Health Care Reform: Preparing for 2014 MONDAY, AUGUST 26, 2013 SPOKANE, WA 1 2013 Public Transportation Symposium Presented by: Melanie Curtice, Partner.

Health Care Reform: Preparing for 2014MONDAY, AUGUST 26, 2013 • SPOKANE, WA

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2013 Public Transportation Symposium

Presented by:

Melanie Curtice, PartnerStoel Rives LLP

Health Care Reform:Preparing for 2014 – Are You and

Your Employees Ready?

MONDAY, AUGUST 26, 2013 • SPOKANE, WA


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Today’s Topics

• First four years of health care reform (“HCR”)– Rules already in effect for group health plans

(“GHPs”)

• New GHP fees and 2014 GHP changes• Individual mandate• Pay-or-play penalties• 2014 restrictions on HRAs


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First Four Years of HCR

• No aggregate lifetime dollar limits– Annual dollar limits on essential health benefits

(“EHBs”) restricted

• Children eligible for GHPs until 26– GHP coverage tax-free through end of year in

which child turns 26

• No pre-existing condition exclusions (“PCEs”) for children under 19


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• Summary of benefits and coverage (“SBC”)• Health FSA limit: $2,500 (indexed) per

employee per plan year • W-2 reporting: cost of health coverage

reported in Box 12, Code DD• Medical loss ratio rules• Restrictions on rescissions


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• Severe restrictions to keep GHPs grandfathered

• Non-grandfathered GHPs– New internal and external review rules – Rules on designation of primary care

physicians– Emergency room payment requirements


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• Non-grandfathered GHPs – Preventive care covered at 100%– Expanded preventive care rules for women

• Contraceptive care, including sterilization

– Preventive care OTC items must be covered without cost-sharing if prescribed

• Folic acid• Aspirin


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• Supreme Court ruling on PPACA – Still various court challenges to PPACA

provisions• Early Retiree Reinsurance Program

(“ERRP”) has come and gone • 2013: Medicare tax increases for

high-income taxpayers and deduction for Medicare retiree drug subsidy eliminated


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Later in 2013: Exchange Notice

• Notice to employees and new hires on exchanges– Explanation of exchange and services provided– Eligibility for premium tax credits– Impact of purchasing through exchange

• Distributed by Oct. 1, 2013, to all existing employees and new hires as of Oct. 1, 2013– Beginning of open enrollment period for

exchanges


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• Applicable to employers subject to Fair Labor Standards Act

• Distributed to all employees– Even if not eligible for health plan (e.g.,

part-time employees)– No distribution to dependents– Distributed by first-class mail or under DOL

safe harbor for electronic delivery


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• Two model notices are available– Employers offering health plan – Employers not offering health plan

• Notices require specific information on employer and employer’s health plan

• New model COBRA election notice also available– Changes relating to PPACA


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Later in 2013: HHS HIPAA Certification• HIPAA’s electronic data interchange rules

– Part of HIPAA’s administrative simplification rules

– Require standardized format, data content, and code set requirements for electronic transactions by covered entities (such as GHPs)

– GHPs required to file certification with HHS documenting compliance by Dec. 31, 2013


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Later in 2013: PCO Fee

• Annual fee to fund a Patient-Centered Outcomes Research Institute/Trust Fund

• Assessed based on number of average lives covered– $1/covered life for 2012– $2/covered life (indexed) for 2013-2018

• First PCO fee due for most GHPs in July 2013– Excise taxes reported on IRS Form 720 (now

available)


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• Responsible parties– Plan sponsor (self-funded plans)– Insurer (insured plans)

• Calculating covered lives in self-funded GHPs – Form 5500 method– Actual count method– Snapshot method– Transition relief: any reasonable method allowed for

2012 plan year


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• Many GHPs excepted– Ex-pats, stop-loss insurance– HRA integrated with self-funded GHP– HIPAA-excepted benefits

• Health FSAs, on-site clinics• Limited-scope dental and vision, long-term care

– EAPs, HSAs, wellness programs


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• PCO fee is applicable to: – Retirees and retiree-only GHPs– COBRA participants– Stand-alone HRA or HRA/insured GHPs

• Not payable from plan assets• PCO fee is tax deductible as ordinary and

necessary business expense


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2014: TRP Fee

• Transitional Reinsurance Program (“TRP”) fee– To assist insurers who provide individual insurance to

high-cost enrollees – To repay federal government for ERRP

• HHS will collect $25B from 2014 to 2016 from health insurers and self-funded GHPs– TRP fee is per capita (per covered life)


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2014: TRP Fee

• TRP fee for 2014– $5.25 per month (or $63 per year) per covered

life in major medical coverage– TRP fee will be lower in 2015 and 2016

• Most GHPs exempt from PCO fee also exempt from TRP fee– Difference: TRP fee not payable for persons

whose coverage is secondary to Medicare• Retirees and COBRA participants


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2014: TRP Fee

• Insurance company pays for insured GHPs, plan administrator for self-funded

• Covered life count due to HHS by Nov. 15, 2014– Use same counting methods as PCO fee (but just for

first nine months of the year)• May use different methods for TRP fee and PCO fee

– HHS calculates fee and sends bill by Dec. 15, 2014– Payment due within 30 days– Payable from plan assets


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2014: Clinical Trials

• Non-grandfathered plans may not deny right to participate in clinical trials– Must cover routine patient costs provided to

participants not in a clinical trial– May not discriminate against the individual

based on participation in the trial– Good-faith compliance, no regulations

before 2014


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2014: Provider Discrimination

• Cannot discriminate against any health care provider acting within the scope of the provider’s license– Does not require plans or insurers to accept all

types of providers into a network– Does not apply to provider reimbursement rates– Good-faith compliance, no regulations

before 2014


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2014: SBC

• New SBC template for 2014– Adds data elements requiring plan to disclose

whether it • Constitutes minimum essential coverage; and • Provides minimum value

– No new coverage examples


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2014: 90-Day Waiting Period

• Maximum 90-day waiting periods– Waiting period is a period of time that must

pass before an otherwise eligible person is allowed to enroll

– Proposed regulations state that eligibility conditions (full-time status) will not count toward 90 days

– No requirement to provide coverage to part-time employees


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2014: 90-Day Waiting Period

• Maximum 90-day waiting periods– No violation if employee is slow to enroll– Enrollment must be available by the 90th day,

even if the middle of the month• Many GHPs are changing to the first day of the month

following 60 days

– Cumulative service hours of not more than 1,200 acceptable as eligibility requirement

• Enrollment must be offered within 90 days


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2014: Cost-Sharing Limits

• Cost-sharing limits (non-grandfathered)– Out-of-pocket maximums may not exceed the

maximums of HSA-eligible high-deductible GHPs (2014: $6,350/single, $12,700/family)

– HCR’s limits on deductibles ($2,000/single, $4,000/family) only apply to the small group market (and not to self-funded or insured GHPs in the large group market)


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2014: PCEs, Adult Children

• No PCEs for anyone (not just children)– HIPAA certificates of creditable coverage no

longer required after Dec. 31, 2014

• Grandfathered plans must cover all adult children to age 26, even if the child has access to health coverage through the child’s own employer or the employer of the child’s spouse


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2014: Individual Mandate

• Individuals must pay tax if they, their spouses, or their tax dependents do not have “minimum essential coverage”– Greater of percentage of income OR dollar amount

multiplied by number of uncovered family members• 2014: 1% or $95 (not to exceed 300% of $95)• 2015: 2% or $325• 2016: 2.5% or $695• Capped at national average bronze-level plan premium• Flat dollar amount for individuals under 18 is half of these amounts


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• Minimum essential coverage includes– Any employer-sponsored GHP– Any government-sponsored plan, including

Medicare Part A, Medicaid, CHIP, TRICARE– Policies in the individual market– State risk pool – Medicare Advantage– Self-funded student plans


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• Exemptions for:– Religious conscience– Health care sharing ministry participants– Taxpayers with income below filing threshold– Individuals who cannot afford coverage (contribution

exceeds 8% of household income)• Compare to other affordability tests (9.5% of household

income; 9.5% of wages)

– Members of Indian tribes


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2014: Premium Tax Credit

• Federal subsidy to help individuals purchase insurance at the exchanges– Individuals eligible for credit may also qualify for

cost-sharing reductions (lower deductibles and co-pays)

– HHS plans to pay premium tax credit amount directly to insurer to partially pay premiums when due

– Lawsuit challenging whether subsidy is available in exchanges operated by federal government

• PPACA says subsidies only available in state exchanges


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• Eligibility for premium tax credit– U.S. citizens and legal residents whose income is between

100% (133%) and 400% of federal poverty level• $46,000/individual, $94,000/family of four

• But not eligible if:– Offered enrollment in an “affordable” employer-sponsored GHP

providing minimum value (“MV”);• Offer also disqualifies all eligible dependents, even if dependent coverage

not affordable

– Actually enrolled in an employer-sponsored GHP (regardless of MV or affordability); or

– Eligible for other coverage (such as Medicare Part A, Medicaid)


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• Minimum value: GHP pays at least 60% of the total allowed costs of GHP benefit– To determine MV

• HHS has issued an MV calculator for use for 2014• HHS checklists• Actuary opinion of MV

• Affordable coverage: cost for employee-only coverage of lowest GHP option does not exceed 9.5% of household income– No affordability test for family coverage– Compare pay-or-play rule: 9.5% of wages


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2014 (2015): Pay-or-Play Penalties

• Employer pay-or-play penalties apply to “applicable large employers” – Averaged 50 or more full-time equivalents on

business days during previous calendar year• Full-time: 30 hours/week or 130 hours/month

– Aggregation rule applies: count employees of all employers in same controlled group

• Equivalents count for determining employer size but not for pay-or-play penalty amounts


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2014 (2015): Pay-or-Play Penalties

• Two types of pay-or-play penalties– No coverage penalty: IRC § 4980H(a)– Insufficient coverage penalty: IRC § 4980H(b)

• Only applicable to full-time employees (“FTEs”)


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2014 (2015): No Coverage Penalty

• Employers who do not offer “minimum essential coverage” to at least 95% of FTEs and their children– Children by birth or adoption– Foster children– Stepchildren

• First federal mandate to cover children of domestic partners or same-sex spouses?

• One or more FTEs receive a premium tax credit at exchanges

• “Offer” means chance to enroll at least once a year


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• Minimum essential coverage (“MEC”)– For this penalty, no requirement that MEC be

affordable or provide minimum value• However, if the coverage is not affordable or does

not provide minimum value, the employee must be able to reject coverage at least once a year

– Most coverage, other than HIPAA-excepted benefits, qualifies under proposed regs

• How minimal can this coverage be?


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• Calculating the no coverage penalty – Monthly penalty payment of $2,000 per FTE

(after subtracting the first 30 FTEs), divided by 12

– Aggregation rules do not apply• Exemption for first 30 FTEs is split among the

companies in the controlled group based on percentage of FTEs of controlled group each company employs


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• No Coverage Penalty Aggregation Example

Controlled Group has total of 150 FTEs

No. of FTEs Percentage Exemption

Company A 90 FTEs 60% 18 FTE

Company B 30 FTEs 20% 6 FTE

Company C 30 FTEs 20% 6 FTE

Monthly No Coverage Penalties

Company A $2,000 X 72 FTE divided by 12 = $12,000/month ($144,000/year)

Company B $2,000 X 24 FTE divided by 12 = $4,000/month ($48,000/year)

Company C $2,000 X 24 FTE divided by 12 = $4,000/month ($48,000/year)


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2014 (2015): Insufficient Coverage Penalty

• Imposed when these requirements are met:– Employer offers coverage to 95% or more of

FTEs– FTE receives a premium tax credit – Monthly penalty is lesser of following, divided

by 12:• $2,000 per FTE (after subtracting first 30 FTEs)• $3,000 per FTE receiving premium tax credit


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2014 (2015): Insufficient Coverage Penalty

• No insufficient coverage penalty if FTE was offered affordable GHP coverage with MV

• Affordability rule for employers (in lieu of 9.5% of household income rule): the lowest cost option for employee-only coverage does not exceed – 9.5% of employee’s W-2 wages– 9.5% of employee’s monthly pay– 9.5% of federal poverty line for a single individual– Not applicable to dependents’ coverage and no

requirement for employer to subsidize if 9.5% test is met


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2014 (2015): Minimum Value

• MV percentage – Use anticipated spending for a standard population

(developed by HHS based on typical plans)– Take into account benefits provided by the plan that

are included in any one of the EHB-benchmark plans– Employer HSA contributions– New HRA contributions that can be used only for cost-

sharing (not to pay premiums) – Wellness incentives not counted unless non-smoking

incentive


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2014 (2015): Affordability Calculation• May consider

– New HRA contributions that can be used for cost-sharing or to pay premiums

– Non-smoking incentives, but not other wellness incentives


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2014 (2015): Full-Time Employee

• Common-law employee• Excluded from the definition are:

– Leased employees (for more than one year)– Sole proprietor – Partner in a partnership – 2% S corporation shareholder – Foreign employees with no U.S.-sourced

income


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2014 (2015): Full-Time Employee

• Employee working 30 hours per week or 130 hours per month is considered FTE– Employer must count all paid time off– Special rules for some unpaid leave (FMLA,

USERRA, jury duty) – Special rules for determining working hours for certain

employees • Non-hourly and commissions-based employees• School employees


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2014 (2015): FTEs and New Hires

• FTEs must be offered coverage to avoid pay-or-play penalties– New FTE hires must be offered coverage

within 90 days of hire

• Employees in part-time positions need not be offered coverage


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2014 (2015): VHS Employees

• Proposed regulations for variable hour and seasonal (“VHS”) employees – Variable hour employee: employer does not know on

hire date whether employee will be FTE– Seasonal employee

• Agricultural employees• Seasonal employees in department stores • Waiting for more guidance on how long “season” may be

– 4-6 months likely maximum – 9-month school employees are not seasonal


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2014 (2015): New VHS Employees

• Proposed regulations for new VHS employees– Initial measurement period (“IMP”) to measure

how many hours employee is working– 3- to 12-month IMP allowed – At end of IMP, employer determines whether

new VHS employee was FTE during IMP


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• If new VHS employee is determined to be FTE during IMP– Employer must offer coverage within 90 days of

end of IMP (or 13 months from the date of hire, if sooner) (“Administrative Period”) to avoid pay-or-play penalties

– Once it begins, coverage must last for “initial stability period” regardless of the number of hours worked during stability period


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• Length of initial stability period (“SP”) after IMP– If IMP was six months or less, initial stability

period must be at least six months– If IMP was longer than six months, initial stability

period must be at least as long as IMP

• If VHS employee is terminated during SP, GHP would offer COBRA


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• If new VHS employee is determined not to be FTE during IMP, coverage need not be offered during the stability period to avoid pay-or-play penalties– However, if VHS employee is hired into a

full-time position during administrative or stability periods, employer must offer coverage within 90 days of hire into full-time position


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2014 (2015): Example: New VHS

• Three-month IMP, one-month administrative period, six-month initial SP– Employee hired Feb. 1, 2014– IMP from Feb. 1 to Apr. 30, 2014– Administrative period from May 1 to May 31, 2014– Stability period from June 1 to Dec. 31, 2014


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2014 (2015): Measuring FTEs in SMP • Proposed regulations allow employer to

select standard measurement period (“SMP”) of 3-12 months– Fixed period of time (such as Oct. 1 to

Sept. 30) each year – All on-going employees (not just VHS

employees) measured


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2014 (2015): Measuring FTEs in SMP • Within 90 days of end of SMP, employees

determined to be FTEs must be eligible for GHP during stability period in order to avoid pay-or-play penalties– If SMP is six months or less, stability period

must be at least six months– If SMP is longer than six months, stability

period must be at least as long as IMP


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2014 (2015): SMP Example

• Nine-month SMP from Jan. 1 to Sept. 30 of each year

• 90-day administrative period from Oct. 1 to Dec. 31 of each year

• 12-month stability period from Jan. 1 to Dec. 31 of the following year


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2014 (2015): Different Periods

• Setting different measurement/stability periods allowed for different classifications of employees– For union/non-union– Salaried/hourly– Employees of different entities– Employees in different states


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2014 (2015): Stability Period Issues • Eligibility must continue during stability

period regardless of hours worked– What if employee’s hours drop so that the

employee cannot afford the coverage?• Expected that IRS will issue guidance that this is a

change event under cafeteria plan rules• If employee is eligible, but does not pay premium,

no qualifying event under COBRA– Must COBRA still be offered at end of stability period?


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2014: Required HRA Integration

• No aggregate lifetime dollar limits allowed• No annual dollar limits on essential health

benefits allowed • HRAs would violate these rules

– Previous waiver program for HRAs and other GHPs (mini-meds) ends in 2014


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2014: Required HRA Integration

• HRAs will violate rules unless “integrated” with a GHP without dollar limits

• What does “integration” mean?– HRA limited to employees enrolled in a GHP

• Mere eligibility for GHP is not enough• Enrollment in an individual policy is not enough• Can HRA be integrated with more than one GHP?


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Issues on Delayed List

• Automatic enrollment for large employers– Delayed until after 2014– Enforcement moved to EBSA

• Nondiscrimination rules for insured GHPs– PPACA requires these rules for

non-grandfathered GHPs to be “similar” to the rules for self-funded GHPs

– Enforcement delayed until regulations issued


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Non-HCR Issues for 2013

• HIPAA Omnibus Rule action items– Amend business associate agreements– Revise GHP’s notice of privacy practices– Revise GHP’s privacy and security policies– Revise GHP’s breach notification policies– Retrain your workforce


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• Possible demise of DOMA– Changes how GHP will be taxed for same-sex

spouses (and possibly registered domestic partners in some states)

– May require summary plan description/plan document changes

– Retroactivity?


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• New HIPAA wellness program regulations– Applicable to a wellness program that is, or is

part of, a group health plan

• Three types of programs– Participatory program– Health-contingent: activity-only– Health-contingent: outcome-based


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• Major changes from previous wellness program rules– Health-contingent program’s maximum reward

increased from 20% to 30% of total premium (50% for non-smoking rewards)

– Health-contingent outcome-based programs must offer alternative method to all who do not otherwise qualify for reward and must pay for the cost of the alternative method


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• Example: reward for non-smokers– All smokers must be offered a reasonable alternative

(smoking cessation program)– Plan must identify and pay the cost of smoking

cessation program– Smoker gets reward upon completion of program,

whether or not smoker quit smoking• No incentive required if smoker dropped out of program• Repeat next year


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2014: State Exchanges

• Mechanism for organizing the health insurance marketplace to help consumers and small businesses access affordable insurance coverage

• Mitigate adverse selection– Essential health benefits for all plans– Single risk pool for individual market plans– Same plan, same premium (inside and outside)


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2014: State Exchanges

• All states required to have one by 2014– State exchange– Partnership exchange– Federally facilitated exchange

• First open enrollment period begins Oct. 1, 2013, for Jan. 1, 2014, coverage


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2014: Exchange Functions

• Certify plans as Qualified Health Plans• Operate internet portal with standardized comparative information• Provide telephone assistance• Rate insurance plans• Use standardized format for presenting plan options• Inform individuals of eligibility for health programs and subsidies• Provide electronic calculator to determine actual cost of coverage• Certify that individuals are covered• Inform employers of employees who cease coverage• Establish a Navigator program


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2014: Exchange Basics

• All plans offered must offer EHBs• Cost-sharing limitations• Four categories of coverage by actuarial

value (“AV”)– Bronze = 60% – Silver = 70%– Gold = 80% – Platinum = 90%

• “Catastrophic” plans for select groups


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2014: Silver/Bronze Illustration

Tier Actuarial Value

Deductible Patient Coinsurance

Out-of-Pocket Limit (HSA)

Bronze 1 60% $4,375 20% $6,350

Bronze 2 60% $3,475 40% $6,350

Silver 1 70% $2,050 20% $6,350

Silver 2 70% $650 40% $6,350

Produced by Kaiser based on federal guidance• Deductible applies to all services except preventive (no

cost sharing allowed)


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2014: SHOP Exchange

• Small Business Health Options Program (“SHOP”) for employer with 2-50 employees

• States may choose to merge with individual exchange

• Employer decides level of coverage– Employees pick any plan offered within level


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But Wait, SHOP Somewhat Delayed

• “Employee choice” provision in the SHOP exchange implementation has been delayed one year

• Federal SHOP exchanges will have only one coverage option until 2015


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QUESTIONS?Please contact:

Melanie Curtice(206) 386-7651

[email protected]

mailto:[email protected]

Health Care Reform: Preparing for 2014 MONDAY, AUGUST 26, 2013 SPOKANE, WA 1 2013 Public Transportation Symposium Presented by: Melanie Curtice, Partner.

Documents

llp health care reform

wa slide

preventive care rules

cost of health coverage

women contraceptive

hras slide

coverage sbc health

electronic delivery