Key Compliance Issues for School Districts March 17, 2011

© 2011 McNees Wallace & Nurick LLC

Key Compliance Issues for School Districts

March 17, 2011

YEAR #2 OF HEALTHCARE REFORM:

Eric N. Athey Jennifer E. WillCo-Chair, Labor & Employment Member717.581.3708 [email protected] [email protected]


PPACA AT A GLANCE Patient Protection and Affordable Care Act

Passed 3/23/10 Some Near-Term Highlights:

• Unpaid breaks for nursing mothers (2010)• Dependent care extended to age 26 (2010-11)• Pre-existing condition exclusions phased out (2010-

14)• Lifetime & Annual Maximum Benefit Limits phased

out (2010-14)• FSA/HRA/HSAs: OTC reimbursements nixed (2011)• Extension of nondiscrimination rules to fully insured

plans (unknown)

2


PPACA AT A GLANCE PPACA Long-Term Requirements (2014)

• Free Rider Penalty: Up to $2085 annual penalty for families who don't have coverage

• No Coverage Penalty for Employers: $2000/yr per employee

• Unaffordable Coverage Penalty for Employers: $3000 per subsidized employee

• Free Choice Vouchers• Cadillac Tax (2018)

Issue: How much of PPACA will survive the 2012 elections?

3

© 2011 McNees Wallace & Nurick LLC 4

PPACA COMPLIANCE AND YOUR CBA:WHERE TO BEGIN?

Determine whether your plan is grandfathered ("GF")

Determine cost/benefits of maintaining GF status

Determine timing & costs of PPACA mandates


PPACA COMPLIANCE AND YOUR CBA:WHERE TO BEGIN?

Develop a bargaining strategy that ensures compliance without breaking the bank(i.e. what does district get in exchange for new benefits)

Develop a bargaining strategy that complies with bargaining obligations


GRANDFATHERING AND COLLECTIVE BARGAINING AGREEMENTS (CBAS)

General Rule: ALL collectively bargained plans must comply with PPACA requirements when they become effective BUT fully-insured CBA plans may retain grandfathered status longer than non-CBA plans

Fully Insured collectively bargained plans in effect before 3/23/10 remain grandfathered until expiration of CBA

Issue: Scope of "binding contract" exception?


GRANDFATHERING AND COLLECTIVE BARGAINING AGREEMENTS (CBAS)

Once CBA expires, any post-3/23/10 changes to fully-insured collectively bargained plans will be analyzed under general GF rules

Change of carriers or of TPA during current term does not eliminate grandfathered status

Grandfathered status determined on a benefit package level rather than plan-wide


APPLYING THE GRANDFATHERING RULES TO CBAS

Hypothetical 1: CBA (July 1, 2009-June 30, 2012) Employee Health Contributions Per

Month: 2009-10: $1002010-11: $1102011-12: $120

Still Grandfathered?




Month:2008-09: 7%2009-10: 8% 2010-11: 9% 2011-12: 10%





Month:2008-09: $1002009-10: $1002010-11: The % equivalent of $100




Hypothetical 4: CBA (July 1, 2008-June 30, 2012) No changes in cost-sharing – but

indemnity plan option is eliminated in 2010-11




Hypothetical 5: CBA (July 1, 2008-June 30, 2012) No changes in cost-sharing or

benefits – but plan moves from self-insured to fully insured in 2010-11




Hypothetical 6: CBA (July 1, 2008-June 30, 2013) The following cost-sharing changes are

implemented during the CBA – which ones defeat GF status:

• 7/1/08: Exclude benefits for treatment of morbid obesity

• 7/1/09: Reduce "supplemental insurance" pool from $300 to $200 per year



Hypothetical 6 (cont'd):• 7/1/10: Annual Deductible increased from

$200 to $400• 7/1/11: Office visit co-pay increase from $10 to

$20• 7/1/12: District decreases its contribution to

indemnity plan premium from 90% to 75%


BARGAINING CONSIDERATIONS FOR PRE-2014 REQUIREMENTS How important is GF status to your

District? Should you renegotiate (or delay)

concessions to maintain GF status? What is the cost of losing GF status

relative to desired cost-sharing concessions?


PROJECTED PPACA COMPLIANCE COSTS

Extension of Dependent Coverage to Age 26: 0-3% premium increase

Elimination of Lifetime Limits and Gradual Elimination of Annual Limits: 0-1.5% premium increase

Remaining Requirements Effective for Plan Years Beginning on or after 9/23/10: No anticipated impact

*Source: Aetna, "Impact of Health Care Reform in 2010


NEGOTIATING THE RIGHT LANGUAGE

Minimize changes to CBA; Address Amendments in Plan Document/SPDs

Annual/Lifetime Limits – OK in CBA with proper context language

Can you charge more for older dependents – No.



What if older dependents have other coverage – Irrelevant unless GF plan

Amend FSAs, HSAs and HRAs to eliminate OTC

Amend FSAs to implement $2500 limit



Preventive Health Services – Avoid listing in CBA

Appeals Procedure – Avoid listing in CBA

Reopener language as needed for compliance


BARGAINING CONSIDERATIONS FOR 2014/2018 REQUIREMENTS What are the 2014/2018

requirements? Will the 2014/2018 requirements be

repealed? How will they impact school

districts? What are the key bargaining

considerations?


WHAT ARE THE 2014/2018 REQUIREMENTS?

Free rider penalty for employees No coverage penalty: $2,000 x [# of

FTEs – 30] Unaffordable coverage penalty:

$3,000 x # of subsidized FTEs [if employee cost of coverage exceeds 9.8% of gross household income]


WHAT ARE THE 2014/2018 REQUIREMENTS?

Free choice vouchers [for employees earning less that 400% FPL and cost of coverage is b/t 8%-9.8% of gross household income]

Cadillac Tax [Eff. 2018 – 40% excise tax on plan costs over $10,200/$27,500]NOTE: $27,500 is threshold amount for all levels of coverage under multi-employer plan


WILL THE 2014/2018 REQUIREMENTS BE REPEALED? 20 State Attorney Generals sue to block

2014 Provisions 6 States pass laws purporting to reject

2014 Provisions Republicans now control House Who will act first, Congress or the

Supreme Court? In the meantime, we must address the

2011 requirements


GENERAL BARGAINING STRATEGIES FOR THE UNKNOWN

Short-term CBAs expiring pre-2014 Long-term CBAs with salary/benefit

reopeners pre-2014 "Me too" provisions to match

administrative or support staff (with a floor)

Negotiate waiver of duty to bargain as necessary to comply and/or avoid penalties


SPECIFIC 2014/2018 STRATEGIES

Free Rider Penalties Strategy: Negotiate provision

prohibiting waiver of coverage or allowing waiver only with proof of other coverage

No Coverage Penalty Strategy: Compare current coverage to

plans on Exchange Consider sharing of savings if

elimination of coverage is feasible



Unaffordable Coverage Penalty Strategy: Knowing gross household

income (GHI) will be key to avoidance

Implement GHI reporting requirement Mutually explore benefit of

eliminating coverage Tighten up opt-out payments



Free Choice Vouchers Strategy: Control cost-sharing to stay

below 8% of GHI Monitor cost/benefits of exchange

plans Consider negotiating elimination of

coverage Trigger elimination of coverage on

threshold number of employees seeking vouchers?


SPECIFIC 2014/2018 STRATEGIESCadillac Tax (eff. 2018) Reopener provision to avoid imposition of

tax Elimination of benefits triggered by

imposition of tax Unilateral reduction of benefits provision

to avoid imposition of tax Greater employee contributions triggered

by imposition of tax Union/Employee indemnification if tax

imposed


WILL THE CADILLAC TAX BE DRIVING YOUR DISTRICT IN 2018?

2010 Avg. District Pseudo Rate*: • Employee Only: $6996/yr or 68.5 of

$10,200• Family: $16,344/yr or 60% of $27,500• Avg. % Premium Increase for Districts

since 2006: 10.65% Where will the avg. pseudo rate be in

2018?*Source: Lancaster County School District Data


ANTICIPATED AVERAGE PSEUDO-RATE FOR 2018:

Assuming 10.65% increase per year• Employee Only: $15,719

Excess of $5,519/yr subject to 40% tax (or $2,207 tax per employee per year)

• Family: $36,726Excess of $9,226/yr subject to 40% tax (or $3,690 tax per employee per year)


QUESTIONS

Visit our blog at: http://www.palaborandemploymentblog.com/

31

Key Compliance Issues for School Districts March 17, 2011

Documents

insured cba plans

cbas hypothetical

grandfathering rules

bargained plans

noncba plansfully

bargaining strategy

insured plans unknown2

bargaining obligations