Pacific Northwest Chapter IS-CEBS: November 12, 2010 Sarah L. Bhagwandin
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Pacific Northwest Chapter IS-CEBS:November 12, 2010
Sarah L. Bhagwandin
Health Care Reform: Hanging in the Balance
It all depends on your perspective. . .
Unemployment 9.6% in October (U.S.
Bureau of Labor Statistics)
Uninsured 50.7 million (almost 1 in 6
residents)
Percent with private insurance was lowest
since 1987
Poverty rate climbs 14.3% (2009)
The Census Bureau's poverty thresholds for 2009
Source: U.S. Census Bureau, Weighted Average Poverty Thresholds 2009, released
in September 2010. Preliminary estimates for 2009 were released February 2010.
$44,366Nine people or more
$37,252Eight people
$33,372Seven people
$29,405Six people
$25,991Five people
$21,954Four people
$17,098Three people
$12,982Householder 65 years and over
$14,439Householder under 65 years
$13,991Two people
$10,28965 years and over
$11,161Under 65 years
$10,956One person (unrelated individual)
Poverty Threshold Size of Family Unit
U.S. Census Bureau Poverty Thresholds, 2009
Health Care Reform: A Policy Discussion in Pictures
Patient Protection and Affordable Care Act
Signed into law by President Obama on 3/23/10
Health Care and Education Reconciliation
Act
Signed into law by the President on 3/30/10
Three Agencies Issuing Regulations
Departments of Treasury, Labor and Health and
Human Services
1)
2)
Health Care Reform:System Overhaul
Individual Mandate (2014)
State Exchanges (2014)
Employer Mandate (2011)
Individuals must be covered
$695 per individual, capped at 300%
Tax Assistance
Lawsuits
Changes to System: State Exchanges
Federal government to give states funding to establish exchanges
Health plans must be certified qualified health plansMust include essential benefits, such as emergency services, hospitalization, maternity and newborn care, rehabilitative care, laboratory services, preventive and wellness services, pediatriccare (including pediatric oral and vision care) mental health and substance abuse and prescription drugs
Must satisfy limits on cost sharing
Either platinum, gold, silver, bronze or catastrophic plan
State Exchanges: Who Participates?
1. Small employers 2014
100 or fewer employees
can pay for coverage on pre-tax basis through cafeteria
plan if employer is a qualified employer
Small employer electing to make all full-time employees
eligible for coverage through an exchange
2. Larger employers 2017 (if permitted by the state)
3. Employees 2014
Employer coverage not affordable
Free Choice Vouchers (later)
1. Who will run them?
2. What restrictions will be placed on
insurers?
3. What will be the cost of administration?
New Mandate: Not covering? Taxed!
PlayOffer group health plan coverage
minimum essential coverage affordable to employees if dependent coverage: cover adult children
ORPay
What is a Large Employer? Large Employer= 50+ FTE employees (work on average 30 hours or more per week).Part-time employees count for determining FTE, but no penalty for part-timeTemporary employees count only if work more than 120 daysExample: 12 employees work 25 hours/week = 1200 hrs
1200/120 hours (30 hrs x 4 wks) = 10 FTE+ 45 employees work 30 hours/wk = 45 FTE
TOTAL 55 FTE
Annual Tax = $2,000 ($166.67 per month) for each
full-time employee (first 30 employees not included).
Example: 12 part-time/45 full-time
45 employees 30 = 15 x $2,000 = $30,000
What is a Full-Time Employee?
Questions Needing Guidance
No penalty for employer with less than 50 FTE
employees.
Employer Mandate: "Play" means Affordable Coverage
What is affordable coverage?
Affordable coverage means either 1) employee's share of cost does not exceed 9.5% of employee's household income, or 2) plan's share of benefits is less than 60% of the cost of coverage.
What if group health plan fails this test?
Employee can decline coverage and enroll in a qualified health plan through an Exchange.
Employer Cost?
Employer Mandate: Play or Pay
If Employer provides coverage, but at least one (1) FTE employee declines because not affordable and receives a state exchange
subsidy or credit = PENALTY
$3,000 penalty per such employee per year (NTE $2,000/year penalty), pro rata per month
Employer Mandate: Play AND Pay --Free Choice Vouchers
Employer Sponsored Contributory Health Plans FREE CHOICE VOUCHERS
What is a Free-Choice Voucher?
What employees are eligible?1. employees who do not elect coverage under Employer-
sponsored group health plan;
2. the employee's household income does not exceed 400% of the poverty line (based on the size of the family); and
3. employee's share of the cost of coverage under the employer -provided plan exceeds (> 8%, but does not exceed 9.8%) of the employee's household income.
Employer Mandate: Free Choice Vouchers
Cost of Voucher: Monthly Cost to Employer if Employee Covered by Employer Plan
single coverage vs. family coverageIf Employer offers several benefit components: cost based on option for which employer pays largest portion
Tax ImplicationsEmployer -- Voucher = Deductible Compensation, No taxes
Employee --Could be partially taxable to the employee. If cost of free choice voucher exceeds premium to enroll in Exchange, excess value taxable income to the employee.
Employer Mandate: Small Employer Tax Credit
Small businesses can take a tax credit for contributions for employee health insuranceWhat is a small employer?
Full credit for employer with 10 or fewer FTE employees with average wages of not more than $25,000Phased-out credit for employer with up to 25 FTE employees with average wages of no more than $50,000
Employer must contribute at least half of premium cost
Effective 2010 for coverage purchased from health insurance company
For years beginning 2014, credit available only if insurance purchased through a state exchange; only take credit for two year
Nonrefundable credit; claim on employer s tax return
SYSTEM OVERHAUL: Expect Revisions
Individual mandate dollar amounts
Delayed effective date
Waivers on Mini-Meds
State Exchanges
2010 ChangesAdult Children and related tax creditEarly Retiree Reinsurance
2011 ChangesCafeteria PlansAdult Children CoverageChanges to Grandfathered and Nongrandfathered Plans
Later ChangesEmployer ReportingCoverage and Cost SharingCadillac Plan Tax
What Is a Grandfathered Plan?
What Requirements Must Be Met by
Grandfathered Plans?
What Additional Requirements Must Be
Met by Non-Grandfathered Plans?
Employer-provided health insurance
coverage or medical expense reimbursement
for an employee s child is tax-free through
the end of the taxable year in which child
turns 26 (effective 3/30/10)
Applies regardless of child s marital status,
residency and support
Temporary program from June 1, 2010 to 2014; $5 billion limitReimburses plan for 80% of retiree costs within range of $15,000 to $90,000Must be age 55 but not Medicare eligiblePlans must apply, similar to Part D subsidy; many already acceptedReimbursement must be used to lower cost of plan or cover increased cost
Need to implement before 1/1/11
Health FSAs cannot reimburse for OTC
drugs, unless prescribed
Family status changes for elections for adult
children
Simple cafeteria plans for small employers
Adult Child Coverage: 2011 (MANDATORY)
Applies to all plans (even grandfathered)
If plan covers dependents, must cover until
child turns age 26
Student, dependency status no longer
matter; does not matter if married
For grandfathered plans, must not be eligible
for other employer coverage (until 2014)
No lifetime limits on essential benefits
Prohibition on annual limits phased in
until 2014
No pre-existing condition exclusions for
children up to age 19
No rescission except for fraud
2011 Changes Non-Grandfathered Plans
Nondiscrimination rules apply to insured
plans
Choose any primary provider/no
preauthorization for emergency or OB/GYN
No cost-sharing (co-pays and deductibles)
for preventive care
Increased Penalty for Nonqualified Withdrawals from HSAs: 2011
Penalty for withdrawals from a health
savings account not used for qualified
medical expenses increases
10% to 20% of withdrawal amount
W-2 aggregate value (Does not make benefit taxable)
Report to Government (5500?) 2014
Uniform Explanation of Coverage (2012)
Written Notice Upon Hire (not later than March 1, 2013)
Uniform Explanation of Benefits and Coverage: 2012
Max. four pages describing plan coverage, including cost sharing, exceptions and limitations on coverage and whether minimum essential coverage is providedDeliver to all participants at time of initial enrollment and at annual enrollment
Within 60 days of effective date of changes
Administrator provides for self-insured plan; insurer for insured plan
Uniform Explanation: 2012 (continued)
Penalty for failure to provide up to
$1,000 per failure
Also new penalty on employers up to
$100 per day, per participant failure
Distribution deadline 24 months after
3/23/10 (by 3/23/12)
Duplication of SPD and SMM disclosures
Employer Reporting: Written Notice Upon Hire
Not later than March 1, 2013Employers must notify employees at time of hiring of:
The existence of state exchange
That employee may be eligible for a subsidy under the exchange if the employer s share of total costs of benefits is less than 60%
If employee buys policy through exchange, may lose employer contribution to coverage
Coverage/Cost Sharing Requirements: 2014
No annual benefit limits on essential
health benefits
Previously could impose restricted annual
limit as permitted by HHS
No waiting periods in excess of 90 days
Wellness Programs Increased
Incentives
40% excise tax on value of employer
provided coverage in excess of:
$10,200 (single) or $27,500 (family
coverage)
Adjusted for inflation
Must Cover at Least One Participant on
March 23, 2010
Must Continuously Cover Someone
Thereafter
Applied on a Benefit Package Basis
10 Major Health Care Changes Applicable to All Plans: Grandfathered or Non-Grandfathered
1. Age 26 Dependent Coverage Grandfathered Plans Can Only Exclude If Covered Under Another Employer s Plan (Until 2014); PHSA § 2714
2. Plan Limits No Lifetime or Restricted Annual Limits; Special Enrollment If Already Met; PHSA § 2711 (750,000 2011; 1,250,000 2012; 2 million until 2014)
3. No Pre-Existing Exclusion Limitation for Children Under 19 [2014 Prohibited for All Participants]; PHSA § 2713
10 Major Health Care Changes, cont.
4. No Rescission of Coverage Absent Fraud or
Misrepresentation; PHSA § 2712
5. All Plans Must Give Participants at Least 60 Days
Advanced Notice of Benefit Changes; PHSA § 2715
6. By March 23, 2012, in Addition to SPD & SMM Must
Be Given a Four Page Summary; PHSA § 2715
7. FSA prohibited from reimbursing over counter drugs (2013 limited reduced to $2,500)
10 Major Health Care Changes, cont.
8. Employers With More Than 200 Full-Time Employees Must Enroll in One of the Health Plans; FLSA § 18A
9. W-2 the Cost of Group Health Coverage Must Be Reported; Code § 6051(a)
10. Beginning in 2014, Waiting Periods Cannot Exceed 90 Days and Must Notify Employees of Health Care Exchanges; PHSA § 2708
7 Ways to Lose Grandfathered Status
1. Cannot Raise Percentage Co-Insurance in Any
Manner
2. Cannot Significantly Raise Fixed Co-Payment
3. Co-Payment Increase Limited to Greater of (a)
$5.00 (Adjusted for Medical Inflation) or (b)
Medical Inflation + 15 Percentage Points
7 Ways to Lose Grandfathered Status
4. Cannot Significantly Lower Employer
Contributions
Cannot increase the charge to employees by
more than 5%
5. Cannot Add or Tighten Annual Limits
6. Cannot Significantly Reduce or Cut a
Covered Benefit
7. Cannot Change Insurance Companies
Changes That Generally Won t Affect Grandfathered Status
Changes Required by Federal or State
Law
Changes Required to Voluntarily Comply
With PPACA or Increase Benefits
Change to Plan s Third Party
Administrator
Changes in Plan Structure Insured to
Self-Funded
Changes in Provider Network
Changes in Prescription Drug
Formulary
Retiree Plans Less Than Two Participants That Are Current Employees
Collectively Bargained Plans
Must comply with all rules applicable to grandfathered plans
Insured plans are deemed grandfathered until expiration of CBA
No special rule for self-insured collectively bargained plans
Excepted Benefit Plans
Changes Applying Only to Non-Grandfathered Plans
1. Preventive First-Dollar Coverage; PHSA § 2713
2. No Pre-Authorization for Emergency Services; PHSA § 2719A
3. No Pre-Authorization for OB/GYN Care (2011)
4. Designation of Any Provider for Primary Care (2011)
5. Non Discrimination Rules for Insured
Plans; PHSA § 2716
6. New Internal & External Claims Processes;
PHSA § 2719
Changes Applying Only to Non-Grandfathered Plans, cont.
7. New Governmental Reports About Claim Information and Quality of Care; PHSA § 2715A; § 2717
8. Beginning in 2014, Limits on Annual Cost Sharing ($5,950 Individual; $11,500 Family); PPACA §1302(o)
9. Beginning in 2014, Limits on Annual Deductible ($2,000 Single; $4,000 Family) PPACA § 1302(o)
10. Mandate to Cover Individuals in Clinical Trials; PHSA § 2709
Changes Applying Only to Non-Grandfathered Plans, cont.
Primarily Carrier-Related ChangesGuaranteed Access Guaranteed Renewal or Continued Access for Everyone; And Also to Any Willing Provider; PHSA § 2702; § 2703; § 2706Plans Must Provide Mandated Essential Benefits; PHSA 2707Must Prohibit Discrimination Based on Health Status; PHSA § 2705Premiums Vary Only by Age; Tobacco Use; Geographic Rating and Whether Coverage is Individual or Family; PHSA § 2701
Send Notice of Grandfathered Status With Open
Enrollment Materials
Amend Plan for Grandfathered Status
Amend All Plans for:
Age 26 dependents
Limits and restrictions on coverage
Pre-existing conditions for children under 19
Special Enrollment
Adult children
Lifetime limit
For Non-Grandfathered Plans:Preventative first-dollar care
Primary care designation
No pre-authorization emergency care; OB/GYN
New appeal procedures
Additional reporting: claims and quality of care
Changes apply to non-grandfathered group
health plans
Effective for plan years on or after Sept. 23, 2010
Modifies existing DOL procedures for internal
claims and appeals
Requires new external review process
For appeals of final internal adverse benefit determinations
Plans must comply with either state or federal review procedures
Most insured plans will comply with state process
External Review Independent Review Organizations (IROs)
Plan must contract with at least 3 IROs for reviewIRO not eligible for financial incentive based on likelihood that IRO will uphold decision to deny benefits
IRO must make final decision within 45 daysNot bound by internal claims and appeals process
Model notice now available
If IRO reverses plan s decision, plan must immediately provide coverage or payment for claim
When required? Timing for internal appeals
process would seriously jeopardize claimant s
life or health
Final internal adverse benefit determination if
Standard external review timing would seriously
jeopardize life or health
Involves admission, availability of care, continued stay
or emergency services if claimant not yet discharged
Immediate preliminary review and
written notice
Provide documents to IRO by email,
phone or fax
72 hours for IRO to provide notice
Confirm compliance with internal claims appeals procedures
Self-insured plans must decide whether to comply with state or federal external review process
To comply with federal process, plan must establish review procedures (can be coordinated with TPA)
Update plan document, SPDs, notices, and related documents
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