Fall Seminar 2010

Presenters:Jeanne Keller, President of Keller & Fuller, Inc.

Catherine Hamilton, VP Planning, BCBSVT

Health Reform and the Longer View

Today’s Agenda

Results of 2010 VT legislative session

Key federal reforms to understand between 2010 and 2014

• Grandfathering- Advantages/Disadvantages • Small Business Tax Credit • Employer Reporting Requirements • The “Pay or Play” Decision • General design of the State-based insurance exchanges

What decisions does the State of Vermont need to

make and how these decisions could impact employers

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2010 Vermont Legislative Action

Health Care System Design and Implementation Plan

• Study prepared for Legislative Commission on Reform• Five months, $300,000 – hired in June• Task: Design three options –

• (1) “a government-administered and publicly financed "single-payer" health benefits system decoupled from employment and allows for private insurance coverage only of supplemental health services.

• (2) a public health benefit option administered by state government, which allows individuals to choose between the public option and private insurance coverage and allows for fair and robust competition among public and private plans.

• (3) a third and any additional options shall be designed by the consultant, in consultation with the commission” 

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Study - continued

“Each design option shall include sufficient detail to allow the governor and the general assembly to consider the adoption of one design during the 2011 legislative session and to initiate implementation of the new system through a phased process beginning no later than July 1, 2012.”

Conflicts with federal law already cited by state’s consultant: Affordable Care Act, ERISA, Fed Qualified Health Centers $, VA, Fed Employees, Medicaid, Medicare, Tricare

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2010 Legislative Action

Blueprint Expansion and Payment Reform Pilots – create “medical home” model and examine alternatives to fee-for-service

Hospital Budget Caps• 2011 and 2012, “the commissioner shall aim to minimize rate

increases for each hospital to ensure that the system wide increase shall be lower than the prior year's increase.”

• 2011, the total system wide net patient revenue increase for all hospitals reviewed by the commissioner shall not exceed 4.5 percent.

• For fiscal year 2012, the total system wide net patient revenue increase for all hospitals reviewed by the commissioner shall not exceed 4.0 percent.

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2010 New Mandates

Anesthesia Coverage for Certain Dental Procedures• (1) a child seven years of age or younger who is determined by a

dentist to be unable to receive needed dental treatment in an outpatient setting or

• (2) a child 12 years of age or younger with documented phobias or a documented mental illness whose dental needs are complex and urgent or

• (3) a person who has exceptional medical circumstances or a developmental disability

 Coverage for Tobacco Cessation Programs • at least one three-month supply per year of tobacco cessation

medication, including over-the-counter medication, if prescribed by a licensed health care practitioner for an individual insured under the plan.

• A health insurance plan may require the individual to pay the plan's applicable prescription drug co-payment for the tobacco cessation medication.

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2010 Mandates – continued

Autism Spectrum Disorders• Diagnosis and treatment of autism spectrum disorders,

including applied behavior analysis supervised by a nationally board-certified behavior analyst,

• Beginning at 18 months of age and continuing until the child reaches age six or enters the first grade, whichever occurs first.

• Treatment includes: habilitative or rehabilitative care; pharmacy care; psychiatric care; psychological care; and therapeutic care (includes services provided by licensed or certified speech language pathologists, occupational therapists, physical therapists, or social workers), if the physician or psychologist determines the care to be medically necessary.

• The provisions go into effect on or after July 1, 2011, on such date as a health insurer offers, issues, or renews the health insurance plan, but in no event later than July 1, 2012.

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PPACA: PPACA: “The Affordability Act”“The Affordability Act”

BenefitChanges

Taxes &Penalties

Subsidies

IndividualMandate

New Insurance

Reforms

2010-2014

Medicaid Expansion

Exchanges

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Key Provisions: Insurance Reforms/Plan Requirements

• Review of “unreasonable” rates

Enactment

• National high risk pool

• HHS web portal

• Early retiree reinsurance

Sept 2010+

Compliance

• No pre-ex for kids

• Dependent coverage to 26

• Limits on rescissions

• Internal/external appeals

• MLRs (80% individual/ small group; 85% group)

• No lifetime limits

• No preventive cost-sharing

• Patient protections

2014

“Pay or Play”

• GI/CR

• Age band (3:1)

• Risk adjustment

• Exchanges

Plan Years Beginning

June/July ‘103/23/10

Patient’s Rights:Patient’s Rights:Removal of Lifetime and Annual LimitsRemoval of Lifetime and Annual Limits

No Lifetime Limits No Annual Limits

•Prohibits lifetime dollar limits on essential benefits

•Special enrollment required for any individual whose coverage ended due to reaching alifetime limit prior tothe effective date

•Prohibits annual dollar limits on essential benefits beginning 2014 witha transition scheduleas follows:

– $750,000 in 2010– $1.25 M in 2011– $2 M in 2012

•No restrictions on day, visit, or other non-dollar limitations

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Dependent CoverageDependent Coverage

• Each young adults 19-25 who is not enrolled in a parent’s plan must be “offered the opportunity to become enrolled” without regard to whether the young adult is:

– Financially dependent on the subscriber

– A student

– Married

– Living with the subscriber

– Employed*

– Residing in Vermont

• The child must be given 30 days to enroll, with the enrollment effective on the first day of the plan year

• Employers are required to provide their employee’s with 30 days notification about the open enrollment period for dependents

– *Grandfathered plans may opt to provide coverage only to dependents that do not have alternative group coverage.

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Preventive Care ServicesPreventive Care Services

• Effective September 23, 2010, Preventive services must be covered without copayments or coinsurance or deductible

– if provided by a network provider.

• Covered under preventive if the US Preventive Services Task Force labeled it “A or B” rated

• Age, gender, diagnosis restrictions apply

• (applies to non-grandfathered plans only)

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GrandfatheringGrandfathering

1. Grandfathered plans are excluded from complying with certain PPACA requirements.– Can opt out of preventive care w/ no cost sharing– Can opt to not cover dependents 19-25 if the dependent

has alternate group coverage option

– Patient protections such as guaranteed access to OB/GYN’s and pediatricians (already VT state law)

– Special notices to employees not required

2. Status of plan renewals in Vermont– BCBSVT: all plans in the small group market will not be

grandfathered AND will be PPACA compliant, so grandfathering not an issue.

– Optional for large groups

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Advantages and Disadvantages of GrandfatheringAdvantages and Disadvantages of Grandfathering

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Pros Cons

•Avoid the elimination of copayments on preventive services.

•Deferral of dependent coverage up to age 26 for those eligible for alternative employer-sponsored coverage until 2014.

•Limits decreases inemployer contributions

•Limits employee cost-share features (such as copayments) or specified dollar maximums

•Limits employee cost-share(co-insurance) increases

•Limits ability to change benefits

•Requires additional disclosure and record retention

Grandfathering & 2011 Renewals MVP and CIGNA

All carriers agree loss of GF status has little impact in VT compared to other states

MVP– all plans in small and large group market will be

grandfathered unless employer makes changes– All plans will be PPACA compliant as of 1/1/2011

CIGNA / VACE– Changes by VACE to out-of-pocket maximums in some

plans will trigger loss of grandfathering– CIGNA / VACE assuming most employers will make

plan choices that will trigger loss this year or next

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Small Employer Tax Credit

Eligibility: •Firm Size: Employers < 25 employees

•Average Annual Wages: < $50,000/year average wages

•Employer Contribution: > 50% of premiumAmount of credit:

•2010-2013: sliding scale credit up to 35% of employer costs (25% if tax exempt)

•2014+: credit up to 50% of employer costs (35% if tax exempt) for first 2 years; limited to exchange only

Calculator:

http://smallbusinessmajority.org/tax-credit-calculator 15

Small Employer Tax Credit Summary Chart

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Small Employer Tax Credit

How to claim the credit:

1. Fill out form 8941 to calculate the credit

2. Include the amount of credit on income tax return (tax-exempt businesses will include it on a revised Form 990-T after 2011 filing season)

3. Money is distributed as a credit, NOT as cash

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More Changes - 2011

All of these take effect – as soon as regulations are issued… Auto-enrollment of ees in health plan (employers >200) National voluntary long term care insurance program (CLASS

Act) (eer chooses offering; ee may opt out) 5-yr demonstration grants to states on tort reform Requires chains (>20 restaurants) to post calorie and fat

content Owners of >20 vending machines “shall provide a sign in close

proximity to each article of food or the selection button that includes a clear and conspicuous statement disclosing the number of calories contained in the article." (e.g. small bag of Fritos = 350 calories)

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Summary: Major Impacts in 2010-2011Summary: Major Impacts in 2010-2011

Among the most significant health care reform changes for 2010-2011 are:

• Coverage of adult children up to age 26

• Preventive care

• Lifetime and annual limit removal/restriction

• Inclusion of the cost of medical coverage on employees’ W-2s

• Exclusion of over-the-counter medications as reimbursable expenses under FSAs/HRAs (with the exception of Insulin), unless prescribed by a physician

• Tax credits for small businesses

• Wellness grants for small businesses

• W-2 reporting requirements

• Auto-enrollment of employees for plans >200

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2012 - New W-2 Requirements

2012 health coverage value to be reported on W-2 forms• Purpose: Congress wants to know how much employers

actually spend on health care. (Doesn’t change tax treatment; only a reporting requirement)

• Must be available to all employees with W-2s issued in Jan 2013

• Regulations may require that forms be available to ex-employees (who worked in 2012) within 30 days of request, e.g. no later than Feb 1, 2012

Note: Original implementation was for 2011 W-2s issued in 2012. On Oct 12th, IRS announced giving employers one addnl year to implement.

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W-2 Requirements – cont

Plans for which coverage costs must be reported include:• Medical, dental and vision

plans• Prescription drug plans.• Executive physicals• On-site clinics if they provide

more than de minimus care• Medicare supplemental

policies• Employee assistance

programs• HRA reimbursements

Not included: • Employee FSA and HSA

contributions• disease-specific plans• stand-alone dental and

vision plans

Valuation:• Estimate with COBRA

minus the 2%, plus any benefit NOT included in your COBRA calculation – e.g. onsite clinics, EAP

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W-2 Requirements – cont

Caveats:• Start now: in or outside payroll needs to be planning

• Watch for rules on how to value things like onsite clinics, where a clear PM/PM isn’t available

• May also apply to persons for whom you don’t normally issue a W-2 (retirees, COBRA)?

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Other Reporting Requirements 2012 +

1. Uniform Explanation of Coverage (March, 2012)

2. 60-Day Advance Notice of Plan Modification (March, 2012)

3. Employee Notice about Exchanges (March, 2013)

4. Certification of Health Care Coverage (January, 2014)

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What does it take to “Play?”

• If you employ >50 FTE, to avoid “Pay” ….• Must offer plan to any FTEs (30+ hr/wk) with HH incomes 100-

400% of FPL• No min. employer contribution required

• Coverage must pay >60% of actuarial value• Coverage must be “affordable” (< 9.5% of hh income)

Play or Pay in 2014

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Play or Pay 2014 - continued

When do you Pay? • You will pay if any employee applies for coverage thru

Exchange AND• If employer does not offer at all: penalty = $2000/FTE in

excess of 30 ees

• If employer does offer some coverage, but it doesn’t meet the >60% and <9.5% of income rules for employee who goes to Exchange: penalty = lesser of $3000/employee covered by Exchange or $2000/FTE

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General Design: 2014 ExchangeGeneral Design: 2014 Exchange

•State-based Exchanges with a federal fallback plan for states who fail to establish an Exchange on their own.

•Available to eligible individuals and small employers under 100

– States can opt to limit to 50 and under until 2016

– Federal subsidies for individuals and tax credits for employers available ONLY thru Exchange

•Maintain internet website that allows Americans to “shop” for insurance easily

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Timeline for Health Insurance ExchangesTimeline for Health Insurance Exchanges

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2011 2012 2013 2014 2015 2016 2017

March

Exchange grants

May

Final regulations

March

Employer notice requirements due to employees

Sept. - Oct.

Plans begin marketing

Website

active

Nov. - Dec.

Initial enrollment

Exchanges operational

< 51 employees

< 100 employees

> 100 employees

Develop Plansof Operations

States Issue RFPs (e.g.,IT, Enrollment)

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Bronze$2,000 Deductible*

Silver

Gold

Platinum:$500 deductible*

Richest coverage

Catastrophic Lowest coverage

Covers 90% of Benefit Costs

Covers 80% of Benefit Costs

Covers 70% of Benefit Costs

Covers 60% of Benefit Costs

3 PCP visits and deductable level set at HSA level

Qualified high Deductible plans

will still exist under these parameters

2014: Products in the Exchange 2014: Products in the Exchange

*Estimated

Decisions the State of Vermont Will Need to Decisions the State of Vermont Will Need to Make RE ExchangesMake RE Exchanges

• Who will administer exchanges

• Number/Composition of exchange

• Eligible populations (Groups 51-100 optional from 2014-2015, 2017 open to groups over 100)

• Certification of health plans

• Qualified health plans

• Risk adjustment

• Enrollment through agents and brokers

• Exchange surcharge

• Contracting to carry out exchange functions

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Questions?

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Thanks for Coming!

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Registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be addressed to the National Registry of CPE Sponsors, 150 Fourth Avenue North, Nashville, TN, 37219-2417. Telephone: 615-880-420034

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