Care Bears and the Land of Care Bears and the Land of Health Care ReformHealth Care Reform

(or)(or)Federal Health Care Federal Health Care Reform: What’s NextReform: What’s NextPresented by:Amy B. Donovan, Esq.Assistant General CounselKeenan & Associates

Care Bears

Health Care Reform

Introduction

Six most important aspects of Health Care Reform:

1.Compliance 2.The new definition of “Full-Time Employee”3.The California Health Benefit Exchange4.The requirements for providing employees

“affordable” health coverage of “minimum value” in 2014 and the Cadillac tax in 2018

5.Grandfathering6.Wellness/VBIC/Preventive Services Mandate

Supreme Court Decision Recap Compliance 2012 – 2014 2014 and Group Insurance California Legislation California Health Benefits Exchange Wrap-Up

Agenda

Individual mandate constitutional under taxing power

Medicaid expansion unconstitutional insofar as it would take away all Medicaid funds for failure to implement expansion

Severance

Supreme Court Decision

Compliance for 2012 – Compliance for 2012 – 20142014

$1.25 million overall aggregate annual dollar limit on Essential Health Benefits

Claims and Appeals for Non-Grandfathered Plans

Medical Loss Ratio Rebates Preventive Care Services for Women Summary of Benefits and Coverage (“SBC”) Plan Audits (Grandfathering)

ACA Compliance 2012

$1.25 million overall aggregate annual dollar limit on Essential Health Benefits• Plan must be amended to state this limit

effective first day of plan year in 2012• Interpretation of the meaning of “overall

aggregate annual dollar limit” varies greatly

2012– Annual Limits on EHB

Applies to Non-Grandfathered Plans New right for participants to request an

independent external review Only for claims involving medical decision or

rescission Plan Sponsors must have contracts with

three Independent Review Organizations Fuller disclosures required in explanations of

benefits (EOB), availability of non-English EOBs, language services and appeals rights

2012– Claims and Appeals

Fully-insured plans must spend 85% of their premiums for claims, clinical services and quality improvement

Notification by Issuer and payment, if any, by August 1, 2012

Non-ERISA Plans can be allocated according to contribution rate

2012– Medical Loss Ratio Rebates

Details on preventive care services for women issued last year• Plan years on or after August 1, 2012• Well-woman visits, gestational diabetes

screening, HPV testing, STD counseling, HIV counseling and screening, breastfeeding support, supplies and counseling, screening and counseling for interpersonal and domestic violence

• Controversy with Church Plans will be resolved in the courts

2012– Preventive Care

Summary of Benefits and Coverage • Effective for open enrollments and plan years

beginning on or after September 23, 2012• Applies to every group health plan (excluding

excepted benefits such as dental and vision)• Must be provided to eligible employees and

family members• Must be provided in a culturally and

linguistically appropriate manner• Electronic delivery permitted but paper copy

must be made available free of charge• Carve out plans have special challenges

2012– Summary of Benefits and Coverage and Related Documents

Uniform Glossary• Same model document for everyone• Found at DOL and HHS websites• Employer may post on its intranet but inform

employees by a paper copy available free of charge

60-Day notice of material change to SBC• Any change to a plan during the plan year that

would cause a change to the SBC requires 60 days advance notice before change becomes effective

2012– Summary of Benefits and Coverage and Related Documents

The Department of Labor has begun conducting audits of plans to check on compliance with the grandfather rules• Auditing GF plans to ensure they are indeed

grandfathered and have provided proper notice• Auditing NGF plans to ensure they complied with

NGF rules timely Have an audit file ready to go

• Plan document as of March 23, 2010 and amendments

• Communications to employees about rates• Proof of plan design changes

2012– Plan Audits for Grandfathering

Definition of Essential Health Benefits $2 million overall aggregate annual dollar

limit on Essential Health Benefits $2,500 contribution cap to Health Flexible

Spending Arrangements (“Health FSA”) Report value of health coverage on IRS

2012 Form W-2 Notice of Exchange Clinical Effectiveness Research Fee for

2012

ACA Compliance 2013

California AB 1453/SB 951 designate ACA requirements + Kaiser small group HMO 30 as of 1Q 2012

Self-insured plans and fully-insured large group health plans will not be required to offer Essential Health Benefits, but definition does apply to: • Lifetime limits• Annual limits

Sponsors may continue to use good faith effort to define what is, and what is not, an Essential Health Benefit until guidance is issued

2013– Definition of Essential Health Benefits

$2 million overall aggregate annual dollar limit on Essential Health Benefits• Effective for Plan Years beginning before

January 1, 2014• Plan Amendment required• Review your definition of Essential Health

Benefit• Consider converting dollar limits to visit

limits

2013– Annual Dollar Limit Floor Rises

$2,500 salary reduction cap to Health FSAs• Effective for plan years beginning on or after

January 1, 2013• $2,500 limit applied on an employee-by-

employee basis• Plan amendment required but no later than

December 31, 2014 retroactive to 2013 provided that the plan is operated in compliance for the 2013 Plan Year

2013– Health FSA Cap

Report value of 2012 health coverage by January 31, 2013• Includes employer and employee portion of:

▫ Major medical and Rx; wellness, EAP and on-site medical clinics if COBRA; employer contribution to Health FSA

▫ Pre-tax payments for voluntary benefits, or if paid by employer (e.g. cancer insurance)

• Use unsubsidized COBRA rate to calculate value (minus administrative fee)

Issues to address:• Reporting on employees who leave mid-year• Off-month payroll cycle – final payroll• Information obtained after the close of the plan year• Non-calendar year plans• Mid-month changes

2013– W-2 Reporting

Plan Sponsor must deliver to employees no later than March 31, 2013

Anticipate a model form for 2013 Informs employees of availability of health

coverage on the Exchange Advises of the potential for government

subsidies and reduced cost-sharing Advises of penalties for failure to have

Minimum Essential Coverage California AB 792– requires court and health

plan notice of Exchange, but does not address employer notice requirement

2013– Notice of Exchange

Supports federally mandated research on best practices for most effective treatments• $1.00/covered life for the 2012 Plan Year• $2.00/covered life for each year thereafter to

2019• Sponsor liability for self-insured plans• Insurance carrier liability for fully-insured plans• Annual Tax Return and payment

▫ Payment due no later than July 31 ▫ TPA is prohibited from submitting on sponsor

behalf

2013– Clinical Effectiveness Research

Plans must offer coverage for all children to age 26 regardless of their eligibility for other coverage

No overall aggregate annual dollar limits on Essential Health Benefits

No preexisting condition exclusions regardless of age

Eligibility waiting periods limited to no more than 90 days

Non-grandfathered plans must cover routine services for clinical trials

Exchange Reinsurance Program Fee imposed on plans

Employer reporting to Exchange

ACA Compliance 2014

Plans must offer coverage for all children to age 26 regardless of their eligibility for other coverage• Covered under any parent plan• Covered under their employer’s plan• Covered under their spouse’s plan• Coordination of Benefits challenges• Mid-Year Enrollment Rights

2014– Dependent Coverage to age 26

No overall aggregate annual dollar limits on Essential Health Benefits• Revisit definition of Essential Health Benefits• Take advantage of visit limits as compared to

dollar limits• No need to offer Essential Health Benefits

No preexisting condition exclusions regardless of age• Certificate of Creditable Coverage

2014– No Annual Dollar Limits

Eligibility waiting periods limited to no more than 90 days• If eligibility is based on time-served only• 90-day period starts when all other requirements

satisfied. For example, promotion to new classification

• Check collective bargaining agreements for probationary periods longer than 90 days

• Check collective bargaining agreement for work rules for full-time employees – may need to re-define FTE

• Part-Time employees may have a different rule

2014– Limits on Waiting Periods

Non-grandfathered plans must cover routine services for clinical trials• Cannot prevent participation in a Clinical Trial

if (1) recommended by participant’s physician; or (2) participant makes the case that he/she satisfies the eligibility requirements for the Clinical Trial

• Must cover all routine costs of Clinical Trial that are covered under group health plan (e.g. blood draw)

2014– Coverage for Clinical Trials

Exchange Reinsurance Program Fee imposed on plans• Paid by the carrier or TPA • To U.S. Department of Health and Human

Services• Additional amounts may be required of the

California Health Benefit Exchange• Carrier/TPA reports to HHS• Amount has not yet been determined

2014– Exchange Reinsurance Program Fee

2014 and Group 2014 and Group InsuranceInsurance

Individual Mandate HBEX health plans become effective• Exchange coverage issued on a guaranteed issue

basis with no medical underwriting• Premium subsidies and cost sharing reductions for

low-paid individuals who purchase Exchange coverage

New definition of full-time employee Tax penalties for employers who for full-time

employees:• Provide no coverage,• Provide unaffordable coverage, or• Provide coverage that provides less than minimum

value

What Else Happens in 2014?

Works, on average, 30 hours per week• May use hourly equivalents for salaried

individuals• FTE under ACA is only for group health

coverage▫ Doesn’t affect other work rules or overtime

• Month-by-month calculation▫ Part-time employee in one month may be a

full-time employee in another month▫ FTE Look-Back/Stability Safe-Harbor

New Definition of Full-time Employee

Why is this important?• Employers are encouraged to provide affordable

medical coverage of minimum value to FTEs• Employer tax penalties are based on a number of

FTEs▫ $2000 x number of FTEs (after the first 30) for

failing to offer coverage▫ $3000 x number of FTEs offered coverage who

instead gets a premium credit to purchase on the Exchange

• Certain Lower-Paid FTEs are eligible for government subsidies (triggering employer tax penalties for employers with at least 50 FTEs)

New Definition of Full-time Employee

“Unaffordable” is based on the cost of the employer’s lowest cost single only coverage as a percentage of an employee’s household income• More than 9.5% is “unaffordable”• How is an employer to estimate an

employee’s household income?

Employer Tax Penalties

Realign workforce using ACA definition of FTE Articulate a benefits philosophy (i.e. what are

you trying to accomplish with your health benefits?)

Begin preliminary workforce analysis using ACA definition of FTE

Estimate potential tax exposure, if any Continual realignment of workforce benefits to

benefits philosophy to FTE workforce Consider realignment of workforce benefits to

benefits philosophy to PTE workforce

2014– Group Insurance Strategy

Employer cost of medical coverage for the low-paid FTEs may be significantly greater than the tax penalty

Employee cost of medical coverage on the Exchange may be significantly less than employer coverage when subsidies are available

Decision: eliminate the possibility of government subsidies (and employer tax penalties); embrace them; ignore them; or something else? Depends upon your benefits philosophy, collective bargaining

2014– Group Insurance Strategy

Evaluate impact of the Exchange • Could it change employee behavior?• Employment practices (e.g. cash-in-lieu)

relative to the Exchange• What behaviors do you want to

promote/discourage?• Does the Exchange present an opportunity?• Would it impact retention of different types of

employee?• Would employees near Medicare retirement

age leave the workforce?

2014– Group Insurance Strategy

Definition of FTE and PTE in CBA/MOU Probationary periods/Waiting periods Coverage for Part-Time Employees Opportunities for subsidy-eligible employees Medicare retirees Early retirees

2014– Collective Bargaining

California LegislationCalifornia Legislation

2012 Legislation Impacting Group Health Plans AB 1083

Rewrites CA small group rules to be consistent with ACA provisions

AB 1761 Requires a formal agreement for producer to hold

themselves out as selling coverage on the Exchange SB 1431

Would have impacted stop-loss for self-funded small groups AB 340

Impact on retiree health plans

2013 special session

California Health California Health Benefits ExchangeBenefits Exchange

CA first state in nation to have stand alone law RFPS being issued constantly Fully funded through 2015 – then must be self

supporting through fees and revenue Likely to become largest state agency Rolling fast to open enrollment by August

2013

California Health Benefit Exchange

Premium Aggregation Individual Exchange Agent Payment Looming decisions• SHOP Policies• QHP and Benefit Design Policies• Service Center Options

September HBEX Meeting

Health Plan Solicitation – Finally! Consumer Assistance/Ombudsman Outreach and Education Grant Program Criteria Exchange Blueprint• 1. SHOP Organizational Structure• 2. Stakeholder Consultation Plan• 3. Exchange Name and Branding

October Meeting

Keenan & Associates is an insurance brokerage and consulting firm. It is not a law firm or an accounting firm. We do not give legal advice or tax advice and neither this presentation, the answers provided during the Question and Answer period, nor the documents accompanying this presentation constitutes or should be construed as legal or tax advice. You are advised to follow up with your own legal counsel and/or tax advisor to discuss how this information affects you.

Thank You . . .