•Patient Protection and Affordable Care Act (PPACA) – signed on March 23, 2010

•Health Care and Education Reconciliation Act (Reconciliation Act) – signed on March 30, 2010

Why We Are Here

Why We Are Here

•The health care reform law makes sweeping changes to our nation’s health care system, but

•Details will be issued in regulations from government agencies:–DOL– IRS–HHS

•Expect nearly 20K pages of rules and regs

A Mountain of Regulation

•Individuals now have a mandate to have insurance

•Individuals and some employers will be able to purchase coverage through state health benefit exchanges

•Some health insurance practices prohibited or reformed

•Coverage changes made to plans•New duties for employers

A Quick Global View

•Simple answer: Yes

•The law does not require individuals or employers to terminate current coverage

•Many health care reform provisions don’t apply to existing plans, even if coverage is later renewed

•Existing Plans = Grandfathered Plans

Can I Keep What I Have?

•A group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of the health care reform legislation

•Significant changes to plan design could take a plan out of “grandfathered” status

•Law is not clear on this point – need to be cautious in redesigning any current plans

Grandfather Status

•Small Employer Tax Credit

•Auto Enrollment for Large Employers–Was effective on date of enactment, but

no regulations/compliance provisions were included in the passed bill.

•High-Risk Pool Program – Running into state resistance

•Early Retiree Reinsurance Program

Reforms Done or Expected Within the

Year

•Coverage for Adult Children until Age 26•Tax exclusion applies to coverage•State mandates above this level continue

to apply

•No lifetime limits on essential benefits

•Restricted annual limits on essential benefits–Allowed for plan years beginning before

Jan. 1, 2014

•Need HHS regulations

Reforms Done or Expected Within the

Year

•No rescission of coverage–Applies to group and individual coverage–Exception for fraud or intentional

material misrepresentation– Individual must be given prior notice of

cancellation•No pre-existing condition exclusions or limitations for children under age 19–This prohibition will apply to everyone in

2014

Reforms Done or Expected Within the

Year

•Limits on preauthorization and cost-sharing

•Patients can chose an available participating primary care provider (or pediatrician)

•Apply to new plans

Reforms Done or Expected Within the

Year

•As of Jan. 1, 2014, individuals must enroll in coverage or pay a penalty

•Penalty amount = greater of flat dollar amount (1/2 for children) or a % of income

Individual Mandate

Individual Mandate Continued

• 2014 = $95 or 1%;

• 2015 = $325 or 2%;

• 2016 = $695 or 2.5%

• Amounts indexed for CPI after 2016

• Family penalty capped at 300% of the adult flat dollar penalty or “bronze” level premium

•States will receive funding to establish health insurance exchanges

•Individuals and small employers can purchase coverage through an exchange

•In 2017, states can allow employers of any size to purchase coverage through exchange

State Exchanges

•Employers can give “qualified employees” a voucher to buy coverage in exchange– Employers have to offer coverage and make a

contribution

•Voucher is for amount employer would have contributed to plan

•Qualified employee– Household income not more than 400 percent

of federal poverty level– Required plan contribution between 8 and 9.8

percent of income

The Voucher Issue

Selected Tax Implications

• July 1, 2010 – Indoor Tanning Tax ($2.7 B)

• 2011– Fee on Drug Manufactures ($27 B)– FSA, HAS, HRA definition of

medical expenses ($5 B)– Increase to 20% Penalty for non-

health withdrawals from an HSA ($1.4 B)

But Wait There’s More!Tax Impacts Continued

2012• 1099 Compliance ($17.1 B)• Fee imposed on insurance and

employer plans to pay for competitive research ($2.6 B)

2013• Eliminate the Medicare Part D

employer subsidy ($4.5 B)

Selected Tax Impacts

2013 Cont• Limit FSAs to $2,500 indexed to

inflation ($13 B)• Raise 7.5% AGI floor to 10% ($15.2

B)• 2.3% tax on medical devices ($20 B)• Increase Medicare payroll tax by .9%

in excess of $200/250K (unindexed) and a 3.8% investment tax ($210.2 B)

Selected Tax Impacts

2014• Fee on insurance providers

($60.1 B)2018• 40% Excise Tax on “Cadillac”

High Cost plans ($32.0 B)

Small Business Tax Credit as a Percent (Maximum of 35%) of Employer Contribution to

Premiums, For-Profit Firms in 2010-2013

Firm sizeUp to

$25,000 $30,000 $35,000 $40,000 $45,000 $50,000

Up to 1035% 28% 21% 14% 7% 0%

11 33% 26% 19% 12% 5% 0%

12 30% 23% 16% 9% 2% 0%

13 28% 21% 14% 7% 0% 0%

14 26% 19% 12% 5% 0% 0%

15 23% 16% 9% 2% 0% 0%

16 21% 14% 7% 0% 0% 0%

17 19% 12% 5% 0% 0% 0%

18 16% 9% 2% 0% 0% 0%

19 14% 7% 0% 0% 0% 0%

20 12% 5% 0% 0% 0% 0%

21 9% 2% 0% 0% 0% 0%

22 7% 0% 0% 0% 0% 0%

23 5% 0% 0% 0% 0% 0%

The Employer Perspective