An Analysis of Health Insurance Premiums Under the Patient ...
Navigating Health Care Reform - WordPress.com · 2013-10-11 · Health Insurance Industry Fee —...
Transcript of Navigating Health Care Reform - WordPress.com · 2013-10-11 · Health Insurance Industry Fee —...
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Navigating Health Care Reform Leading Age Delta Region Meeting
Presented by Erika James Oct. 9, 2013 Erika James Vice President, Employee Benefits Phone: 925-407-0416 Email: [email protected]
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Table of Contents
▲ State of the Union: Healthcare Trends
▲ Understanding the Affordable Care Act (ACA)
▲ Timeline and Compliance Checklists
▲ Plan Design Requirements / Provisions
▲ Employer Obligations
▲ Premium Tax Credits and Cost Sharing Subsidies
▲ Health Insurance Exchanges
▲ Emerging Healthcare Models for Employers and Employees
▲ Additional Resources
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State of the Union: Healthcare Trends
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$508
$999
$2,875
$4,885
2003 2013
ER Contribution EE Contribution
$3,383
$5,884 74% Total Premium Increase
97% EE Contribution Increase
Average Annual Health Insurance Premiums and Worker Contributions
for Single Coverage
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$2,411
$4,565
$6,657
$11,786
2003 2013
ER Contribution EE Contribution
$9,068
$16,351
80% Total Premium Increase
89% EE Contribution Increase
Average Annual Health Insurance Premiums and Worker Contributions
for Family* Coverage
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2013 * Family coverage is defined as health coverage for a family of four.
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▲ Since 2002, premiums in California rose by 169.7%, more than five times the 31.5% increase in the state's overall inflation rate
▲ Average 2012 annual premiums for single and family coverage in California were 16% and 6% higher than national respectively
▲ Proportion of CA employers offering coverage has declined significantly over the last decade, from 71% in 2002 to 60% in 2012
— Higher offering rates are associated with larger firms, firms with higher wages, and firms with fewer part-time workers
$6,540
$16,632
$5,616
$15,744
Single Coverage Family Coverage
CA US
Source: California HealthCare Foundation/NORC California Employer Health Benefits Survey, 2012
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Understanding the Affordable Care Act (ACA)
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Understanding ACA… Easy as 1, 2, 3!
1. Comply Implement all ACA
health coverage and associated requirements
2. Understand How is ACA/HCR
supposed to work?
How will it change coverage marketplaces (Individual, Group, Public Programs)?
Where could it fail?
What does it mean for your organization?
3. Strategize A compliance
strategy is not a HCR/health care management strategy
Don’t take your eye off the cost
Where does your organization want to be: reactive vs. proactive?
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Understanding ACA New Industry Taxes and Fees
▲ Comparative Effectiveness Research Fee (PCORI) — $1 PMPY (due July 2013) for plans ending on or after
10/1/12
▲ Health Insurance Industry Fee — $8 billion in 2014 — +$100 billion over 10 years — Expected to increase premiums 2%-2.5% in 2014, 3%-4%
in later years
▲ Reinsurance Assessment Fee — Program to stabilize carriers in individual market from
“guarantee issue” risk — 2014―fully insured & self-insured plans — Approx. $60 PMPY
▲ Employer Excise (“Cadillac”) Tax — 2018―Employer Plan Sponsors with coverage costs
exceeding threshold are responsible for a 40% excise tax on the difference
$10,200 single/$27,500 family — Estimates are that many employer plans will exceed the
threshold based on current health care costs and industry norm trends
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Understanding ACA Implications by Financing Options
FULLY INSURED PLANS SELF-INSURED PLANS
• Carriers in defensive position due to plethora of ACA-related requirements & changes
• Guarantee Issue & No Pre-Ex for Ind./Small Group markets
• Weak Individual Mandate
• Modified Community Rating for Ind./Small Group markets
• Required Coverage of Essential Health Benefits for Ind./Small Group Plans
• Essential Health Benefits cannot have dollar limits and are defined by State’s BM Plan
• MLR Requirements
• Insurance Industry Fee = +2%-2.5% (2014), +3%-4% (later yrs.)
• Plan sponsors are not subject to community rating rule s and other carrier requirements
• Elimination of taxes and carrier pass through fees
• Essential Health Benefits not required, but if covered cannot have dollar limits
• Plan sponsor defines EHB
• Plan sponsors are able to customize plans to meet specific needs – Value -based plan design – Custom provider networks – Direct return on successful population health
management strategies / claims impact
• Employers of various sizes embracing self-insured strategies
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Understanding the ACA How is it supposed to work?
PROVIDE ACCESS FOR 48 MILLION UNINSURED /
IMPROVE ACCESS FOR OTHERS STRENGTHEN COVERAGE STABILIZE COVERAGE COSTS
• All individual coverage is guarantee issue/no pre-ex, no medical UW
• Establishes Health Insurance Exchanges for individuals/ small businesses
• Employer mandate & child eligibility to age 26
• Insurance Affordability Programs
Medicaid expansion, federal premium tax credits & subsidies
• “Minimum Essential Coverage” Plan Requirements
• Individual / Small Group Coverage Reforms
Essential Health Benefits requirement with no annual/ lifetime dollar limits
100% preventive care requirement
Deductible limits
Out-of-pocket limits
Actuarial value 60%
• Large Group / Employer Coverage Reforms
No annual / lifetime limits on Essential Health Benefits
100% preventive care
Out-of-pocket limits
Minimum value 60%
• Phase out of most Limited Medical Plans
• “Individual Coverage Requirement” (Individual Mandate)
• New Individual/ Small Group Market Rating Reform
“Modified Community Rating” & “Single risk pool” requirements
• Reinsurance, Risk Corridors & Risk Adjustment Programs to Stabilize Individual/Small Group Markets
• New Medical Loss Ratio Requirements for Carriers
• Some provisions allowing individual coverage costs to be tied to health/ wellness factors
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Understanding the ACA Will it work?
PROVIDE ACCESS: STRENGTHEN COVERAGE: STABILIZE COVERAGE COSTS:
• Will guarantee issue/no pre-ex requirement cause huge carrier losses? Who will buy?
• Will health insurance exchanges be ready, much less work?
• Will employers exit?
• Will the U.S./ state fiscal situation lead to a scaling back of Insurance Affordability Programs?
• Will new coverage requirements lead to spiraling costs?
• Individual/Small Group coverage requirements are staggering for carriers
Essential Health Benefits
60% Minimum Actuarial Value
Exchange Requirements―Qualified Health Plans
• Will the Individual Mandate be sufficient enough to motivate younger uninsured individuals to buy and maintain coverage?
$95 (2014)
$695 (2016)
• Will new Individual/ Small Group Market Rating Reform work or throw insured market into turmoil?
GI / No pre-ex ― carriers must take all comers
Modified community rating ― changes the playing field
Reinsurance, Risk Corridors & Risk Adjustment Programs ― unsubstantiated
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Understanding the ACA Implications by Financing Options?
FULLY INSURED PLANS SELF-INSURED PLANS
• Carriers in defensive position due to plethora of ACA-related requirements & changes
• Guarantee Issue & No Pre-Ex for Ind./Small Group markets
• Weak Individual Mandate
• Modified Community Rating for Ind./Small Group markets
• Required Coverage of Essential Health Benefits for Ind./Small Group Plans
• Essential Health Benefits cannot have dollar limits and are defined by State’s BM Plan
• MLR Requirements
• Insurance Industry Fee = +2%-2.5% (2014), +3%-4% (later yrs.)
• Employers of various sizes embracing self-insured strategies
• Elimination of taxes and carrier pass through fees
• Essential Health Benefits not required but if covered cannot have dollar limits
• Plan sponsor defines EHB
• Plan sponsors are able to customize plans to meet specific needs – Value -based plan design – Custom provider networks – Direct return on successful population health
management strategies / claims impact
• Stop-loss markets are responsive and competitive (down market)
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Timeline & Compliance Checklists
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Affordable Care Act Implementation Timeline
2010 2011 2012 2013 2014 2015 2018 Small Business Tax
Credits Funding for Small Business Wellness
Programs
Summaries of Benefits and
Coverage
FSA Limits 90-Day Max Waiting Period
60-Day Max Waiting Period CA
Small Group
Employer Mandate-Play or Pay
Cadillac Tax
Adult Dependent Coverage
Medical Loss Ratio Rebates
Medicare Tax Increase
Individual Mandate Automatic Enrollment
No Lifetime Dollar Limits
No Part D Deduction Health Insurance Exchanges
New Nondiscrimination
Rules
Restrictions on Annual Dollar Limits
PCORI Fee Community Rating-Small Group &
Individual
Employer Reporting Requirements*
No Rescissions Except Fraud
Health Insurance Exchange
Notifications
Guaranteed Issue / No Pre-Ex
No Pre-existing Conditions for
Children
No Annual Dollar Limits
No OTC Reimbursement from FSA, HSA
Enhanced Wellness Incentive/ Penalty
External Review Procedures
Cost Sharing & Ded. Limits
Full Coverage of Preventive Services
*2016 requirement for 2015 plan year
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Employer Compliance Checklist Notices and Disclosures
Notice/Disclosure Plans Impacted Effective Date GF/non-GF
Notice of Exchange* Small/ Large Employer Oct. 1, 2013 Both
Summary of Benefits and Coverage Small/ Large Employer
First OE and plan years beginning on or after
9/23/12 Both
60-Day Notice of Plan Changes Small/ Large Employer SBC plan year effective
date Both
Notice of Rescission Small/ Large Employer Plan years beginning on
or after 9/23/10 Both
Statement of Grandfathered Plan Status Small/ Large Employer Plan years beginning on
or after 9/23/10 GF
Notice of Patient Protections and Selection of Providers
Small/ Large Employer Plan years beginning on
or after 9/23/10 Non-GF
* No penalty for non-compliance
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Employer Compliance Checklist Plan Design & Coverage Requirements ― in Effect
Requirements Effective Now Plans Impacted Effective Date plan years beginning
on or after:
GF/ non-GF
Dependent Coverage to Age 26 Small/ Large Employer 9/23/10 Both
No Lifetime Dollar Limits/Dollar Limit Restrictions on Annual Limits
Small/ Large Employer 9/23/10 Both
No Rescissions (except for fraud and material misrepresentations)
Small/ Large Employer 9/23/10 Both
No Pre-Existing Condition Exclusions for Children Small/ Large Employer 9/23/10 Both
No reimbursement for OTC Medicine and Drugs (w/o a prescription)
Small/ Large Employer 1/1/11 Both
No Cost-sharing for Preventive Care Services Small/ Large Employer 9/23/10 Non-GF
Additional Preventive Care Services for Women Small/ Large Employer 8/1/12 Non-GF
Requirements for Internal Claims and Appeals and External Review
Small/ Large Employer 9/23/10 Non-GF
Patient Protections and Selection of Providers (PCP, OB/GYN, ER)
Small/ Large Employer 9/23/10 Non-GF
$2,500 Employee Contribution Limit to Health FSAs Small/ Large Employer 1/1/13 Both
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Employer Compliance Checklist Plan Design & Coverage Requirements ― 2014
2014 Requirements Plans Impacted Effective Date plan years beginning
on or after:
GF/ non-GF
No Pre-Existing Condition Limitation Small/ Large Employer 1/1/14 Both
No Annual Dollar Limits on Essential Health Benefits
Small/ Large Employer 1/1/14 Both
90-day Waiting Period Limit 60-Day Waiting Period Limit for CA Small Groups
Small/ Large Employer 1/1/14 Both
Deductible Limits for Health Plans Small Employer 1/1/14 Non-GF
Out-of-Pocket Max Limits for Health Plans Small/ Large Employer 1/1/14 Non-GF
Required Coverage of Clinical Trials Small/ Large Employer 1/1/14 Non-GF
Non-discrimination for Fully Insured Plans* Small/Large Employer Delayed Non-GF
Required Coverage of Essential Health Benefits Small Employer 1/1/14 Non-GF
* Regulations pending or not final
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Employer Compliance Checklist Employer Obligations
Provision Plans Impacted Effective Date
W-2 reporting Large Employer** 2013 for 2012 pay year
Comparative Effectiveness Research Fee Small/ Large Employer 2013
Transitional Reinsurance Fees Small/ Large Employer 2014
Additional Medicare Tax N/A 2013 pay year
Employer Penalties for Not Offering Coverage- Section 4980H “Play or Pay”*
Large Employer Delayed until 1/1/15
Automatic Enrollment* Large Employer unknown
Employer Health Plan Reporting* Large Employer Delayed until 1/1/15
* Regulations pending or not final **Required if ≥ 250 EE W-2’s issued
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Employer Compliance Checklist Miscellaneous
Provision Plans Impacted Effective Date plan years beginning
on or after:
GF/ non-GF
Non-discriminatory Health-contingent Wellness Programs
Small/Large Employer 1/1/14 Both
MLR Rebate Participant Distributions (if any)
Small/Large Employer Fully Insured
8/1/12, 8/1/13, 9/1/14 Part. Distributions w/in
90 days Both
New Notice of HIPAA Privacy Practices Self-Insured Plans 9/23/13 Both
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“Play or Pay” Section 4980H Basics
Large employers are required to offer coverage to full-time employees (and dependents*) or pay a penalty/excise tax
Defines who is a full-time employee and when they must be offered coverage
• Eligibility Definition
• Eligibility Determination
• Waiting Period
Defines acceptable Employer Coverage as that which has “Minimum Value” and is “Affordable”
*Employers are required to offer coverage to dependent children; however, employers are not required to contribute to coverage for dependent children
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“Play or Pay” Section 4980H Large ER Full-Time EE Determination
▲ Full-time = 30 hours/week average (130 hours/month)
— Hours of service include PTO, vacation, sick time, leave etc.
— Hours of service must be “reasonably” calculated for certain positions
▲ If EE is expected to be full-time at the time of hire, they are
full-time for the purposes of 4980H
▲ What about variable hour and seasonal EEs?
— IRS acknowledges practical challenges in determining full-time status
on a monthly basis and is providing a more flexible approach
▲ IRS Safe Harbor allows for ERs to use a look back approach
(“Measurement Period”) to determine full-time status for
subsequent predetermined “Stability Period”
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4980H Full-Time EE Determination Ongoing Employees
▲ ERs define Standard Measurement Period (SMP) to determine if ongoing EEs were FT (30 hrs. per service week/130 hrs. per mo.)
— SMP can range from 3 to 12 months
▲ If ongoing EE was FT during the SMP, they must be considered FT for the entire Stability Period (SP)
— Formula used is total hours worked in SMP divided by months in the MP ≥ 130 hours
— If ≥ 130 hours, ER must offer EE coverage for entire SP or face penalty
— SP must be at least 6 months, but not shorter than the SMP
▲ If ongoing EE was not FT during the SMP, they would not be considered FT for the entire SP
— SP cannot be longer than SMP
▲ Administrative Period (AP) allowed (up to 90 days) to calculate FT status; however, AP cannot create a “gap if covered”
▲ Allows different MPs & SPs to be used for different EE classifications (hourly vs. salary, CBA/non-CBA, different states)
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4980H Full-Time EE Determination New Variable Hour/Seasonal EEs
▲ ERs may use same look-back (Measurement Period)/ Stability Period approach with a few differences
▲ “Initial Measurement Period” (IMP) allowed for any new Variable Hour EE if ER cannot reasonably determine if they are expected to work more than 30 hours per week
— After Date of Hire, IMP can range from 3 to 12 months
▲ If Variable Hour EE was FT during the IMP, the EE must be considered FT for the entire Stability Period (SP)
— ISP must be at least 6 months, but not shorter than the IMP
▲ If Variable Hour EE was not FT during the IMP, they would not be considered FT for the entire SP
— SP cannot be longer than the IMP + 1 month and cannot exceed the end of the SMP + AP (90 days)
▲ Administrative Period (AP) allowed (up to 90 days) on both front end and/or back end of IMP to calculate FT status
— However, the IMP and AP together cannot extend beyond last day of the first month beginning on or after the anniversary of the EE’s start date
▲ Once Variable Hour EE has been employed for one full SMP, they must be retested as a ongoing EE
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4980H Full-Time EE Determination Example
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ACA Employer Penalties
▲ In general, failure to comply can result in excise tax under the Internal Revenue Code or penalties under PHSA or ERISA, depending on which of these statutes is applicable to the employer – $100/day “with respect to each individual
to whom such failure relates”
– Maximum for unintentional failure is the lesser of: • 10% of the total spent of the group health
plan for preceding year; or
• $500,000
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DOL Plan Audits
▲ DOL Plan Audit Program is underway
▲ Because there is no history of audits, health and welfare plan compliance is often lacking
▲ Auditors looking at historic areas of non-compliance in plan documentation
▲ Review also encompasses ACA-required provisions
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Plan Design Requirements and Select Provisions
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Cost-sharing Limitations
Deductible Limits
• $2,000/$4,000
• Non-GF Small Group Plans
Cost Sharing
Limits
• Pegged to IRS CDHP OOP Limits ($6,250/$12,500 for 2013)
• Non-GF Individual, Small Group Large Group, and Self-insured Plans
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Essential Health Benefits (EHB) Basics
▲ Fully insured, non-GF small group and individual plans must cover all EHB w/o an annual or lifetime dollar caps on EHB
▲ Fully insured large group and self-insured plans are not required to cover EHB, but if they do so are prohibited from imposing any annual or lifetime dollar caps on EHB
▲ ACA-defined 10 EHB Categories:
1 Ambulatory patient
services
2 Emergency services
3 Hospitalization
4 Mental health and substance abuse
disorders/behavioral health treatment
5 Maternity and newborn care
6 Prescription drugs
7 Rehabilitative
services/devices
8 Laboratory services
9 Preventive and
wellness services and chronic disease
management
10 Pediatric services,
incl. oral and vision care
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Essential Health Benefits Defining Covered Items & Services
▲ DHHS authorized states to define EHB through establishment of a benchmark plan
▲ States may choose from four existing health plan options for benchmark plan to establish the covered items/services within each EHB category : • Largest plan by enrollment in any of the three largest small group products • Any of the largest three state employee health benefit plans by enrollment • Any of the largest three federal employee health plan options by
enrollment • Largest insured commercial non-Medicaid HMO operating in the state
▲ State mandates associated with the selected benchmark plan will be included in the EHB package
▲ If State does not select a benchmark plan, default option will be largest small group product in the state
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Essential Health Benefits Plans Effected ▲ Effective for plans beginning on or after 1/1/14
* Large group = 51+ in all states currently (will be 101+ in all states as of 1/1/16)
Plan/Funding Type
Grandfather Status
Must Cover EHBs?
Defines EHB Annual Lifetime Limits on EHB
Permitted?
Individual and Fully Insured Small Group
Non-GF Yes State No
GF No State No
Fully Insured Large Group
Non-GF No Employer No
GF No Employer No
ASO Small Group and Large Group
Non-GF No Employer No
GF No Employer No
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Other Plan Design & Coverage Requirements ▲ Contraceptive Services Requirements
• Exemptions for Religious Employers
• Accommodations for Religious Affiliated Organizations
▲ 90-day Waiting Period Limit
▲ Required Coverage for Participants in Clinical Trials • Cannot deny a qualified individual the right to participate in an approved
clinical trial
• Cannot limit or impose additional conditions on coverage of routine patient costs for items and services furnished in connection with the approved clinical trial
• Cannot discriminate against a qualified individual based on participation in an approved clinical trial
▲ Non-discrimination Rules for Fully Insured Health Plans • Expected to closely follow IRS Section 105H Rules for self-insured plans
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Non-discriminatory Wellness Programs Proposed Regulations
▲ Explains differences in types of incentive based wellness programs (participatory vs. health factor)
▲ Increases permissible incentive (penalty) for health factor contingent wellness programs
▲ 2014―permissible incentive increased to 30% of cost of coverage (up to 50% for tobacco cessation standards)
▲ Health factor contingent wellness programs must meet revised non-discrimination requirements
— Reasonably designed — Include annual opportunity to comply — Provide “reasonable alternative” standard for participants
• Not clear if “reasonable alternative” is medically driven
▲ Aggressive programs must comply with ADA, HIPAA & GINA
▲ Wellness programs that are not contingent on a health factor have more flexibility w/ incentives
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Employer Obligations
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“Play or Pay” Section 4980H Basics
Large employers are required to offer coverage to full-time employees (and dependents*) or pay a penalty/excise tax
Defines who is a full-time employee and when they must be offered coverage
• Eligibility Definition
• Eligibility Determination
• Waiting Period
Defines acceptable Employer Coverage as that which has “Minimum Value” and is “Affordable”
*Employers are required to offer coverage to dependent children; however, employers are not required to contribute to coverage for dependent children
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“Play or Pay” Section 4980H Large Employer Determination ▲ Large Employer
• Defined as employer that averaged at least 50 full-time employees during prior calendar year Transition rule 2014―employers may
use any consecutive 6 mo. period from 2013
• To calculate full-time employees: Add number of full‐time employees
(30 or more hours a week) and number of full‐time equivalent employees (FTEs)
Divide total monthly part time hours by 120
▲ Must include all full‐time employees and FTEs in “controlled group” to determine if Large Employer (but penalty applies on member‐by-member [separate tax ID] basis)
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“Play or Pay” Section 4980H Large ER Full-Time EE Determination
▲ Full-time = 30 hours/week average (130 hours/month) • Hours of service include PTO, vacation, sick time, leave etc.
• Hours of service must be “reasonably” calculated for certain positions
▲ If employee is expected to be full-time at the time of hire then they are full-time for the purposes of 4980H
▲ What about variable hour and seasonal employees? • IRS acknowledges practical challenges in determining full-time status
on a monthly basis and is providing a more flexible approach
▲ IRS Safe Harbor allows for employers to use a look back approach (“Measurement Period”) to determine full-time status for subsequent predetermined “Stability Period”
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“Play or Pay” 4980H Large Employer Requirements
▲ Must offer Minimum Essential Coverage to all full-time employees
– Employer subject to a penalty for failure to do so if any single full time employee receives federal premium tax credit (“assistance”) to purchase coverage through a qualified exchange
– $2,000 penalty for each full-time employee (minus first 30 EEs)
▲ Minimum Essential Coverage must provide “Minimum Value” and be “Affordable”
— Employer is subject to a penalty of the lesser of the $2,000 coverage penalty OR $3,000 for each full-time employee receiving a federal premium tax credit (assistance) to purchase coverage through a qualified exchange
▲ Employer penalties are triggered if employee(s) receive federal premium tax credit (assistance) for coverage through a qualified exchange ▲ Only apply to full time employees (defined as those working
30 hours per week or more)
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“Play or Pay” Section 4980H Employer Requirements
Potential Annual Penalties Beginning in 2015 for Large Employers Applies to For-profit and Nonprofit Organizations
Not a large employer (Fewer than 50 full-time equivalent employees)
Large employer: 50 or more full-time equivalent employees
Does not offer coverage Does not offer coverage Offers coverage
A No full-time
employees receive credits for
exchange coverage
B 1 or more full-time employees receive
credits for exchange coverage
C No full-time
employees receive credits for
exchange coverage
D 1 or more full-time employees receive
credits for exchange coverage
No penalty No penalty Number of full-time employees minus 30 multiplied by $2,000
No penalty Lesser of: • Number of full-time
employees minus 30, multiplied by $2,000.
• Number of full-time employees who receive credits for exchange coverage, multiplied by $3,000.
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4980H Full-Time EE Determination Ongoing Employees ▲ Employers define Standard Measurement Period (SMP)
to determine if ongoing employees were full-time status (30 hrs. per service week/130 hrs. per mo.) • SMP can range from 3 to 12 months
▲ If ongoing employee was full-time status during the SMP, then they must be considered full-time status for the entire Stability Period (SP) • Formula used is total hours worked in SMP divided by months
in the MP ≥ 130 hours • If ≥ 130 hours, employer must offer EE coverage for entire SP
or face penalty • SP must be at least 6 months but not shorter than the SMP
▲ If ongoing employee was not full-time status during the SMP, then they would not be considered full-time status for the entire SP • SP cannot be longer than SMP
▲ Administrative Period (AP) allowed (up to 90 days) to calculate FT status; however, AP cannot create a “gap if covered”
▲ Allows different MPs & SPs to be used for different employee classifications (hourly vs. salary, CBA/non-CBA, different states)
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4980H Full-Time EE Determination New Variable Hour/Seasonal EEs
▲ Employers may use same look-back (Measurement Period)/ Stability Period approach with a few differences
▲ “Initial Measurement Period” (IMP) allowed for any new Variable Hour Employee if employer cannot reasonable determine if they are expected to work more than 30 hrs. per week • After Date of Hire, IMP can range from 3 to 12 months
▲ If Variable Hour Employee was full-time status during the IMP, then the EE must be considered full-time for the entire Stability Period (SP) • ISP must be at least 6 months but not shorter than the IMP
▲ If Variable Hour Employee was not full-time status during the IMP, then they would not be considered full-time status for the entire SP • SP cannot be longer than the IMP + 1 month and cannot
exceed the end of the SMP + AP (90 days) ▲ Administrative Period (AP) allowed (up to 90 days) on both front
end and/or back end of IMP to calculate the full-time status • However, the IMP and AP together cannot extend beyond
last day of the first month beginning on or after the anniversary of the EEs start date
▲ Once Variable Hour Employee has been employed for one full SMP they must be retested as a ongoing employee
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Large ER Requirements 4980H Minimum Value Determination ▲ Minimum Value―Plan’s share of the total allowed costs of benefits
provided under the plan ≥ 60%
▲ Employers may select from three methodologies for determining Minimum Value of Plan • Minimum Value Calculator
• Plan Design Checklist Safe Harbor
• Certification by certified actuary
▲ Employer HSA contributions & HRA contributions newly made available count toward Plan’s Minimum Value
▲ 60% Minimum Value requirement based only on Essential Health Benefits*
* Note: Large group and self-insured employer plan sponsors are not required to cover specific EHB and it appears MV
calculation is based all covered benefits
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Large ER Requirements 4980H Affordable ER Coverage Determination
▲ ACA and Subsequent Federal Regulations/Guidance define “affordable” employer coverage as: • Single (Self-only) coverage costing employee no more than 9.5% of
income
• IRS Safe Harbor allows employers to base affordability on employee W-2 income. For example:
FT Employee earning $20,000 year;
Employer could not charge EE more than $1,900 year ($158 mo.) for Single (Self-only) coverage
▲ Employees w/o access to affordable ER coverage may be eligible for federal Premium Tax Credits & Subsidies (Households @ 100%-400% FPL)
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“Play or Pay” Section 4980H Miscellaneous
▲ Under the proposed regulations’ transition relief, solely for purposes of stability periods beginning in 2014, employers may adopt a transition measurement period that: • Is shorter than 12 months, but not less than 6 months long; and
• Begins no later than July 1, 2013, and ends no earlier than 90 days before the first day of the first plan year beginning on or after Jan. 1, 2014.
▲ Proposed regulations provide allowances to use standard payroll periods for the purposes of Measurement Period calculations with exception
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“Play or Pay” Section 4980H Miscellaneous
▲ Authorized Safe Harbor / “95% Rule”: • Employer complies with 4980H if it
offers Minimum Essential Coverage to at least 95% of full-time employees (and dependents)
▲ Dependent coverage requirement: Must provide coverage to children of full-time employees under age 26 • No penalty in 2014 if employer takes
steps toward compliance
▲ Fiscal year plans: Employers will not be subject to 4980H penalties until the first day of the 2015 plan year.
▲ Common Law Employer standard used to determine employer -employee relationship
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Premium Tax Credits and Cost Sharing Subsidies
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Premium Tax Credits & Subsidies Why They Matter to Employers
▲ Premium Tax Credits and Cost-Sharing Subsides are available to households with low to moderate incomes (100%-400% FPL) if they meet eligibility requirements
▲ Low- to middle-income employees (households) may have more affordable coverage options through a Public Exchange due to these Insurance Affordability Programs
▲ Premiums Tax Credits
– Households w/ incomes b/t 100%-400% FPL eligible for advanceable tax-credits capping premiums for a 70% “Silver Plan” at 2% to 9.5% of modified adjusted gross household income
• 133%-400% threshold in states that enact Medicaid expansion
▲ Cost Sharing Subsides
– Households w/ incomes b/t 100% to 250% FPL are eligible for additional cost sharing subsides
• Increase the actuarial value of the Silver Plans to greater than 70%
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Premium Tax Credits/Subsidies Why They Matter to Large Employers ▲ If employee is offered affordable
coverage by employer, they are not eligible for Premium Tax Credits/ Subsidies through Public Exchange for both self/dependents
▲ If employer does not offer affordable coverage, EEs may be eligible for Premium Tax Credits/ Subsidies for self/dependents
▲ The eligibility requirements for Premium Tax Credit/Subsidy appear to create an incentive for employers to make coverage less affordable for certain lower-wage employees so they can qualify
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Premium Tax Credit Cost Analysis EE w/ Family Example
ER EE
EE 395.69$ 336.34$ 59.35$
EE+Sp 791.39$ 474.83$ 316.55$
EE+Ch 791.39$ 474.83$ 316.55$
Fam 1,187.08$ 712.25$ 474.83$
ER EE
EE 395.69$ 218.62$ 54.84$
EE+Sp 791.39$ 308.64$ 292.50$
EE+Ch 791.39$ 308.64$ 292.50$
Fam 1,187.08$ 462.96$ 438.74$
Family Income FPL % of income Cap
35,137 150% 4%
46,850 200% 6.3%
70,275 300% 9.5%
93,700 399% 9.5%
Cost w/o affordable ESI ER EE EE Savings 192.78$
250.00$ 245.96$ ER Savings 212.96$
EE Unaffordable Threshold (9.5%)
278.17$
370.90$
556.34$
741.79$
Cost ESI (80/20 Plan)
Tax Adjusted Cost ESI
Premium Cap (Mo.)
117.12$
EE+Child
245.96$
556.34$
741.79$
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Tax Credits/Subsidies Why They Matter to Individuals PPACA Premium and Cost-Sharing Subsidy
PREMIUM SUBSIDY COST-SHARING SUBSIDY³
INCOME (%PPL)
ANNUAL INCOME (BASED ON TRENDED
2014 FPL¹)
PREMIUM PERCENT OF INCOME CAP²
MONTHLY MAXIMUM PREMIUM
REDUCTION IN MAXIMUM OOP LIMIT
REDUCED MAXIMUM ANNUAL LIMITATION OF COST SHARING (2014)
REQUIRED ACTUARIAL VALUE OF
BENEFIT PLAN
<133% $15,455 2.00% $26 66.70% $2,250 94%
150% $17,430 4.00% $58 66.70% $2,250 87%
200% $23,240 6.30% $122 20.00% $5,200 73%
250% $29,050 8.05% $195 N/A $6,400⁴ 70%
300% $38,860 9.50% $276 N/A $6,400* 70%
400% $46,480 9.50% $386 N/A $6,400* 70%
1. Based on 2012 100% FPL of $11,170 for a single individual, trended two years at 2% annual trend (rounded). 2. Premium tax credit percentages are for 2014 and will be indexed in the future. 3. Excluding cost-sharing reductions for Indians with household income not more than 300% FPL of proposed rule for cost-sharing reductions 4. HHS estimated 2014 maximum annual limitation on cost sharing. For future years, will be based on IRS dollar limit on cost sharing for high-deductible plans..
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Tax Credits/Subsidies Considerations ▲ Most employers offer affordable self-only coverage, would they
adjust contributions to allow certain workers eligibility for premium tax credits and subsidies?
▲ Is it appropriate for an employer to drive lower wage workers to the exchanges to qualify for these programs? • Sustainability • Public relations aspect • Will increased pay be required for those who don’t qualify for these
programs be required to offset higher employee premium contributions
▲ Many questions and uncertainties exist about these insurance affordability programs
▲ Will the premium tax credits/subsidies be scaled back in 2014 and beyond?
▲ Legal challenges to premium tax credits/subsidies through federal exchanges?
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Health Insurance Exchanges
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Qualified Health Insurance Exchanges
Medicaid & CHIP Insurance Affordability Programs: Subsidized
Coverage - Premium Tax Credits & Cost Sharing
Subsidies
Unsubsidized Coverage SHOP/Small Group ER Coverage
< 100%/133% FPL (state option) including adults
100%/133% - 400% FPL w/out affordable ESI
> 400% FPL ERs < 50/100 (state option)
Carriers Products Plan Types Actuarial Value
Cigna Aetna Kaiser BC/BS
Etc.
HMO PPO POS
Co-Op Plans State Basic Health Plan
Platinum Gold Silver
Bronze Catastrophic Plan (≤30)
90% 80% 70% 60% N/A
Product Choices
Programs
Exchanges
Federal State Partnership (Federal + State)
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Health Insurance Exchange State Progress & Federal Defaults
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Emerging Healthcare Models for Employers and Employees
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Emerging Models Employer/Employee Health Coverage
POPULATION HEALTH & RISK MANAGEMENT
MARKETPLACE APPROACH
• Self-insured models
• Wellness programs that actually achieve behavior change
• Incentives and penalties (ACA increases wellness allowance to 30%)
• Value-based benefit design
• Multi-purchasing Coalitions, Value-Based Networks, Patient-Centered Medical Home Models
– Direct contracting for larger self-insured employers
• Market alternatives exist
– GI & No Pre-Ex
– Exchanges (Public & Private)
• Defined Contribution Model
• Reallocation of compensation & benefits spend based on best available options
– Leverage Premium Tax Credits & Subsides
• Stability of non-large group market in question!
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Guess What? It’s Still About Rising Health Care Costs
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Health Care Strategy Fundamentals
Employee Education/ Communication Campaign on Health Care Costs & Quality!
Population Health Management
Delivery System Strategies
• Total Rewards Conversation
• Value-Based Benefit Design
• Keep healthy members healthy!
• Keep those with costly health issues compliant and from getting worse!
• Incentives/ Penalties
• Carrier programs are very limited/ that’s not enough
• Population Health Management within your organization is up to you!
• Centers of Excellence
• Focus/ Narrow Networks
• Pay for Performance Initiatives
• Patient-Centered Medical Home/ ACO’s
• On-site Clinics
• Tele-Medicine
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Defined Contribution Approach Through Public/Private Exchange DEFINED CONTRIBUTION
SUBSIDY INSURED PLAN OFFERINGS FOR PARTICIPANTS
THROUGH EXCHANGE (Public or Private)
1 2 3
Health Care Credit Standardized Plans Competing Carriers
Employer makes a defined contribution per month
Bronze -60% Silver-70% Gold-80%
Platinum-90%
Aetna Cigna
United Kaiser
▲ Many questions remain about this model ▲ Group or Individual products ▲ Employer tax deduction/employee tax
deduction status in question ▲ What does it do to impact underlying health
care costs?
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Modeling Coverage Scenarios Impact on Employer & Employee Costs Potential Employer Scenarios Employer Costs Employee
Expenses
Status Quo • Maintain current ER plan • Continue to treat all benefit-eligible EEs the same • Employer costs are plan costs less EE contributions
Employer Plan
Cost-sharing
EE contributions
Encourage Exchanges for Certain EEs • Maintain current ER Plan for certain EEs • Steer EE’s to most cost-effective coverage source • Employer costs are combination of plan costs less EE
contributions, 4980H taxes/fees, possible increased EE compensation for higher-income EEs (+400% FPL)
Employer Plan Cost-sharing
EE contributions
PPACA Fees Subsidies
Exit Completely • Terminate current ER plan • Increase EE compensation or use “Defined Contribution”
strategy & allow EEs to purchase individual coverage through Public Exchange, Private Exchange, or off exchange
• Employer costs are combination of 4980H taxes/fees & defined contribution/increased EE compensation
Increased Compensation
Cost-sharing
PPACA Fees Subsidies
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Additional Resources
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Additional Resources
▲ Kaiser Family Foundation www.kff.org
▲ Federal Government HCR Website www.healthcare.gov
▲ Health Insurance Tax Credit Calculator http://healthreform.kff.org/subsidycalculator.aspx
▲ California Health Insurance Exchange Website www.CoveredCa.com Contact: Erika James, Vice President, Employee Benefits Ascension Benefits & Insurance Solutions 925-407-0416 [email protected]
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We appreciate the work you do …
Thank You!