The Health Care Reform Act What You Need To Know James P. Gelfand, Director of Health Policy.

The Health Care Reform Act

What You Need To KnowJames P. Gelfand, Director of

Health Policy

U. S. C h a m b e r o f C o m m e r c e

For more information, contact James Gelfand at [email protected]

Learning ObjectivesIdentify key provisions of the legislation that will affect your organizationDetermine the course of action needed to comply with the new regulations Understand the implications of non-compliance with the regulationsDetermine the financial implications of the new law



What the Chamber supported…

Bending the cost curveA focus on wellness and preventionInsurance market reforms coupled with individual responsibilityPayment reforms (addressing cost-shifting & P4P)Medical liability reformHealth ITImproved affordability subsidiesComparative effectiveness research



The Patient Protection and Affordable Care of 2010(H.R. 3590)…Signed into law (P.L. 111-148) on Mar. 22, 2010

Extends health insurance coverage to about 32 million currently uninsured.Subsidies – provides subsidies for up to 400% of FPLMedicaid Expansion – Up to 133%FPL (14,000 ind./29,000 family)Individual Mandate – Starting 2014, with penalty of $695 ind./$2,915 familyEmployer Mandate – (Free rider) Penalty for lack of “affordable” coverage if 50 or more employeesCreates State Insurance Exchanges – Available in 2014, state marketplace for purchasing insurance



The Patient Protection and Affordable Care of 2010(H.R. 3590) – continued…

Insurance Reforms No rescissions (unless fraud – 2010) Dependents covered until age 26 (2010) No pre-existing condition exclusions (2010 for children; 2014 for

everyone) No lifetime limits (2010) or annual limits (2014 for group plans) Requires preventative coverage (2010) Guarantee Issue and rating limitations (2014)

Small Employer Credits – Up to 50% of employer’s contributions (up to 5 yrs.)Minimum Benefits Package – All health plans offered through exchanges to provide the essential benefits



Cost $$$....According to the Congressional Budget Office

(CBO)… Cost = $938 billion/10 years

• Deficit reduction = $124 billion/1st-10years, $1.2 trillion/2nd-10 years• Doc Fix will cost over $275 billion

$569 billion in new taxes and tax increases $528 billion total cuts to Medicare Creates 16,500 new jobs for the IRS Billions more in spending authorized, but not

appropriated.



Pay Fors = $569 billion/10 years…10% excise tax on tanning services $2.7 billion/10 (2010)

Modification of tax treatment in certain health organizations $400 million/10 (2010)Codify economic substance doctrine $4.5 billion/10 (2010)Repeal of “black liquor” credit $23.6 billion/10 (2011)Conforming definitions for medical expenses $5.0 billion/10 (2011)Additional tax on distributions from HSA’s and MSA’s other expenses $1.4 billion/10 (2011)Excise tax on manufacturers and importers of drugs $27.0 billion/10 (2011) Corporate reporting requirements (1099 issue) $17.1 billion/10 (2012)Limit flexible spending in cafeteria plans to $2,500 $13 billion/10 (2013)Excise tax on medical device manufacturers $20 billion/10 (2013)Medicare tax on HI earners $210.2 billion/10 (2013)Eliminate Part D subsidy deduction $4.5 billion/10 (2013)Limitations on executive compensation $600 million/10 (2013)10% medical expense deduction $15.2 billion/10 (2013)Excise tax on insurance providers $60.1 billion/10 (2014)Free Rider penalties $52 billion/10 (2014)Individual Mandate penalties $17 billion/10 (2014)40% excise tax on Cadillac plans $32 billion/10 (2018)Effects on coverage provisions in revenue $46 billion/10 (Misc.)Other changes in revenue $14.3 billion/10 (Misc.)



1099 reporting requirement…

Burdensome reporting requirement that increases the cost of doing businessSection 9006 requirement: Submit a separate 1099 form for every single business-to-business transaction in aggregate of $600 each year – GOODS and SERVICESCould affect over 40 million businessesHouse bill – H.R. 5141 – repeal Section 9006 (Rep. Lungren) / Senate bill – S. 3578 (Sen. Johanns)



Implementation: What happens and when?Implementation will be a 10 year processImmediate changes: 2010-2011Longer term changes: 2012-2013Most significant changes: 2014-2018 and beyond Individual Mandate Employer Mandate Subsidies, Exchanges, Medicaid expansion



Immediate changes…Insurance Reforms – 6 months after enactment Prohibits lifetime limits, rescissions, and

excessive waiting periods Dependents covered until 26 No preexisting conditions for under 19 yrs. old First dollar coverage for preventative care Grandfathered plans



Small business tax credit…

Available to small companies and tax exempt organizations (2010-2015). 2 Phases.

PHASE 1 (2010-2013): Employers with less than 25 full-time employees w/ avg. wage of

$50,000 or less, and company pays min. of 50% of premiums are eligible for tax credit up to 35% of premiums.

Maximum credit if you have 10 or less full-time employees w/ avg. wage of $25,000.

Credit claimed on business tax return, not employment tax return.

PHASE 2 (2014-2015): Same criteria above; but only available to employers purchasing

insurance through the exchange. Credit increases up to 50% of premiums; but only good for 2 years.



Important choices for businesses…

What is the Employer “Free Rider” Mandate?

Offering vs. Non Offering firms

Plan cost considerations for those who are offering

Other issues impacting employers



Employer “Free Rider” Mandate…

Employers with <50 Full-Time Equivalents (FTE) are exempt from offering.Employers with 50 or more FTE, who do not offer, no fines levied if all employees’ incomes are over 400% of FPL (88 K/family of 4).For employers with 50 or more FTE who don’t offer, if any employee receives tax credit through exchange, fine is equal to $2,000 times the # of employees minus 30. These penalties are also incurred if the employer is not offering a “Qualified” health plan.If an employer with 50 or more FTE does offer health insurance, but it is not “affordable” (employee’s share is more than 9.5% of income), and the employee goes into exchange (and gets tax credit), the penalty is $3,000.



Employer Mandate and Penalties…



Plan considerations for offering…

Whether you are a self-insured or fully insured, may trigger different requirements. Here are some items to think about:

Self-Insuring – New requirements for self-insured plans – Reporting value on W-2, will not need to cover “essential benefits” but will need to meet actuarial value (60%), will be exempt from new tax on insurers, but may be subject to “Cadillac Tax” in 2018Sending Employees to the Exchange – Starting 2017, large employers (over 100) may be able to participate in the exchangeGrandfathering of plans – What changes to your plan will trigger loss of “grandfather” status?



Grandfathering rule – How it works…

“Plans will lose their grandfather status if they choose to make significant changes that reduce benefits or increase costs to

employees.”Changing carriersAny changes in coinsurance that increases employee share of medical payments (i.e. Going from 80/20 to 70/30)Any increase in a fixed payment amount (except co-payments) of more than medical inflation plus 15%; applies to deductible, max out of pocket, etc. (since 3/23/10)Any increase in co-payment that exceeds the greater of medical inflation plus 15% or $5 plus medical inflation (since 3/23/10)Decrease employer contribution to premiums by more than 5% below the level (since 3/23/10)Eliminating any benefit for diagnosis or treatment or any part of treatment for a particular condition (since 3/23/10)



Issues impacting employer plans…Long-Term Care – Starting 2011, employers permitted

to automatically enroll employees into CLASS program

Retiree Prescription Drug Plans – In 2013, employers who receive 28% for RDP’s will no longer be able to deduct subsidy

Compensation: Salary vs. Benefits – Employers may prefer compensation through income rather than health benefits.

Consumer-Directed Account Options – Penalties for non-qualified purchases; limits on contributions



What’s next?Political – 2 election cycles before 2014Legislative – Ongoing fixes in future Congresses, opportunities to improve the law.Regulatory – Guidance & Rulemaking – DOL, HHS, & IRS Good Faith Compliance/Medical Loss Ratio

Legal – Legal challenge; 21 states have filed suit on constitutionality



Chamber resources…Vote For Business www.voteforbusiness.com

Health Care Toolkit www.uschamber.com/chambers/healthcare

Primer: Critical Employer Issues in the Patient Protection and Affordable Care Act http://www.uschamber.com/publications/reports/100426_c

ritical_employer_issues_ppaca.htm

Health Reform Impacts www.healthreformimpacts.com



Questions?

The Health Care Reform Act What You Need To Know James P. Gelfand, Director of Health Policy.

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