Healthcare Reform Update A review of provisions of the Patient Protection and Affordable Care Act (PPACA) July 12, 2012
Presented By J.W. Terrill Consulting Services
Introduction: Patient Protection & Affordable Care Act (PPACA) Health Care Reform U.S. Supreme Court Ruling Summary Timeline Review of Employer Impacts 2010 – 2018 Drill Down Topics – – – – – – – – –
Medical Loss Ratio - Rebates OTC drugs and Flexible Savings Accounts Reporting Plan Value on Form W-2 SBC (Summary of Benefits and Coverage) Women's Preventive Health / Contraception Coverage Comparative Effectiveness Research Fee Individual Mandate Employer Mandate Essential Benefits
Health Care Reform Introduction Patient Protection & Affordable Care Act (PPACA) – Amended by Health Care and Education Affordability Reconciliation Act of 2010 – Signed into law March 30, 2010 – Implementation of the bill’s provisions will continue through 2018
– Legislation > 425,000 words – Final regulations estimated at > 2,160,000 words – By comparison: Harry Potter and the Order of the Phoenix = 257,000 words Harry Potter and the Goblet of Fire = 190,000 words Harry Potter and the Deathly Hallows = 198,000 words Cyrus the Great (10 volumes, 13,000 pages) = 2,100,000 words
Health Care Reform: Supreme Court Ruling June 28th, 2012 US Supreme Court Upheld Law − More time than any other case since 1966 for arguments − More briefs filed than any other case in history (170) − 5 to 4 vote to uphold law Legitimate use of Congressional ability to levy taxes
Limited expansion on Medicaid − Allowed states to opt out of Medicaid expansion with no federal penalty Effective January 2014 (in participating states) individuals under age 65 with income below 133% of the federal poverty level (FPL) will be eligible for Medicaid.
Health Care Reform: Timeline June 2010 – ERRP Program Temporary reinsurance program for early retirees established ($5 billion) Acceptance of applications for program ended May 2011 funds exhausted in December 2011
Plan Years Beginning on or After September 23, 2010 – – – – – – –
No lifetime limits Only “restricted” annual limits allowed (3 year implementation) 100% coverage of specified preventive services required Dependent coverage extended to age 26 Coverage for ER services at in-network cost-sharing levels with no prior authorization Rescissions (Retroactive terminations) prohibited Prohibits discrimination based on salary (Suspended Enforcement)
Health Care Reform: Timeline “Grandfathering” Provision – All Plans must provide certain benefits:
No lifetime limits on coverage for “essential benefits” No rescissions of coverage Extension of parents coverage to young adults under 26 years of age No coverage exclusions for children with pre-existing conditions No “restricted” annual limits for “essential benefits”
– To qualify for “grandfathered” status – based on plan design in effect March 23, 2010
Cannot significantly cut or reduce benefits Cannot raise co-insurance charges (i.e. 20% to 25%) Cannot significantly raise copayment charges (more than $5 or 15% + inflation) Cannot significantly raise deductibles (more than 15% + inflation) Cannot significantly lower employer contributions (more than 5% as % of premium) Cannot add or tighten an annual limit on what the insurer pays Cannot change insurance companies – Modified to allow changes provided same benefits exist
Health Care Reform: Timeline 2011 − Minimum loss ratio standards 80% for individual and small group and 85% for large group markets; rebates payable to policy holders if standards not met by 8/1/12 − HSA non-qualified withdrawal penalty increases from 10% to 20% − Prohibits reimbursement of OTC (d) purchases from FSAs, HRAs and HSAs − Government run long-term care program. Employers are expected but not required, to allow for payroll deductions and automatically enroll employees (CLASS) - Suspended − 1099 requirement on vendors receiving $600 or more - Repealed
Health Care Reform: Timeline 2012 − − − − − −
“Plan Value” reported on W-2 Summary of Benefits and Coverage (SBC) Women's Preventive Services 60-Day notice in advance of material modifications Claims Appeal & External Review Procedures (1/1/12) Comparative Effectiveness Research Fee
2013 − Health Care FSA contributions capped at $2,500/calendar year − Medicare tax increase for high earners Those earning $250,000 joint / $200,000 singles Tax increased by 0.9% (1.45% to 2.35%)
Health Care Reform: Timeline 2014 − − − − − − − − − − −
State-based health insurance exchanges established No preexisting condition exclusions 90-Day limit on waiting periods “Individual mandate” “Employer mandate” Employers with 200+ employees must automatically enroll employees into health plans. Employees may opt out - SUPSENDED Pending DOL Guidance Post 2014 $8 billion health insurance industry tax increasing in 2018 to $14.8 billion $25 billion tax on insurers and TPAs from ‘14 to ‘16 for exchange reinsurance program Numerous guarantee provisions and denial prohibitions “Essential Benefits” Defined 12/16/11 Rating restrictions (fully-insured market)
Health Care Reform: Timeline 2015 − Small group nationally defined as 1 to 100 employees
2016 − States may enter into health care choice compacts in which “qualified” plans could be offered in all participating states (subject to HHS regulations).
2017 − States may choose to include coverage for the large group market in exchanges
2018 − “Cadillac Plan” excise tax 40% tax on value above $10,200/individual and $27,200/family Higher indexing for retirees and high risk industries
Health Care Reform: MLR Rebates Requirement on fully-insured markets − 80% Medical Loss Ratio (MLR) target for small / individual market − 85% Medical Loss Ratio (MLR) target for large group market
Annual Calculation − By state, by book of business and business entity
Rebates due to policy holders by 7/31 − − − −
Paid to policy holders must be allocated appropriately; Employer / employee shares Specific uses – cash rebates, future premium reductions, benefit enhancements − Rebates must be utilized within 90 days or a trust must be established
Healthcare Reform: Flexible Spending Accounts No OTC(d) – Effective January 1, 2011 no over-the-counter (OTC) medicines or drugs will be recognized as eligible expenses.
$2,500 Calendar Year Maximum – Effective January 1, 2013 $2,500 limit on employee salary reduction for FSA’s – Transitional relief provided May 30th, 2012 for non-calendar year FSA plans Does not apply until plan years beginning prior to 2013
– Provision does not apply to employer contributions into a employee’s FSA – Still subject to discrimination testing
Healthcare Reform: Form W-2 Tax Reporting Requirement to report plan value on employee’s Form W-2 – – – – –
Effective for tax year 2012 Reporting requirement “informational only” Employers issuing 250+ W-2’s in prior tax year Reported in box 12, using code “DD” How is value calculated? The COBRA premium method – report using the COBRA rate for that period Premium charged method – report using actual premium charged by insurer
– What to report?
Fully-insured or self-funded Employee & employer contributions Imputed income (i.e. domestic partner coverage or a discriminatory plan) Full scope of coverage (i.e. employee only or family) Major medical, “mini-med” plans, onsite clinics, Medicare supplemental plans, Medicare Advantage plans, employer FSA contributions, EAP’s if more than just referral plan.
Healthcare Reform: SBC’s Summary of Benefits and Coverage – February 9, 2012 DOL, Treasury and HHS released final guidance – Effective first plan year on or after September 23, 2012 – Two (2) documents: A short, easy-to-understand Summary of Benefits and Coverage (SBC)
8 page document (double sided) Model documentation available online from DOL (Department of Labor)
A uniform glossary of terms commonly used in health insurance coverage
– When to provide SBC? To new enrollees Existing participants & beneficiaries – upon request and on renewal
– Can be a stand-alone document or incorporated into other document (i.e. SPD) – Can be distributed electronically – but have right to request it in paper form – Must be provided in a linguistically appropriate manner HHS has produced translations in Spanish, Chinese, Tagalog and Navajo
Healthcare Reform: SBC’s
Healthcare Reform: Women's Preventive Care August 2011 HHS announced new regulations – Effective plan years on or after August 1, 2012 – Non-grandfathered health plans would have to cover: Contraceptives and contraceptive counseling for women (FDA approved methods)
Condoms, Diaphragms, Sponge, Cervical Cap, Oral Contraceptives, Patch, Vaginal Contraceptive Ring, Progestin shots, Emergency Contraceptives (“morning after pill”), IUD, and voluntary sterilization.
Screening for gestational diabetes DNA testing for HPV Counseling about: sexually transmitted diseases, HIV, breast-feeding, interpersonal violence and domestic violence.
– On January 20, 2012 church affiliated organizations ordered to cover Does not apply to houses of worship Church affiliated institutions granted one year extension and must comply on plan years beginning on or after August 1, 2013
– Amended February 10, 2012 to allow church affiliated to not cover but requiring insurers &/or TPA’s to pay for coverage (Additional guidance to follow)
Healthcare Reform: Research Fee Comparative Effectiveness Research Fee – Assessed on health insurers and plan sponsors – Funds Patient-Centered Outcomes Research Institute (PCORI) Promote research to evaluate and compare health outcomes and clinical effectiveness, risks and benefits of varying medical treatments, services, procedures and drugs
− Applies to self-insured & fully-insured plans except; HIPAA excepted benefits (dental, vision, std, ltd and most FSA accounts), HSA’s, EAP’s, Expatriate plans and stop loss coverage
− Who is responsible for payment of the fee? Insured plans = insurance company Self-funded plans = plan sponsor
− How much is the fee? $1 per covered life (year 1) and $2 per covered life (year2) In year 3 and beyond the fee will be determined based on national health expenditures.
− Fees will be paid starting in 7/31/13 using IRS Form 720 − Program ends October 2019
Healthcare Reform: Individual Mandate 2014 “Individual Mandate” − Requirement for all U.S. citizens and legal residents to have qualifying coverage
Those without coverage will have to pay a penalty the greater of $625 per year up to a maximum of three (3x) that amount or $2,085 per family or 2.5% of household income. Penalties to be phased in as follows: 2014 Greater of $95 or 1% of taxable income 2015 Greater of $325 or 2% of taxable income 2016 Greater of $695 or 2.5% of taxable income After 2016 penalties will be increased annually by the cost-of-living adjustment Exemptions will be granted for: Financial hardship, religious objections, American Indians, undocumented immigrants, incarcerated individuals, those whom the lowest cost plan exceeds 8% of an individuals income and those with incomes below the tax filing threshold.
Health Care Reform: Employer Mandate Applicability determination “Employer” = entity with 50 full-time employees (>30 hours) Part-Time Employees, are counted to determine employer size − Add up hours worked for all part-time employees divide by 120, resulting number added to the number of full time employees in determining employer size
Employer Mandate “Pay or Play” Employers Not Offering Coverage If employer does not offer “minimum essential coverage” / $2,000/yr per FTE Subtract 1st 30 full-time workers for payment calculation
Employers Offering Coverage If employer offers “minimum essential coverage” If a FTE receives a credit or subsidy through exchange, $3,000 penalty/FTE receiving credit or subsidy
Health Care Reform: Employer Mandate FTE: Current Employees − PPACA defines a “full-time employee” as an employee who works an average of at least 30 hours per week. Treasury and the IRS intend to release additional guidance allowing employers to use a look-back/stability period safe harbor to determine whether an employee (other than a new hire) is a FTE. The look-back stability period will likely not exceed more than 12 months.
FTE: New Hires January 1, 2014 Forward − If a new hire is reasonably expected at time of hire to work full-time (30 or more hours per week on an annual basis) and does work full-time during the first three months of employment, the employee must be offered coverage. − If at time of hire it cannot be reasonably determined that a new hire is expected to work full-time:
If employee works 30+ during the first three months, and those hours are reasonably viewed as representative of what the employee is expected to work annually, the employee will be considered full-time. If the employee works 30+ during the first three months, but those hours are reasonably viewed as not representative of the average hours the employee is anticipated to work annually, the plan is allowed an additional 3-month period to determine the employees status.
Healthcare Reform: “Essential Benefits” States determine “essential benefits” coverage – Each state chooses one of four (4) existing plan options to model as benchmark
One of the three (3) largest small group plans in state; One of the three (3) largest sate employee health plans; One of the three largest federal employee health plan options; The largest HMO plan offered in the state’s commercial market.
– Essential benefits do not apply to self-insured plans, grandfathered plans and large group market health plans. Except in regards to annual & lifetime limits and preventive care benefits for non-grandfathered plans.
– Benchmark plans should be selected by states by third quarter of 2012.
Healthcare Reform Summary A Summary review of provisions of the Patient Protection and Affordable Care Act (PPACA) Contact Information Chris Johnson, Manager Consulting Services 314.594.2607 [email protected]