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. . . Health Care Reform February 14, 2014
Andrew Ky Haynes, Esq.Haynes Benefits PC
Part 1: Market overview
Insurance market rules: 2014
No pre-ex for anyone No annual limits on EHB (“mini med” plans)Cost sharing limits
OOP not to exceed HSA limits (2014 = $6,350 for employee-only, $12,700 for family)Delayed where medical and Rx provided by different carriers
Wellness incentive limits increase 30% of cost of coverage50% for tobacco programs
Insurance market rules: 2014
Deductible limits ($2,000 single, $4,000 family)Applies only to small group market
Clinical trial coverageMust cover “routine patient costs”No guidance will be issued prior to effective date – use “good faith, reasonable interpretation”
Waiting period limitations (90 days or less)Coverage must begin on 91st day
Insurance market rules: 2014
Auto enrollment for large employers (>200 EEs)Not effective until guidance is issued – not expected by 2014Must provide notice, opportunity to opt out
Annual fee on health insurersApplies to carriersAlso applies to self funded MEWAsNot applicable to self funded GHPs
Insurance market rules: 2014
Fair health insurance premiumSmall groupAge, area, status, tobacco3 age bands: under 21, adults 21-63, and adults 64 and older
TransparencyFinancial statements publishedDelayed
Insurance market rules
Guaranteed availabilityAccept every employer and individual
Guaranteed renewabilityRenew every group
Single risk poolInside and outside exchange
Insurance market rules
ReinsuranceFunded by insurers and plans
Risk corridorsLimits on gains or losses
Risk adjustmentPayments to insurers in high risk markets
Notice 2013-54
Application of Market ReformHRA used to purchase individual coverage not
integratedFSA that is excepted not subject to market reformsStandalone HRA is minimum essential coverage, and
retiree will not be eligible for subsidyEAPs generally are excepted benefitsTwo methods of integration• Minimum value required• Minimum value not required
105(h) nondiscrimination testing
Rules previously applied to self-funded plansMany “discriminatory” plans choose fully insured
statusPPACA requires fully insured plans to satisfy rules
“similar to” §105(h)Effective date:
PPACA: Plan Years beginning after 9-23-10IRS: Not until guidance, likely in 2015
105(h) nondiscrimination testing
Problem industries:RestaurantsRetailHospitalityWorkforce
Will Regs look at choice?Beware interaction with pay or play strategies
Part 2: Exchanges
Employer exchange notice
All EEs must receive the noticeCurrent employees – by 10/1/13New hires after 10/1/13 – within 14 days of start date
Two model notices (ERs with and without group health plans)
DOL: No penalty
Enrollment
Initial: 10-1-13 to 3-31-14
Special
Annual: 11-15 to 12-17
Small employer SHOP exchanges
Small = 100 unless state says 50Employer disclosures to employees
All employers subject to FLSACurrent and new hiresConsequences of exchange vs. employer planFF-SHOP – no employee choice model in 2014
Employer only able to chose a single QHP to offer employees
Individual mandate
Not delayedPenalty tax for not purchasing coveragePenalty tax applies to:
Applicable individuals withoutMinimum essential coverageExceptions
Impact on cafeteria plans
Individual – noSHOP – yes (2014)Amendment allowed for non-calendar year
plans, transition relief from change event rules
Part 3: Pay or play
Delayed until 2015
Announced 7/2/13
Official Guidance – IRS Notice 2013-45 (7/9/13)
IRS encouraged employers expand coverage
Delays required information reporting as wellIRS requests voluntary compliance
Does not affect premium tax creditFor now we have IRS proposed rules and
public hearing testimony
Delayed until 2015
Reporting delayed
Penalties delayed
Mandate not delayed
Employer liability?
Delay good?
Federal and state agencies have more time to implement exchanges.
Agencies have more time to issue further guidance on pay or play penalties.
Employers have more time to develop pay or pay strategies.
Delay good?
Trend of employers dropping hours was becoming quite worrisome for employees and employee groups.
New deadline coordinates with the expanded SHOP options projected for 2015.
Delay bad?
Employers now have another year to procrastinate.
Employers with completed strategy now need to decide whether to implement the strategy, or in some cases even revoke the strategy.
Confusion because the mandate still exists; only reporting and penalties are delayed.
Delay bad?
Employers are left with only proposed regulations, which likely will change between now and 2015.
Reduced enrollment may create more adverse selection in the exchanges, which will raise premiums even further.
Where are we?
Large Employer Status: Are you subject to the penalties?
Who are your full-time employees?What are the applicable penalties?What are your strategies with respect to the
penalties?
Strategies for 2014?
Currently have no coverageOffer coverage, OR not offer coverage and
pay penaltyCoverage, but it is not affordable because
employee premium is greater than 9.5%Coverage, but it fails 60% minimum value testKeep full-time employee level below 50, OR keep
number of full-time employees as limited as possible (Caution!)
Strategies for 2014?
Some employers already in compliance
Others can do a “trial run”
Await guidance on specified employee classifications
Skinny plans – delay allows time for Regs.
Part 4: Sex
Coverage of contraceptives
First dollar basis; list of required coveragesExemption for religious employersHobby Lobby caseOther litigation
DOMA: U.S. vs. Windsor decision
5-4 decisionSupreme Court ruled that DOMA definition of
spouse and marriage are unconstitutional (deprivation of protections of Fifth Amendment)
Full faith and credit clause was not addressed (remains law)
DOMA: IRS Guidance 8-29-13
Recognizes all same sex marriages, even if not recognized in state of residence
Other relationships not recognizedRuling applies for all tax purposes, including
employee benefitsPermits individual and employer refunds on
taxes paid on value of coverageRequires retirement plans to recognize same sex
spouses as of 9-16-13
DOMA: Issues remaining
Must benefits be provided retroactively?Plan design and administration issuesImpact on HSAs, FSAs, HRAs and other account
balance plansImpact on COBRA, FMLA, and HIPAA special
enrollments
DOMA: Domicile vs. state of marriage
Only 12 states issue same-sex marriage licensesCT, DE, DC, IA, ME, MA, MN, NH, NY, RI, VT, WA
7 states and DC provide for spousal rights (short of marriage – ex. domestic partnership/civil union)CA, HI, IL, NJ, NV, OR, WA
Part 5: HIPAA
HIPAA/HITECH Final Rules
Duties extend to business associatesAttorneys are business associatesAbility to audit
New individual rightsSale or marketingBreach notification
HIPAA enforcement
Hired staff and contractorsHeavy penalties
$1.5M – failure to check server$1.7M – stolen USB drive$1.2M – failure to erase copier
Closing
Big year aheadStay on top of developmentsFocus on PPACAAlso on HIPAA
