maximum of three. Following is the schedule of taxes:

• 2014: The higher of $95 per person (up to 3 people, or $285) OR 1.0% of taxable income.

• 2015: The higher of $325 per person (up to 3 people, or $975) OR 2.0% of taxable income.

• 2016: The higher of $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income.

• After 2016: The same as 2016, but adjusted annually for cost-of-living increases


Employer MandateIRS Notices 2011-36, 2011-73, 2012-17 and IRS 4980H

Deign Your

Essential Benefits

Und

erst

and

Nee

ds

Keep Informed

Stay

Com

pliant

Control Costs

Educate and Engage

What does this mean:Certain employers will be required to provide coverage to its full-time employees and dependents.

Who does this apply to:“Applicable large employers” with 50 or more full-time equivalent employees

• Entity that is an employer of an employee under common-law test• All entities are treated as a single employer• All employees of a controlled group are taken into account


Employee Definitions(Proposed amendments to Employer Sharing Responsibility REG-138006-12; pub. 1.2.13)

Employees included in calculations:•All full-time employees with, on average, 30 hours or more of service per week; 130 hours if using a monthly standard•Part-time, variable, or seasonal employees•Hours for services performed outside the U.S. for which an individual receives U.S. source income

Special rules:•Teachers and employees of educational organizations – traditional breaks in academic school year will often be periods of paid leave so would be counted as hours of service•Commission-based employees, transportation employees, adjunct faculty and analogous employment positions – non-standard employees paid on commission or subject to safety regulations, e.g. airline pilots – under review. In interim consider all hours necessary to perform work


Affordability Test and Safe Harbor Rules

• $3,000 penalty per year for each employee whose health insurance premium contribution for single coverage exceeds 9.5% of their annual household income

• Affordability safe harbor -an employer will not be subject to the $3,000 penalty as long as the employee portion of the self-only premium for the employer's lowest cost plan that provides the minimum value required is not more than 9.5% of the employee's current W-2 wages from the employer.

• The IRS also confirmed that the affordability test applies only to individual coverage, meaning employers can charge

disproportionately more for family coverage.


Employer MandateIRS Notices 2011-36, 2011-73, 2012-17 and IRS 4980H

Deign Your

Essential Benefits

Und

erst

and

Nee

ds

Keep Informed

Stay

Com

pliant

Control Costs

Educate and Engage

What are the penalties associated with non-compliance?Employers may be assessed fees for any month they:

1. Fail to offer employer-sponsored minimum essential coverage to FTEs and their dependents

a. AND at least one person enrolls for coverage, from the Exchange, and receives a subsidy

b. Assessment = 1/12 of $2,000, or $166.67 per month, for each FTE, less the first 30 employees

2. Offer employer-sponsored minimum essential coverage to FTEs and their dependents but the employee contribution is deemed unaffordable

a. AND 1 or more employees enroll for coverage, from the Exchange, and receive a subsidy

b. Assessment = the lesser of:i. 1/12 of $3,000, or $250 per month, for FTE receiving a subsidy ORii. 1/12 of $2,000, or $166.67 per month, for each FTE, less the first 30

employees


Compliance with §4980H(a), (b)(Proposed amendments to Employer Sharing Responsibility REG-138006-12; pub. 1.2.13)

Deign Your

Essential Benefits

Und

erst

and

Nee

ds

Keep Informed

Stay

Com

pliant

Control Costs

Educate and Engage

Assessment penalties can be avoided if the employer offers minimum essential coverage under an employer-sponsored plan to its full-time employees and their dependents.

• Minimum Essential Coverage (MEC): to be defined in a future regulation

• Definition of dependent: An employee’s child under age 26 – does not include spouse

• Employers will not face a tax penalty if not offering coverage to spouses, who will be able to seek a federal premium tax credit to purchase health insurance in an Exchange if other minimum essential coverage is not available.

• Offer of coverage in case of non-payment: Employer will not be deemed as not offering coverage if employee fails to pay their portion of the premium – this regulation adopts the COBRA 30-day grace period rule

• Offer of coverage: Employer will satisfy requirement as having offered if they offer to 95% of their employees

• Assessment payments: These are not tax deductible


Reporting requirements Employer Plan Reporting

Who must report?•Any entity that provides minimum essential coverage

•Those employers required to meet the shared responsibility, i.e. employer mandated coverage

What is to be reported and how often?•Annual returns required

• Fully insured group health plan = provided by the health insurance issuer• Full demographic and coverage information on each

individual participant

• Identification if a qualified health plan offered through an Exchange and any advance premium payment

• Employer required to offer coverage:• Terms and conditions of health care coverage provided

to full-time employees for the year

• Employee information for those full-time employees who received it and when they received it

New IRS Notice 2012-32, issued 5/14/12

Comments taken through 6/11/12


Fines and fees for the upcoming year


What is your responsibility in helping employees

As mandated by the Patient Protection and Affordable Care Act (PPACA), employers are required to provide notice to their

employees regarding the availability of the Health Insurance Marketplace, and explain how the exchanges will operate and the criteria to obtain a federally funded subsidy to help offset

the cost of premiums

Health Care Reform

Resources


Healthcare Reform References

• Dept. of Health and Human Services www.hhs.gov

www.healthcare.gov

• Kaiser Family Foundation http://healthreform.kff.org

• America’s Health Insurance Plans www.ahip.org

• National Association of Health Underwriters

www.nahu.org

• Internal Revenue Service

www.irs.gov

Health Care Reform Q & A

All Rights ReservedDigital Insurance VACO What does your business need to know? Nancy Grasso Digital Benefit Advisors.

Documents

health individual

ppaca slide

age rating

small group insurance

exchange slide

individual rating bands

family member slide

group health plans