Health Care Reform: An Update On PPACA

Copyright © Innovative Benefit Planning LLC 2013. All Rights Reserved

This UBA WisdomWorkplace webinar program is brought to you by United Benefit Advisors

in conjunction with our Partner Firms Innovative Benefit Planning & Hanna Global

Solutions


• PPACA Compliance 2012-2013

• Individual Mandate & The Health Care Marketplace (Exchange)

• PPACA Provisions 2014

• Play or Pay 2015

• Reporting Requirements

• Private Corporate Exchange Option

• What Are Employers Doing To Prepare?

Agenda


PPACA Compliance 2012W-2 Reporting 2013 for 2012 plan year

• Required for employers that filed more than 250 W-2s for tax year 2011. (Companies in a Controlled Group situation count by their individual Federal ID rather than the group total)

The Minimum Loss Ratio is:

• 85% for large group plans (>100 employees) • 80% for small group plans (<100 employees) and individual plans • Carriers will have to issue a premium rebate to individuals for plans

that fail to meet the Minimum Loss Ratio requirements• Applies to all fully insured and grandfathered plans. Self-insured plans

are exempt.

*First of the rebates were issued August 2012


Summary of Benefits and Coverage Requirements and Uniform Glossary

• Required 1st day of 1st open enrollment period or 1st plan year after 9/23/12

• May be posted on a single webpage or electronically provided the option of a paper copy is available

• Must be provided no later than 7 days after receiving a “substantially complete” application

Penalty: up to $1,000 per instance of willfully failing to provide required information (no penalty 1st year if working in good faith to comply)

Material Modification of Plan Provision

• If any material modification is made by a group health plan or health insurance issuer in terms of the plan or coverage (during the plan year), enrollees must be notified within 60 days of the effective date of the change

PPACA Compliance 2012


2013 PPACA


2013: WHAT’S HAPPENED SO FAR?

• FSA Annual Limit – $2,500 per year o limit applies on a plan year basis and became effective

for cafeteria plans beginning after December 31, 2012.o May “carry over” up to $500 of unused contributions to

following year. Plan must be amended. May use either grace period or carry over, not both.

• HRAs – standalone HRAs not permitted after the 2013 plan year. HRAs integrated with group health plans still allowed.


2013 Tax for Comparative Research(PCORI)

• Federal tax on fully and self-insured group health plans used to fund Patient Centered Outcome Research (PCORI).

• Fee imposed = $2 x average # lives covered (drops to $1 for policies ending during fiscal 2013).

• DUE DATES:o Was due July 31, 2013 for plan years ending October 1, 2012 through

December 31, 2012. o Due July 31, 2014 for plan years ending January 1, 2013 through September

30, 2013.• Self-funded:

o TPAs can’t file the return or pay the fee Plan sponsors must file Form 720 annually

o Fees must be paid by July 31st of each calendar year immediately following the last day of the plan year.

• Fee does NOT apply to policy years ending after September 30, 2019


2013 Tax for Comparative Research (PCORI)

Also Applies to HRA and some FSA Plans• FSA - For a fully insured plan, sponsors that offer an FSA may be required to

pay the PCORI fee

If the FSA is considered an excepted benefit , it will not be subject to the fee. To be considered an excepted benefit the FSA :

o Must be offered in addition to a group health plan,

o And the arrangement is structured so that the maximum benefit payable to any eligible participant cannot exceed two times the participant’s salary reduction election (or, if greater, $500 plus the amount of the salary reduction election).

• HRA – If the medical coverage is fully insured and the HRA is self-insured a separate payment would be due.


Health Insurance Marketplace


Individual MandateIf an individual is uninsured for more than three months in 2014, he/she may incur the tax penalty for the Individual Mandate as follows:

2014 Penalty – Greater of 1% of taxable income or $95 per adult and $47.50 per child (up to $285 per family)

2015 Penalty – Greater of 2% of taxable income or $325 per adult and $162.50 per child (up to $975 per family)


Exchanges/Marketplace

What is a Health Insurance Marketplace?

A public virtual Marketplace run by the Government that provides a new place to shop for, and buy, health insurance.


ExchangesEffective no later than 1/1/2014Levels of coverage to be offered through the Exchange:

• Bronze Plan -

Provides 60% of actuarial value of minimum qualifying coverage.

• Silver Plan -


• Gold Plan -


• Platinum Plan -


• Catastrophic Plan - Available to individuals aged 21-30 at time of enrollment and also those

exempt from coverage mandate due to affordability or hardship.


What Are Premium Tax Credits?

Starting in January 2014, a new Federal Tax Credit will be available to help individuals that qualify to purchase health insurance in the newly established Health Insurance Marketplaces (Exchanges).

To Qualify for Premium Tax Credits Income under 400% of federal poverty level Not eligible for coverage through a government program such as

Medicare, Medicaid or Chip Not eligible for minimum value and affordable coverage through the

employer Payments of the premium tax credits can go directly to insurers

to pay a share of the monthly health insurance premiums charged to individuals and families, offering eligible individuals and families a reduction in their monthly premiums.


400% of Poverty level


What Are Cost-Sharing Subsidies?

Cost-Sharing Subsidies will help individuals to pay for cost-sharing aspects of the plan such as deductibles, copayments, and other out-of-pocket charges.

Individuals and families with incomes between 100% and 250% of the federal poverty level are eligible if they are eligible for premium tax credits and purchase a Silver Plan.


Subsidy AvailabilityFamily Income in Terms of Federal Poverty Level


2014 and 2015 PPACA


• Pre-Existing Conditions – prohibited for all members as of the start of the 2014 plan year; must guarantee issuance and must be renewable

• Waiting Period – may not be more than 90 days; effective with the start of the 2014 plan year

• Annual limits – entirely prohibited for 2014 plan years

• Clinical Trials – Plans must provide coverage for treatment of cancer or other life-threatening diseases; effective with the start of the 2014 plan year

• Definition of Full-Time Employee – employee averages 30 or more hours per week; with delay of Play or Pay effective 2015

2014 and 2015 Provisions


Beginning with the 2014 plan year, non-grandfathered plans must have a qualified plan which provides “essential health benefits”. Benefits shall include the following categories…

• Ambulatory patient services• Emergency Services• Hospitalization

• Mental Health and substance use disorders, including behavioral health treatment

• Prescription drugs

• Laboratory services• Maternity and newborn care• Rehabilitative & habilitative

devices and services• Preventive and wellness

services and chronic disease management

• Pediatric services, including oral and vision care

“Essential” Coverage

Self-funded plans do not have the Essential Coverage Requirements. However, must provide an actuarial benefit of at least 60%, which is considered “minimum value”.


2014 ProvisionsWellness Incentives

• Types of programs: Participatory: not based on health status Activity-Based and Results-Based: rewards are

offered for achieving set goals

• Employers may vary premiums: up to 30% (for programs not related to avoidance of

tobacco) or, up to 50% (for programs related to tobacco)

• Employers must provide a “reasonable alternative standard” if employee has medical condition that prohibits them from participating or accomplishing set goals, as per his/her doctor’s waiver.


2014 Additional Fees and Taxes

The Transitional Reinsurance Program (TRP)Intended to provide funding to cover additional costs associated with covering formerly uninsured individuals who may have unmet health needs. The program will run from 2014 through 2016 and would be funded by both fully insured and self-funded plans.

Applies only to major medical coverage. Estimated fee for 2014 is $5.25 per covered person per

month ($63 per year). This fee will decline by about one-third for 2015 and by yet another one-third for 2016.

Self-administered, self-funded plans will possibly be exempt from paying the fee for 2015 and 2016.


2014 Additional Fees and Taxes

Health Insurance Provider Tax – Imposes aggregate annual tax apportioned among health insurers

2014: $8 billion2015: $11.3 billion2016: $13.9 billion2017: $13.9 billion2018: $14.3 billionAfter 2018 the applicable tax is indexed to the rate of premium growth of the prior year’s premium.

**Self funded employer plans are exempt


Should You Consider Self-Funding?

Copyright © Innovative Benefit Planning LLC 2013. All Rights ReservedIncludes Transitional Reinsurance Fee, Federal Carrier Fee, State Taxes and PCORI fees

Ins SF Ins SF Ins SF$0

$25

$50

$75

$100

$125

$150

$175

$75.00

$32.50

$77.25

$32.99

$86.95

$35.01

$10.10

$0.35

$44.38

$11.38

$59.61

$0.40

Admin Taxes

Fully In-sured

Fully Insured

Fully In-sured

2013 2014 2018

Self Funded

Self Funde

d

Self Funde

d

Tax Advantages of Self-Funding Under PPACA


Play or Pay 2015


Play or PayPPACA provides that an employer that has 50 or more full-time employees or full-time employee equivalents (a “large employer”) must provide health coverage, or pay one of two penalties.

Families of companies are added together.

PPACA calls for two possible penalties:• one for not offering “minimum

essential” coverage• one for offering coverage that is

considered inadequate because it is not “affordable” and/or it does not provide “minimum value.”


Employer PenaltiesFor those with 50+ Full-Time

EquivalentsDo you offer coverage?

Does the plan provide

minimum value? Plan pays 60% of

claims

Is the coverage affordable?

No Penalty

Yes

Yes

Yes

No $2,000 per FTE (minus first 30)

Only applies if one full-time employee receives federal premium assistance (i.e. credit or subsidy)

for exchange coverage.

Lesser of: $3,000 per FTEreceiving tax credit/subsidy; or$2,000 per FTE (minus first 30)Only applies if one full-time employee receives federal

premium assistance (i.e. credit or subsidy) for exchange coverage.

.

No

No

Employer “Safe Harbor”Coverage would be considered “affordable” if the premium contribution for single coverage does not exceed 9.5% of an employee’s W-2 wages.


“Affordability” Safe Harbors12/28/12 Proposed Regulations

(clarification expected by early January)• The employee’s contribution for self-only coverage under

the least expensive plan option over the entire year is not more than 9.5% of the employee’s Box 1 W-2 income.

• The employee’s contribution for self-only coverage under the least expensive plan option is not more than 9.5% of his wage on the first day of the plan year.

• The employee’s contribution for self-only coverage under the least expensive plan option is not more than 9.5% of the most recently issued Federal Poverty Level (as of the start of the plan year) for a single person in his state.


Paying the Penalty

• The penalty will be determined after the end of each calendar year, after employees have filed their federal tax returns (so penalties will be assessed sometime after April 15).

• Although the penalty is calculated monthly, it will be paid annually. The penalty will not be included in any standard tax filing but instead will be charged through a notice of assessment from the IRS. Employers will have the right to dispute the amount due.


Who Is Considered An Employee ?

Common Law EmployeeCommon-Law Employee – no set definition but the parameters are: Hirer has control over how an individual performs a task and

where the tasks are performed Length of relationship is indefinite Hirer provides material needed to complete the task Ability to assign additional tasks Sets work hours Payment is made on set schedule of time Work is part of regular business Benefits and perks are provided and person is invited to

company events Training is provided Expenses are reimbursed


Controlled Groups and Affiliated Service Groups

When one business owns a significant part of another business, there may be a “controlled group”. There are 3 types of Controlled Groups*:

*All members of a controlled group and affiliated group will be used in combination to determine if an employer is “large”.

• Parent-Subsidiary • Brother-Sister • Combined Group

A group of businesses working together to provide services to each other or jointly to customers is called an Affiliated Service Group. Each business is a shareholder in the “first service organization”*. There are 3 types of Affiliated Service Groups:

•A-Organization (A-Org)•B-Organization (B-Org)•Management groups


How To Count Hours For Play or Pay?


Handling Employees Expected to Work Full-Time

To avoid penalties, a new employee who is reasonably expected to work 30 or more hours per week must be offered coverage following satisfaction of the eligibility waiting period. Under PPACA, the waiting period cannot be more than 90 days.


Handling Seasonal and Variable Employees

“Variable hours employees” are those whose hours are variable or are otherwise uncertain and who are not reasonably expected to average 30 or more hours per week over the measurement period. This would include both those expected to work full-time when initially hired but who are expected to have their hours reduced at some point.

“Seasonal employee” is not defined in the new notice and at least for 2014, an employer’s good faith determination that an employee is seasonal will be honored. Also for 2014 only, employers can take into consideration the anticipated termination date. Usually, seasonal employment means employment for a limited period to perform a specific function, such as retail during holiday seasons.


How Will Employers Count Hours?

• It is expected that current DOL rules for counting hours for pension plan purposes will be used to count an employee’s hours of service as a full-time employee or full-time employee equivalent. Under these rules, a person is considered to have completed an “hour of service” with each hour for which he is paid for work, vacation, holiday, sick time, layoff, jury duty, military duty, etc.

• When converting time to a monthly basis, 30 hours per week would mean 130 hours per calendar month.


Determining Average Hours Worked

An employer may simply look at its population on a current, month by month basis if it wishes to. However, to avoid the complications that may arise if an employee alternates between working more and less than 30 hours, or to simply reduce calculation frequency, IRS Notice 2012-58 gives an employer the option of using longer calculation periods to get a smoother, more predictable result if it prefers to do that.

If the employer wants to use a smoothing technique, different processes apply to existing and new employees.


Standard Measurement and Stability Period


Standard Measurement and Stability Period for Ongoing

EmployeesStandard Measurement Period • A “lookback” period of 3-12 months used to track and determine

how many hours he worked on average during this time period.The employer can select any start date for the Standard Measurement Period.

Stability Period • Period for which the employee is considered Full-Time or not Full-Time

and must be:o At least as long as the Standard Measurement Period.o At least 6 months if the employee is Full-Time but not more than 12

months.• Must immediately follow Standard Measurement Period and any

applicable Administrative Period.


Administrative Period

• A period of up to 90 days given to employers to determine whether an employee is “full-time” during a Standard Measurement Period, and to enroll the employee if he is eligible.

• Can include time at both the beginning and the end of the Measurement Period.

• Cannot reduce or lengthen the Standard Measurement Period or Stability Period.

• Must overlap the prior Stability Period.


Example of Ongoing Seasonal or Variable Hours Employee

If seasonal or variable hourly employee works an average of 30 hours in the Standard Measurement Period, they must be offered coverage through the next Stability Period.

• Ridge, Inc. has chosen to use a 12-month standard measurement period for on-going employees running from November 1st to October 31st.

• Administrative period of 61 days will be from November 1st to December 31st.

• Stability period of 12 months from January 1st to December 31st.


New, Seasonal or Variable Employees

• “Initial Measurement Period” of 3-12 months

• Combined “Initial Measurement Period” and “Administrative Period” cannot exceed 13 months plus a fraction of a month (dependent on the hire date).

• Initial Stability Period: Must be the same length as the Stability Period for ongoing

employees For new employees deemed to be full-time:

o must be at least as long as Initial Measurement Period and at least 6 months

For new employees that are deemed not to be full-time:o may not be more than one month longer than the Initial

Measurement Period


ABC Company Transitioning New Hires Into Standard Measurement Period

12 Month Standard – 11 Month Initial

• Tim was hired on November 10, 2014.• His Initial Measurement Period goes from November 10, 2014 to October 9, 2015 and

the Administrative Period is October 10, 2015 to December 31 ,2015.• He works an average of 32 hours.• He must be offered coverage for a Stability Period that runs January 1, 2015 through

December 31, 2016.• ABC Company must also test Tim’s hours during the Standard Measurement Period 3

of September 1, 2015 through August 31, 2016


Standard Measurement and Stability Period

Employers may use different standard measurement and stability periods start dates for these classes of employees:

• Collectively bargained and non-collectively bargained• Hourly and salaried• Employees of different entities• Employees located in different states


• Employers offering health plans that exceed a certain cost (the total employee and employer cost) would be subject to 40% excise tax on amount above that value.

• For individual coverage, the threshold would be $10,200; for family coverage the threshold would be $27,500. These thresholds would be indexed at CPI plus one percentage point.

• Certain high-risk professions would have higher cost thresholds. (Calculation includes value of medical, dental, vision, reimbursement from HRA and FSA, and employer contributions to H.S.A)

Excise Tax on High Value Health Plans “Cadillac Plans”

Taxable years beginning after December 31, 2017


Reporting Requirements


Proposed: Minimum Essential Coverage Reporting (6055

Requirement)• Prepared by the insurer for insured plans and the plan sponsor for self-funded plans.

• Only required on individuals who actually elect coverage.

• Much like the W-2, both the employee and the IRS will receive copies with information pertinent to them.

Must report:

The insurer’s or plan sponsor’s name, address, and employer identification number (EIN) The name, address, and Social Security number of the named insured The name, address, and Social Security number (or date of birth if a Social Security

number is not available) of each covered spouse and dependent. The number of months each covered person was covered for at least one day The name, address, and EIN of an employer sponsoring the plan Whether coverage is through a SHOP exchange, and if so the SHOP’s unique identifier

*Effective January 1, 2015 with the first report due January 31, 2016 for employees, and employer “roll-up” report due 2/28, or 3/31 if filing electronically.


Proposed: Minimum Value/Affordable Coverage Reporting (6056 Requirement)

• Must be filed by all “large” employers.• Employers in a controlled or affiliated service group are combined for purposes of deciding if

an employer is “large”, but each employer in the group will file the 6056 report separately.• Much like the W-2, both the employee and the IRS will receive copies with information

pertinent to them.

Must report: The employer’s name, address, and employer

identification number (EIN) The name and telephone number of a contact

person The calendar year for which the information is

being reported (non-calendar year plan MUST report on a calendar year basis)

A certification, by calendar month, as to whether minimum essential coverage was offered to employees (and dependents)

The number of full-time employees for each month

For each full-time employee: The months during the year that

minimum value coverage was offered The employee’s share of the cost of

self-only coverage for the least expensive minimum value plan offered to the employee, by calendar month

The employee’s name, address, and Social Security number and the number of months, if any, that the employee was actually covered

*Effective January 1, 2015 with the first report due January 31, 2016 for employees, and employer “roll-up” report due 2/28 or 3/31 if filing electronically.


What Are The Penalties?6055 and 6056 Non-Compliance

Penalties assessed for:

• Any failure to furnish a statement • Any failure to include all of the information required• Submitting incorrect information on a furnished

statement

Penalty: $100 for each statement, up to a maximum of $1.5MM; penalties reduced accordingly if corrected within 30 days, or on or before August 1st.


Additional Reporting Requirements

Return Filing Requirements for Large Employers Not Offering Coverage

Name, date, and employer ID

Certification that they do not offer coverage

The number of full-time employees for each month of the calendar year

Any other information required by the Secretary


What Are Employers Doing? Using a Defined Contribution approach to benefits

through a Private Exchange…


• ACA Catalyst• Challenges and Objectives facing Employers• Exchanges

o Traditional v. Exchange Strategy for Benefit Program

• Components of Private Exchanges• Projected Development of Exchanges in

Market• Profile of Exchange Adopters

Agenda


Bank of America Merrill Lynch 2013 Survey “CFO Outlook”

PPACA


Challenges• Do I continue to offer

medical benefits?• How do I cover new

populations affordably?• How do I continue to meet

changing employee needs and manage complexity?

• How do I meet new regulatory requirements and manage compliance risk?

• How do I manage ever-increasing costs and financial risk?

Objectives • Financial

o Cost controlo Budget certainty

• Legalo Risk avoidanceo Overhead avoidance

• Employee Engagement o Increase in choice o Decision / buying support

• Administrationo Overhead reductiono Employee experience

54

Challenges and Objectives for Employers

Copyright © Innovative Benefit Planning LLC 2013. All Rights Reserved55

Traditional Large Employer Coverage

Public Exchanges

Private Exchanges

Plan type Group Individual Typically group

Funding Typically “Defined Benefit” (self-funded)

Fully insured “Defined Contribution” (fully insured) or self-

fundedPlan Choices Typically 2-3 4 4-plus

Actuarial Value

Averages 80-plus percent, with few if any low-cost plans

60-90 percent Typically broader – 60-90 percent

Carriers One or more TBD – Varies by state

Varies per exchange

Customization High, as requested by employer

None Limited

Consistency High nationwide Low, impacted by each state’s Exchange approach, rules

High, impacted by state

mandates

Tax Treatment Deductible by employer

“Pay or Play” penalties not deductible by

employer

Deductible by employer

Member Support

Varies by employer TBD – Much work to do Generally high

Traditional v. Exchange Benefit Strategy


Defined Contribution

Plan That Funds a Diverse

Selection of Health Plans

Decision Support

HRAs and Sec 125

Accounts

Benefits Eligibility, Enrollment

and Administrati

onPremium

Processing and Billing Services

Voluntary Ancillary Benefits

Plan Resources

and Support

Components of Private Exchanges


• Cost mitigation due to plan migrationo Choice of multiple plans for employeeso Findings

80% of employees moved to lower cost plan 15% moved to higher cost plan 5% stayed with same plan

• Employer can define a level contributiono Define budget for benefit program and design from there

• Plans offered on a marketplace platformo Interactive technology to engage and educate employees in buying

experience• Employees given decision support tools and telephonic support to

help purchaseo Web based predictive modelers and live support

• Compliance load on employer transferred to carrier* o Additional requirements due to ACA (PCORI, etc.)*for fully insured plans

What A Private Exchange Offers…

What A Private Exchange Offers


Private Exchange Projected Growth


Exchange Adopter Profile

Key Qualities• Large employer – 50+

eligible employees• Objective to keep benefit

program• Objective to educate

employees to better consumer

• Applies to all industries

Adopters• IBM (retirees)• Trader Joes• Sears• Time Warner• Walgreens • AON Hewitt


• In-depth analysis on how employee population is affected by Health Care Reform Use a Certified Actuarial Tool Evaluate the Exchange plan rates available to Employees

• Be proactive in managing health risk within population Predictive Modeling/Data Analytics Results Based Plan Design

• Consider Self-Funding

• Develop a Defined Contribution approach to benefits

• Benchmark your health plan

What Are Employers Doing?


This program has been submitted for 1.25(General) recertification credit hours toward PHR, SPHR and GPHR recertification through the HR Certification Institute.

All attendees will receive an email with the HRCI credit code once UBA receives approval for this program.

For more information about certification or recertification, please visit the HR Certification Institute website at www.hrci.org.


Thank you for your participation in the UBA WisdomWorkplace Webinar Series.

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Health Care Reform: An Update On PPACA

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Transcript of Health Care Reform: An Update On PPACA