Health Care Reform &the 2014 Mandates

Navigating the Future of Healthcare

October 14, 2011

Health Care Reform

• What we sought– Lower Medical Cost, Build from ESI– NRF Vision for Health Care Reform

• What we got– Affordable Care Act, a.k.a. Patient Protection

and Affordable Care Act– Universal coverage first, fundamental

changes to health care, marginal cost reductions in future?

2014 – A Key Year to Watch

• Employer, individual mandates become effective.

• Limits on waiting periods (90 days) become effective.

• Massive insurance market reform in all markets becomes effective.

• Exchanges are launched at state level with federal fall-back, regional exchanges.

End to Voluntary System• Every American citizen and legal resident

must purchase qualified coverage.• Employers must provide coverage to full

time employees or pay penalties. Employers are also subject to penalties if their coverage is deemed unaffordable for certain employees and they receive subsidized coverage.

• Employees must accept coverage but can opt out in designated low income categories.

Coverage Threshold• Applies to employers with 50 or more full-

time employees or full-time equivalents.• Full-time employee is defined as working an

average of 30 hours per week per month.• Part-time employees count toward this

threshold but not for penalties.– Total part-time hours per month divided by 120 = full-

time equivalents.

Failure to Offer Qualifying Coverage to Full-Time Employees• Penalized for the 31st uncovered full-time

employee (first 30 are exempt) @ $2,000 per if one covered employee is eligible by income (more than 9.5% of family income) for and receives an exchange subsidy.– Penalty is not tax deductible.

Failure to Offer Affordable Coverage to Full-Time Employees

• Full-time employees whose premium cost exceeds 9.5% of their family income or if the employer pays less than 60% of the cost of coverage can opt out of their employer’s plan and receive subsidized coverage in the Exchange.

• Employers are penalized the lesser of $3,000 per actual subsidy-recipient employee or $2,000 times every full-time employee minus the first 30 employees.

NRF Health Care Mandate Cost Calculatorwww.nrf.com/healthcare

Example: 35 full-time and 25 part-time employees [@ 25 hours/week] = 2500 PT hours

Example: penalty for not providing coverage: 35 full-time EEs minus 30 = 5 full-time x $2,000 = $10,000

“Unaffordable” penalty is the lesser of $3,000 times actual FT recipients or $2,000 times every full time employee minus the first 30.

Coverage would run between $350k - $525k

The cost for single coverage [$10K - $15K] would run to $50-75 million.

Also Effective 2014• State-based Exchanges (health

insurance purchasing cooperatives). Regional compacts?

• 90-day limit on waiting periods• Auto-enrollment for 200 or more

employees becomes effective

Effective in 2014Essential Benefits Package• Defines cost-sharing, mandates, and

minimum covered benefits• Multiple levels available based on actuarial

equivalents – bronze, silver, gold, platinum.

Effective 2014• Guaranteed issue coverage in all markets

and must also be guaranteed renewable. • Preexisting condition exclusions

prohibited in all markets. • Annual limits prohibited in all group (even

self-funded plans) or individual plans.

Effective 2014Strict Modified Community Rating• Applies to all individual health insurance

policies and all fully insured group policies 100 lives and under (and larger groups purchasing coverage through the exchanges).– Premium variations only allowed for age (3:1),

tobacco use (1.5:1), family composition and geography

– Wellness discounts are allowed for group plans under specific circumstances.

Effective 2014Individual Mandate• All American citizens and legal residents must

purchase qualified health insurance coverage. • Exceptions are provided for:

– religious objectors, – individuals not lawfully present – incarcerated individuals, – taxpayers with income under 100 percent of poverty, and those who have a

hardship waiver– members of Indian tribes, – those who were not covered for a period of less than three months during the

year– People with no income tax liability

• Low dollar penalties = spotty adherence?

Contact Information:

Neil Trautwein

Vice President

Employee Benefits Policy Counsel

National Retail Federation

202 / 626-8170 phone

TrautweinN@nrf.com

www.nrf.com