What You Need to Know on the Implementation of the

Affordable Care Act

Presented to the WSAC Employee Health Care Benefit Forum

June 5, 2013

DiMartino Associates

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The ACA: An Overview PPACA Overview Provider Issues/Implications for Employers PCORI Fees Transitional Reinsurance Program Insurer Fees 90 Day Waiting Periods Minimum Essential Coverage Employer Shared Responsibility Exchange Model Notice HRA Impact…short introduction

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The ACA: An OverviewObjectives of the Legislation:Lower the cost of healthcare for everyone.Expand access to care for all.Create mechanism for improving/measuring quality of care.

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Provider IssuesMedicare/Medicaid:Effective 1/2014 Medicaid eligibility will expand to those up to 133% of the FPL (Federal Poverty Level ) from 100%...could add 30M to Medicaid enrollment.Medicare/Medicaid moving towards episodic based payments and less fee for service.Whether it’s hospitals or physicians, reimbursements will be lower in the future. …so why is this important for employers?

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Provider Issues

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Hospital Payor Mix (by admissions): Medicare = 51% Medicaid = 12% Charity = 4% Bad Debt = 5% Private = 28%

Provider Issues

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Likely Trends:Shrinking hospital margins will reduce plant reinvestment…less capital investment!Physicians will continue to seek employment models with hospitals and larger entities.Consolidation of hospitals/physician practices will continue.Care options will likely reduce in rural areas. …Potential cost transfer to private market!

Provider IssuesImplications for Employers:Initially look for insurers to battle with providers over reimbursements.Long run, expect different kinds of payment models to emerge including: shared risk contracting, less fee for service and more capitation.Provider networks likely to become smaller and more efficient.

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PCORI Fees

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PCORI Fees= Patient-Centered Outcome Research Fees Effective: plan years ending after 9/30/2012. Purpose: evaluate and compare outcomes and clinical

effectiveness. Imposed on insurers and self-funded groups.

Plans impacted: active plans, retiree plans, FSA and HRA plans (unless tied to a self-funded health plan).

Fee Structure: o PY Ending after 9/30/2012 = $1 per covered lifeo PY Ending after 9/30/2013 = $2 per covered lifeo PY Ending after 9/30/2014 thru 9/30/2019= TBD

PCORI Fees

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Who pays the fees? Insurers will pay on behalf of their fully insured

customers. Self-funded plans will need to pay on the Federal Excise

Tax Form 720. When are they due?

Fees are due by the end of July in the year following the close of the Plan Year.o Plans years ending between 9/30/12 and 12/31/12 will

file prior to 7/31/13o Plan Years ending after 12/31/2012 will not file until

7/31/2014.

Transitional Reinsurance Program

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Fees imposed 2014, 2015 & 2016 will raise $25 billion to: Fund adverse selection in the individual market Repay Treasury for the Early Retiree Reinsurance

Program (ERRP) from 2010 All employers with group health plans are impacted. Insurers will pay on behalf of their customers. Self-funded may pay HHS directly or have their TPA do so

on their behalf. HHS estimated 2014 contribution = $63.00 “per life.” Employee count based on 1st 9 months of calendar year.

Insurer Fees

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All Insurers will be subject to these fees beginning January 1, 2014.

The tax is permanent and will gradually increase over time.

It is intended to fund premium subsidies in the Exchange.Self funded plans are exempt.Insurers will be passing this tax on in renewal rates

beginning in 2014. 2014 = 2.0% to 2.25% Subsequent years are tied to premium growth but

tax will increase to as high as 3.0%.

90 Day Waiting Periods

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This provision is effective for Plan Years beginning on or after 1/1/2014.

Impacts employers regardless of number of full time (30 hour/week) employees.

A new full time employee otherwise eligible for coverage cannot be subject to a waiting period for entering the plan longer than 90 days from date of hire.

From a practical perspective, employee waiting periods will not exceed the 1st of the month following 60 days from date of hire.

Minimum Essential CoverageWhat does it mean for a County Employer?

MEC is the minimum level of benefits you can offer to avoid penalty under “Pay or Play” rules. Must meet 60% minimum value test…a plan meets this criteria

if it is expected that it will pay at least 60% of the total allowed costs of benefits.

Minimum value calculator is now available on the HHS website.Employers need to be certain that they offer at least one

plan that meets the 60% threshold to all eligible employees.

Note: The plan must also meet the affordability definition under the Employer Shared Responsibility rules.

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Employer Shared Responsibility

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Which Employers must comply and when: Effective January 1, 2014 (transition rules for non-calendar year plans apply for 2014).

Employ 50 or more employees on a typical business day during the prior calendar year are considered a large employer for the next year.Include all full-time employees for each month of the year.For less than full time employees, add the total number of hours (not < than 120 hours/month) and divide by 120Add the Full-Time Plus FTE then divide by 12

If > 50 then you are a large employer for the coming year.Seasonal employees of more than 120 calendar days per year must also be included…more guidance to be issued.

Employer Shared Responsibility

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The Large Employer Shared Responsibility Rules (ESR):Employers failing to offer a MEC plan to at least 95% of their eligible employees will be subject to a fine of $2,000/employee (disregarding the first 30 employees) if any eligible employee:

Enrolls in coverage on the Exchange and, Qualifies for a premium tax credit.

Employers offering a MEC plan may still be subject to a $3,000 penalty for each employee who enrolls in the Exchange and receives a premium tax credit if:

The Plan is determined to be unaffordable (EE Only contribution exceeds 9.5% of household income but there is a Safe Harbor tied to 9.5% of wage).

Fails to offer minimum value (60% level of benefits).

Employer Shared Responsibility

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Variable Hour Employees “straddle” the 30/hour/week:

There is a complex system for determining if this type of employee is eligible for the Plan.

Standard Measurement Period: time frame to measure the hours worked (may be from 3-12 months).

Administrative Period: The period following the Standard Measurement Period (up to 90 days).

Stability Period: The period in which an employee’s status cannot change…typically the Plan Year.

If they work a 30 hour average during the Measurement Period then they are eligible for the Plan for the following Stability Period.This is an annual exercise for employers (and employees!)

Employer Shared Responsibility

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Employer Strategies to Consider: Be sure you offer at least one MEC plan that meets the 60% minimum value test.Verify your plan will meet the affordability criteria.Manage the use of seasonal employees to < 120 days.Manage hours of variable hour employees to affect plan eligibility and budget objectives.Engage with payroll vendors and other advisors to begin collecting data now!

Exchange Model Notice

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Employers are required to notify employees of the availability of coverage through the Exchange:

Originally to be sent to employees before the end of March 2013, this was delayed until fall 2013.

Last month the DOL released Model Notice for Employers to use as well as instructions: Must be distributed to ALL employees before October 1st. New COBRA model election notice includes information on

health coverage alternatives offered through the Exchanges. New employees will need to be provided the notice within 14

days of date of hire.

Accountable Care Act and Changes to HRA

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The ACA places restrictions on how HRAs work:

The ACA prohibits health plans from imposing lifetime or annual limits.As defined in the ACA, HRA falls under the definition of a health plan.The Internal Revenue Code defines a HRA as a limited employer contribution health plan so it has limits. …hence the conflict!

Accountable Care Act and Changes to HRA

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Implications for Employers and Employees:No change for HRA plans that are fully integrated into a health plan. This will also apply to HRAs that provide “retiree only” benefits.Non-integrated (not tied to another health plan) HRAs will be subject to the provisions of the Law.

In Conclusion

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The ACA will have far-reaching impact on providers, insurers, employers and individuals.

Employers will see new taxes plus increased healthcare costs due to both benefit changes and fees imposed on insurers.

Staying in compliance will require additional time and attention to detail.

Begin the journey early… get your staff educated!