Chris G. PulosSenior Vice PresidentBrower Insurance, a Marsh & McLennan Agency LLC Company

Health Care Reform

Agenda

• What is the legal status of the law?

• Which plans must comply?

• Reforms currently in place

• 2012-2013 compliance deadlines

• Future compliance deadlines

• PPACA Taxes

• Handouts

• Questions 2

Legal Status of Health Care Reform Law

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Supreme Court Decision

• Supreme Court issued its decision on June 28, 2012−5:4 ruling−Chief Justice Roberts wrote the court’s opinion

• Upheld individual mandate (purchase health coverage or pay a penalty – 2014)

• The individual mandate is constitutional, so the rest of the law is too

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What Will Be Next?

• Implementation of health care reform law continues as scheduled

• Changes to law may come from Congress−Some changes already made−Democrats will oppose any major changes, and President

Obama has promised to veto

• Courts will address other aspects of the law−For example, courts have ruled on the law’s contraceptive

coverage mandate, with mixed results on whether employers must comply

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Which Plans Must Comply?

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Plans Subject to Health Care Reform

• Health care reform’s health plan rules generally apply to group health plan coverage

• Exceptions−Excepted benefits −Retiree-only plans−Group health plans covering fewer than 2 employees

• Excepted Benefits−Accident or disability income coverage−Separate dental and vision plans−Liability insurance−Some FSAs

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Reforms Currently in Place

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Provisions Already Effective

• Small employer tax credit• Dependent coverage up to age 26• No lifetime limits/restrictions on annual limits• No rescissions • No pre-existing condition exclusions for children (age 19 or

under)• No cost-sharing for preventive care services• Appeals process changes • No reimbursement for Over-the-Counter medicine or drugs

(without a prescription)• Medical loss ratio rules

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2012-2013 Compliance Deadlines

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W-2 Reporting

• Employers must report aggregate cost of group health plan coverage on each employee’s W-2 Form

• Does not change the tax rules for health coverage – coverage is still not taxable

• Mandatory for 2012 tax year (W-2 Forms provided in January 2013)

• For employers that filed fewer than 250 W-2 Forms last year, reporting requirement is delayed until further guidance issued.

• Please refer to Handout for additional information

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Summary of Benefits and Coverage

• Health plans to enrollees:− Open enrollment: 1st day of the 1st open enrollment period that begins on or

after Sept. 23, 2012, or

− Other enrollment: 1st day of the 1st plan year that begins on or after Sept. 23, 2012

• Issuers must provide SBC to health plans:− Upon application

− Before the first day of coverage (if there have been changes to the SBC)

− When a policy is renewed or reissued

− Upon request

• Plans must provide SBC to enrollees:− For each benefit package offered or which they are eligible

− Annually at renewal (or 30 days before new plan year if automatic renewal)

− With enrollment application materials (if no written enrollment materials, when the participant is first eligible to enroll)

− Before the first day of coverage (if there have been changes to the SBC)

− To special enrollees within SPD timeframe

− Upon request12 12

Increased Medicare Tax

• Medicare tax rate to increase for high-earners−0.9 percent increase (from 1.45 percent to 2.35 percent)

• High-earner threshold −Single: $200,000−Married : $250,000

• Employer responsibilities−Withhold additional amounts from wages in excess of

$200,000−No requirement to match additional tax−No requirement to notify employees

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Health FSA Limits

• Beginning in 2013, limit is $2500/year−Limit is indexed for CPI for later years

• Applies to plan years beginning on or after 1/1/13−This is a change from initial effective date

• Does not apply to dependent care FSAs

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Comparative Effectiveness Research Fees

• Patient-Centered Outcomes Research Institute − Created to improve informed health decisions− Research funded by a fee paid by insurers and plan sponsors of

self-funded plans

• Effective date− Plan years ending after Sept. 30, 2012 − Do not apply for plan years ending after Sept. 30, 2019− For calendar year plans – apply for 2012-2018 plan years

• Amount of fee:− $1 per covered life (enrolled)− Increases to $2− Indexed for Consumer Price Index (CPI)

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Notice of Exchange

• Employers must notify new and current employees of exchange information− Effective October 1, 2013

• Notice must include information about 2014 changes:− Existence of health benefit exchange and services provided− Potential eligibility for subsidy under exchange if employer’s

share of benefit cost is less than 60 percent− Risk of losing employer contribution if employee buys coverage

through an exchange

• More guidance and model notice expected

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2014 Compliance Deadlines

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Individual Mandate

• Jan. 1, 2014: Individuals must enroll in coverage or pay a penalty

• Penalty amount: Greater of $ amount or a % of income – Single annual fee−2014 = $95 or 1%−2015 = $325 or 2%−2016 = $695 or 2.5%

• Family penalty capped at 300% of the adult flat dollar penalty or “bronze” level premium

• Penalty proposed to be deducted when filing income tax

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Health Insurance Exchanges

• Health insurance exchanges will be established in each state (by the state or the federal government)−Premiums in Public Exchange are NOT pre-tax

• Individuals and small employers can purchase coverage through an exchange (Qualified Health Plans)− In 2017, states can allow employers of any size to

purchase coverage through an exchange

• Individuals can be eligible for tax credits−Limits on income and government program eligibility−Employer plan is unaffordable or not of minimum value

• Private Exchanges

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Employer ResponsibilityDelayed until 2015!

• Large employers subject to “Pay or Play” rule−Offer coverage of a certain quality or possibly pay a penalty

− Please refer to Handout

• Applies to employers with 50 or more full-time equivalent employees in prior calendar year−Full-time employee: employed for an average of at least 30

hours of service per week

• Penalties apply if:−Employer does not provide coverage to all full-time

employees and any full-time employee gets subsidized coverage through exchange OR

−Employer does provide coverage and any full-time employee still gets subsidized coverage through exchange20

Exchange Premium Assistance• Employee eligibility will trigger employer penalties

• Employees who are not offered coverage−Not eligible for government programs (like Medicaid)−Meet income requirements (less than 400% of Federal

Poverty Level (FPL))

• Employees who are offered coverage−Not enrolled in employer’s plan−Not eligible for government programs (like Medicaid)−Meet income requirements (less than 400% of FPL)−Employer’s coverage is unaffordable (greater than 9.5% of

employee’s single income) or not of minimum value (an actuarial determination that plan covers less than 60% of total health care cost incurred by participants)

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Employer Penalty Amounts

Delayed until 2015!

Employers that do not offer coverage to all full-time employees:

− $2,000 per full-time employee per year− Excludes first 30 employees

• Employers that offer coverage:− $3,000 for each employee per year that receives subsidized

coverage through an exchange− Capped at $2,000 per full-time employee per year(excluding

first 30 employees, if ALL full-time employees receives subsidized coverage through an exchange

• Pay or Pay Calculators 22

Essential Health Benefits

• PPACA generally prohibits both group health plans and issuers from imposing lifetime or annual limits on the dollar value of health benefits for plan years beginning on or after September 23, 2012.

−May impose lifetime and annual limits on “Non-Essential Health Benefits” to the extent that such limits are permitted under Federal/State Laws

−No Interim Final Rule that specifically defines Essential Health Benefits

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Essential Health Benefits

• Essential Health Benefits have been described to include:− Ambulatory patient services− Emergency services− Hospitalization− Laboratory services− Maternity and newborn care− Mental health and substance use disorder services, including

behavioral health services− Pediatric services, including oral and vision care− Prescription drugs− Preventive and wellness services and chronic disease

management− Rehabilitative and habilitative services and

devices 24

Safe Harbors

• Employer penalties: Who is a full-time employee?−Ongoing employees−New full-time employees−New seasonal and variable hour employees

• Affordability Safe Harbor−Use W-2 income

• Waiting periods−Cannot exceed 90 days−No penalty for employees in waiting period

• Employers can rely on Safe Harbors through 2014−Please refer to Handouts

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Employer Reporting

• Employers will have to report certain information about health coverage to the government and individuals

• Applies to:−“Applicable large employers” (50 +)−“Offering employers” – employers that provide coverage if

employee cost exceeds 8% of income

• Applies to coverage offered after Jan. 1, 2014

• First returns to be filed in 201526

Information Required

• Employer identifying information

• Whether employer offers health coverage to full-time employees and dependents

• Number of full-time employees for each month

• Length of any waiting period

• Monthly premium for lowest-cost option in each enrollment category

• Employer’s share of cost of benefits

• Names and contact info of employees and months covered by employer’s health plan

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More 2014 Changes

• No pre-existing condition exclusions or limitations

• Wellness program changes - maximum reward increases to 30%

• Limits on out-of-pocket expenses and cost-sharing

• No waiting periods over 90 days

• Coverage of clinical trial participation

• Guaranteed issue and renewal

• No annual limits on essential health benefits

• Insurance premium rating restrictions28

Future Compliance Deadlines

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2018 – Cadillac Plan Tax

• 40 percent excise tax on high-cost health plans

• Based on value of employer-provided health coverage over certain limits (includes HSA & HRA)−$10,200 for single coverage−$27,500 for family coverage

• To be paid by coverage providers−Fully insured plans = Health Insurer−HSA/Archer MSA = Employer−Self-insured plans/FSAs = Plan Administrator

• More guidance expected

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Nondiscrimination Rules Coming for Fully-Insured Plans

• Will apply to non-grandfathered plans

• Discriminating in favor of Highly-Compensated Employees (HCEs) will be prohibited−Eligibility test −Benefits test

• Highly-Compensated Employees (HCEs)−5 highest paid officers −More than 10% shareholder −Highest paid 25% of all employees

• Effective date delayed for regulations31

Automatic Enrollment Rules• Will apply to large employers that offer health benefits −Applies to GF and non-GF plans−Large employer = more than 200 employees

• Must automatically enroll new employees and re-enroll current participants

• Adequate notice and opt-out option required

• DOL: −Regulations will not be ready to take effect by 2014−Employers not required to comply until regulations issued

and applicable

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PPACA Taxes and Fees

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Overview of PPACA Taxes and Fees

Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount

Pharmaceutical industry fee- an annual fee on branded prescription drug manufacturers and importers

Impact: Individual

Applies to any branded prescription drug sales after December 31, 2008

Manufacturers or importers with gross receipts from branded prescription drug sales

Amount is determined by the branded prescription drug sales during the calendar year and percentage of gross receipts taken into account.

Medical device manufacturer fee- an annual fee on medical device manufacturers and importers

Impact: Individual

Applies to any medical device sales after December 21, 2008

Manufacturers or importers with gross receipts from medical device sales

Amount is determined by the medical device sales during the calendar year and percentage of gross receipts taken into account

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Overview of PPACA Taxes and Fees

Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount

Indoor tanning services tax- a tax on any service that uses an electronic product with 1 or more ultraviolet lamps for skin tanning

Impact: Individual

Applies to services performed on or after July 1, 2010

Individuals that use the service

Tax equal to 10% of the amount paid for a service.

Tax on high earners and unearned income- an annual tax on wages or unearned income of more than $200,000 for singles and $250,000 for married couples

Impact: Individual

Tax years beginning 1/1/3013 and later

Individual tax payers 0.9% Medicare surtax on wages in excess of $200,000 single/ $250,000 married couples.

3.8% tax on unearned income for taxpayers with modified adjusted gross income in excess of $200,000 single/$250,000 married couples.

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Overview of PPACA Taxes and Fees

Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount

*Comparative effectiveness research fee- this fee funds research on the effectiveness, risks, and benefits of medical treatments through the Patient-Centered Outcomes Research Institute

Impact: Employer

*Refer to Handouts

Plan/policy years that end after 9/30/2012 and beginning before 10/1/2019

Issuers of fully insured plans

Self-insured plan customers

For plan years that end during October 1, 2012 through September 30, 2013, this fee is $1 per participant per year.

For plan years that end during October 1, 2013 through September 20, 2014, the fee increases to $2 per participant per year.

After that, the rate increases each year by the medical inflation rate.

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Overview of PPACA Taxes and Fees

Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount

Comprehensive Primary Care Initiative Fee- this fee is administered by CMS and imposed upon plans that have patients who utilize a physician practice that was selected through a competitive application process that focused on technology, cost and outcomes. Practices in 7 states/regions are currently included in the pilot (including SW Ohio). This is a subset of the Patient- Centered Medical Home Initiative and may be expanded to other states and regions.

Impact: Employer

November 1, 2012 through 2016

Issuers of fully insured plans

Self-insured plan sponsors

Estimated at $7-$9 per patient per month for 2013 rollout

Proposed shared-savings implications in years 3 and 4

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Overview of PPACA Taxes and Fees

Tax/Fee Effective Date

Responsible Party Annual Tax/Fee Amount

ACA Insurer fee- an annual excise tax on health insurance to fund premium subsidies and Medicaid expansion

Tax years beginning 1/1/2014 and later

Issuers of full insured plans

Based on the insurer's market share of net premiums written based on the previous year. For example, the 2014 fee will be based on 2013 premiums.

Total fee amount to be collected across all insurers starts at $8 billion in 2014 and increasing to $14.3 billion in 2018. After 2018 the fee increases annually based on premium growth.

Starting in 2014 the estimated fee is 2.46% of premium.

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Overview of PPACA Taxes and Fees

Tax/Fee Effective Date

Responsible Party Annual Tax/Fee Amount

ACA Reinsurance fee- this will support the transitional reinsurance program that aims to stabilize premiums for coverage in the individual market and lower the effects of adverse selection

Plan/policy years beginning in the 3-year period starting 1/1/2014

Issuers of fully insured plans

Sponsors/administrators will collect and send the contributions on behalf of self-insured plans

Funds will be used to make reinsurance payments to health insurance issuers that cover high-cost individuals in non-grandfathered individual market plans.

The estimated fee is $5.25 per participant per month.

High-cost insurance tax- an annual excise tax on high-cost health plans

Tax years beginning 1/1/2018 and later

Issuers of fully insured plans

Sponsors/administrators of self-insured plans

Tax of 40% on health plan cost that exceed “Cadillac” plan thresholds of $10,200 for single coverage or $27,500 for family coverage.

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Questions?

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Thank you!

This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such.  Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein.  Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors.  Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.