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How To Comply With The Affordable Care Act: Who Knows What

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How To Comply With The
Affordable Care Act:
Who Knows What That Means?
Presented By:
Jared S. Pope
May 8, 2013
Texas Municipal Human Resource Association
Annual Conference
Current Requirements from 2012 and 2013
Upcoming Requirements/Timeline
Overview of 2014 Aspects
2012 Implementations
2013 Implementations
2013 Forthcoming Requirements
2013 Other Aspects
New 2014 Aspects
Delayed/Awaiting Additional Guidance
Other Aspects and Concerns
Future Directions/Strategies
Confidential and Proprietary
Timeline of Events
First, a timeline of whatтАЩs already required
╠╢тАп 2012 Requirements
тАвтАп W-2 reporting
тАвтАп Summary of Benefit & Coverage (9/23/12)
тАвтАп External Appeals Process
тАвтАп MLR requirements
тАвтАп Age 26 coverage
тАвтАп Preventative Coverage (1st Dollar Coverage)
тАвтАп Patient Centered Outcomes Research Fund Tax
тАвтАп Others
╠╢тАп 2013 Requirements
тАвтАп FSA requirements (2013) - $2,500 limit
тАвтАп WomenтАЩs Preventative (1st dollar coverage)
тАвтАп Medicare Surtax (administration for payroll)
тАвтАп Others
Confidential and Proprietary
Health Care Reform тАУ WhatтАЩs on the Horizon?
2014 Highlights
Required plan amendments (first day of the plan year)
Eliminate annual dollar limits on тАЬessential health benefitsтАЭ
Eliminate waiting periods greater than 90 days
Allow all dependents to age 26 to remain on the plan regardless
of accessibility through their employer
Eliminate the pre-existing exclusion for all participants
Limit out-of-pocket maximums to HSA-compatible limits
Provide coverage for certain clinical trials
Pay or Play: Employer and Individual Mandates
Other upcoming requirements
Confidential and Proprietary
HCR: 2012 Implementations
Type of Coverage
Premium charged (unless included in
Self Insured
COBRA applicable premium (unless not
subject to COBRA or included in income)
Separate Dental/Vision
If provided under a separate policy OR if
separate election and separate contribution
тАвтАп Report total cost (EтАЩor
& EтАЩee portion)
Voluntary for HRA, but must include
employerтАЩs contributions to an FSA or HRA
тАвтАп тАЬminiтАЭ or тАЬexceptedтАЭ
benefits are exempt
Already reported in Box 12, Code W
For employee pretax contributions
For employee after-tax contributions
тАвтАп W-2 Reporting
тАвтАп For coverage beginning
on or after 1/1/12
тАвтАп 250 threshold
requirement (look back
period тАУ 2011)
тАвтАп Dental or vision? Are
they тАЬstand aloneтАЭ
plans or combined?
тАвтАп Are small employers
subject to this now or
тАвтАп Easy Guidance Table
Confidential and Proprietary
Indemnity Specific
Accident, Disability, LT
Workers Compensation
On-site Medical Clinic
Reportable if employer charges premium for
COBRA coverage
Reportable if employer charges premium for
COBRA coverage
HCR: 2012 Implementations
тАвтАп Summary of Benefits & Coverage (SBC)
тАвтАп Purpose:
тАвтАп Help consumers better understand and evaluate their health insurance choices
тАвтАп Timing
тАвтАп Effective for open enrollments on or after 9/23/12
тАвтАп For newly eligible and special enrollment
тАвтАп Plan year beginning on or after 9/23/12
тАвтАп Whose responsibility?
тАвтАп Insurer (fully insured) to provide plan sponsor SBC
тАвтАп If self-funded, then plan sponsor provides SBC
тАвтАп Distribution
тАвтАп Current enrollees only need SBC for plan in which currently enrolled
тАвтАп Eligible EEs need SBC for all plan options
тАвтАп Hard copy or electronically (detailed requirements)
тАвтАп SBC is in addition to the Summary Plan Description (SPD)
тАвтАп Glossary of commonly used insurance terms is required
тАвтАп Notice of material modification? WhatтАЩs that about?
Confidential and Proprietary
HCR: 2012 Implementations
Electronic Delivery of SBC is permitted to whom:
тАУтАп Participants currently enrolled in connection with online
enrollment or renewal
тАвтАп May post on enrollment website so long as participant enrolls online
тАУтАп Participants currently enrolled in accordance with DOL rules
тАвтАп If EEтАЩs have routine access to electronic media as part of job function
тАвтАп If not, need affirmative electronic consent before sending electronically
тАУтАп Eligible but not enrolled
тАвтАп E-format must be readily accessible
тАвтАп Paper copy, free upon request
тАвтАп If SBC is on a website, eligible individual must be notified that SBC is
available and provide web address by another means such as post card
тАУтАп Paper copy must be made available upon request
HCR: 2012 Implementations
Permitted Features for Electronic Delivery of SBCs:
тАвтАп Can be displayed on a single webpage with scrolling
тАвтАп Minor adjustments are permitted to accommodate the
electronic display method (e.g. column expansion)
тАвтАп Deletion of rows or columns is NOT permitted
тАвтАп May display SBCs in a way that facilitates comparison
of different benefit package options
тАвтАп Full SBC for all benefit package options must be
provided as required
Confidential and Proprietary
HCR: 2012 Implementations
SBC Penalties
тАвтАп Failure to provide: up to $1000/failure
тАвтАп Potential addтАЩl penalties: up to $100/day
тАвтАп First year: good faith effort, no penalties
тАУтАп UPDATE: This was EXTENDED to second year
тАвтАп Compliance assistance is a high priority with the
Confidential and Proprietary
HCR: 2012 Implementations
тАвтАп Medical Loss Ratio
тАУтАптАЬRebatesтАЭ were due August 2012
тАвтАп August 2013 is fast approaching
тАУтАпEnsure payment of any rebates to participants
тАУтАпRemember, participantтАЩs portion is тАЬplan assetтАЭ and
subject to fiduciary aspects!!
HCR: 2012 Implementations
тАвтАп External Appeals
тАУтАпAn тАЬexternalтАЭ avenue for claims appeal
тАвтАп Applies to non-GF plans
тАвтАп Insurer responsible for insured plan
тАвтАп Self-funded plan sponsor is responsible for providing
тАвтАп May have to provide information in claimantтАЩs native
Confidential and Proprietary
HCR: 2012 Implementations
тАвтАп Patient Centered Outcomes Research Fund (PCOR) Tax
тАвтАп Applies to fully-insured and self-funded
тАвтАп File IRS form 720 to report the fees and make annual payment
тАвтАп Filed by 7/31 of calendar year immediately after last day of policy/plan year
тАвтАп How much?
тАвтАп $1 per member/year (2012) and $2 per member/year (2013)
тАвтАп 2014-2019 тАУ indexed to national health expenditures (stops in 2019)
тАвтАп Determination of lives
тАвтАп Same methods as under Transitional Reinsurance Fee (TRF)
тАвтАп May choose a different method for PCOR vs. TRF counting
тАвтАп HRA and FSA
тАвтАп What if coupled with health plan (self-insured) or a fully-insured plan? Any difference?
тАвтАп If applicable, and only HRA/FSA, then only have to count employee, not dependents
under HRA/FSA for which expenses are paid for.
тАвтАп There may be some double counting.
Confidential and Proprietary
HCR: 2013 Implementations
тАвтАп Medicare Surtax
тАУтАпAdministrative payroll requirements
тАвтАп 0.9% increase in tax from 1.45% to 2.35% for
earnings over $200K ($250K married) (above
1.45% tax already)
тАвтАп No employer match on addтАЩl amount of tax
тАвтАп Effective: January 1, 2013
Confidential and Proprietary
HCR: 2013 Implementations
тАвтАп PCORF тАУ increases to $2 per member/
тАвтАп Tax-deduction for employers who receive
Medicare Part D retiree drug subsidy
payments is eliminated effective 1/1/13
Confidential and Proprietary
HCR: 2013 Implementations
Employer is required to provide notice to Employees of:
тАУтАп Health exchanges that will be operative on 1/1/14
тАУтАп Employees potential eligibility for federal assistance if plan doesnтАЩt meet
affordability & minimum value criteria, and if EтАЩee income is below a certain
тАУтАп The possibility of losing the EтАЩors contributions to health coverage if they
purchase health insurance through the exchanges
тАУтАп Notice must be provided regardless of the size of the EтАЩor and include
minimal information to protect privacy of individual
тАУтАп Employees hired on or after 3/1/13 must be provided notice at time of hiring
тАУтАп Current employees must be provided notice no later than 3/1/13
тАвтАп Model notice has been delayed (Summer тАУ possibly?)
тАвтАп Originally effective 3/23/13
Confidential and Proprietary
HCR: 2013 Implementations
тАвтАп Must be operating in compliance as of 1/1/13
тАвтАп Currently, no OTC reimbursement for FSAs, etc.
тАвтАп Max FSA is $2,500
тАвтАп How does the grace period work?
тАвтАп What about non-calendar year plans?
тАвтАп IRS guidance provided that specifies limit applies on plan year basis,
not employerтАЩs/employeeтАЩs taxable year basis
тАвтАп If plan starts 7/1/12, limit applies to plan year that begins on 7/1/13
тАвтАп Limit does not apply to flex credits, premium conversion plan amounts, HSA
or HRAs
тАвтАп Short plan year тАУ limit must be prorated
тАвтАп Annual COLA increases
тАвтАп Applies to salary reduction contributions only
тАвтАп Not EтАЩor contributions, DCFSAs, HSAs, HRAs or salary reduction for premium
тАвтАп Per Employee & Per-Employer Basis applicability
тАвтАп Documents must be amended by 12/31/14
HCR: 2013 Forthcoming
тАвтАп WomenтАЩs Preventive Health Services
тАвтАп Applies to non-GF plans
тАвтАп Effective: for plan years beginning on or after 8/1/2012
тАвтАп First dollar coverage requirement, no cost-sharing for:
тАвтАп Breast-feeding support/supplies/counseling + cost for renting/
purchasing equipment
тАвтАп Counseling/screening for HIV
тАвтАп Interpersonal and domestic violence screening/counseling
тАвтАп Contraceptive methods and counseling (Religious exception)
тАвтАп Well-women visits
тАвтАп Screening for gestational diabetes
тАвтАп Counseling for STDs
Confidential and Proprietary
HCR: 2013 Other Aspects
тАвтАп Closing the тАЬDonut HoleтАЭ
тАУтАпBegins phasing-in federal subsidies for brandname prescriptions filled in the Medicare Part
D coverage gap (reducing coinsurance from
100% in 2010 to 25% in 2020, in addition to
the 50% manufacturer brand-name discount).
тАУтАпImplementation: January 1, 2013
Confidential and Proprietary
HCR: 2013 Other Aspects
тАвтАп Update all policies, notices (including the privacy notice)
and training to comply with HIPAA and HITECH Breach
Notification Rule
тАвтАп Must send the updated Privacy Notice to participants
тАвтАп Business associate transition rule applies for those in
effect before 1/25/2013
тАвтАп Penalties have increased to $100 - $50,000/violation
тАвтАп Effective: 9/23/2013
Confidential and Proprietary
HCR: 2013 Other Aspects
Whistleblower Protections Under Interim Final Rules
тАвтАп Protection for employees who have an adverse employment
action taken against them because of:
тАУтАпReporting a possible violation of Title I of the ACA
тАУтАпTestifying, assisting, or participating (or about to do so) in
a proceeding regarding a violation of Title I
тАУтАпObjecting to/refusing to participate in any activity that the
EтАЩee reasonably believes to violate Title I, or
тАУтАпReceiving a tax credit or subsidy from an Exchange
тАвтАп Title I includes a range of company accountability policies
тАвтАп Released by OSHA, effective until final rules are
HCR: New 2014 Aspects
Dependent Age 26
тАвтАп Grandfathered plans now have to provide even if other employer sponsored coverage
Individual Mandate Penalty
тАвтАп Greater of 1% or $95/$295 (family) (2014)
тАвтАп Greater of 2% or $325/$975 (family) (2015)
тАвтАп Greater of 2.5% or $695/$2,085 (family) (2016)
Exchange Subsidies & Premium Tax Credits (next slide)
Income Level
Premium as % of Inc.
% of Covered Exp.
Up to 133% FPL
2% of Income
From 70% to 94% Plan
Reduced by 67%
133-150% FPL
3-4% of Income
From 70% to 94% Plan
Reduced by 67%
150-200% FPL
4-6.3% of Income
From 70% to 87% Plan
Reduced by 67%
200-250% FPL
6.3-8.05% of Income
From 70% to 73% Plan
Reduced by 50%
250-300% FPL
8.05-9.5% of Income
Reduced by 50%
300-400% FPL
9.5% of Income
Reduced by 33%
So whatтАЩs this like in 2014 dollars? Income and What Will They Pay?
тАвтАп 134% FPL = $15,417/$31,389 тАУ 3.06% of Income = $472/$960
тАвтАп 250% FPL = $28,763/$58,562 - 8.05% of Income = $2,315/$4,714
Confidential and Proprietary
HCR: New 2014 Aspects
тАвтАп Premium Tax Credit
тАУтАпIs difference between cost of 2nd lowest cost
silver plan (70% plan) and premium as % of
тАУтАпIs refundable and may be advanced
тАУтАп% of Covered Exp. adjustment allows low income
families to upgrade their enrollment from silver
тАУтАпOut-of-pocket maximums will be lower than
QHDHP maxтАЩs that will otherwise apply
Confidential and Proprietary
HCR: New 2014 Aspects (Pay or Play)
Employer Mandate тАУ Pay or Play
тАвтАп Applies to employers with 50 or more Full Time Equivalent employees
тАвтАп Hours of p/t employees included in calculation
тАвтАп Determined on control group basis
тАвтАп Offer coverage to all FT employees or pay annual penalty if even one
employee access Exchange subsidy
тАвтАп Fee = $2,000 x (FTEs тАУ 30)
тАвтАп Offer coverage but NOT тАЬvaluableтАЭ or тАЬaffordable,тАЭ pay annual penalty
per FT employee who obtains federal subsidy
тАвтАп тАЬvaluableтАЭ aspect (60% value) &/or тАЭaffordableтАЭ of 9.5% of W-2
тАвтАп If тАЬunaffordable,тАЭ employee goes to exchange, the fee is lesser of
$3,000 x # of FT Ee on exchange OR $2,000 x (FT Ee тАУ 30)
тАвтАп PTE/FTE used for different purposes тАУ small/larger EтАЩor & Penalty
тАвтАп Employer fines are not deductible
тАвтАп Simple flow chart on next slide
тАвтАп Effective 1/1/14
Confidential and Proprietary
HCR: New 2014 Aspects
тАвтАп Pay or Play тАУ A simple flow-chart
Confidential and Proprietary
2014: Pay or Play (Affordability)
Affordable Coverage
тАвтАп Employee must pay no more than 9.5% of income as payroll deduction
тАвтАп For self-only coverage
тАвтАп IRS allowed safe harbor using W-2 wages reported in Box 1 (instead of household
If not affordableтАж.
тАвтАп Individuals with income up to 400% FPL who purchase coverage through Exchange will
be eligible for premium tax credit
тАвтАп Employer will be subject to $3,000 penalty (capped at $2,000 max amount)
Examples of тАЬAffordableтАЭ
тАвтАп $30,000 Household Income = $238/month or $2,850/year in premium
тАвтАп $50,000 Household Income = $396/month or $4,750/year in premium
тАвтАп $90,000 Household Income = $713/month or $8,550/year in premium
Should coverage be affordable?
тАвтАп Maybe notтАж..may be better to have higher payroll contributions and risk some $3K
тАвтАп Penalty wonтАЩt apply if employee i) opts out (no coverage, spouse plan, etc.), ii) eligible
for Medicare/Medicaid, iii) not eligible for subsidy (inc. < 46K (ind)/94K (fam)), iv) not
willing to pay Exchange premium
Confidential and Proprietary
2014: Pay or Play (Valuable)
Valuable Coverage
Plan share of total allowed cost of benefits must be at least 60% (i.e.,
60% actuarial value)
тАвтАп Methods to determine valuable:
тАвтАп Actuarial value or minimum value calculators (plans with
standard cost sharing features)
тАвтАп Design-based safe harbor checklists
тАвтАп Several options will be available
тАвтАп Actuarial certification (plans with non-standard features)
If notтАж
тАвтАп Individuals with income up to 400% FPL who purchase coverage
through Exchange will be eligible for premium credit and
тАвтАп Employer will be subject to $3K penalty for that individual
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
тАвтАп First, remember тАЬFTEтАЭ is different from Full-time Employees in the
тАвтАп FTE is full-time equivalents
тАвтАп FTE is used to determine whether or not employer is a large
employer or small employer
тАвтАп FTE is determined by number of full-time employees plus (# Hrs
of PTE worked that month / 120)
тАвтАп This is strictly for тАЬeligibilityтАЭ purposes as a small/larger
тАвтАп So, recap тАУ if more than 50 FTEs, subject to Pay or Play Mandate
and must offer full-time employees, and their dependents,
тАЬaffordableтАЭ health coverage with a тАЬminimum value,тАЭ or face
possible penalties.
2014: Pay or Play (Full-Time Employee?)
тАвтАп Defined as employees with 30 or more hours of service/week or 130
or more hours of service/month (тАЬFT EeтАЭ)
тАвтАп Full-time status is easy enough to determine when an employee is
hired to work a regular number of hours each week or salaried
тАвтАп Tricky part is for variable hour employees, such as part-time or
seasonal staff or employees
тАвтАп IRS guidance to the rescue!
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
тАвтАп The defined look back time periods for determining whether an
employee has averaged at least 30 hours of service/week are:
тАвтАп Measurement Period (MP):
тАУтАп Employers select a fixed 3-to-12 month period
тАУтАп 12 months is recommended in industries with high turn-over
тАУтАп < 12 months will result in multiple open enrollments
тАУтАп May begin the MP in 2012
тАвтАп Stability Period (SP):
тАУтАпAfter meeting the minimum-hours threshold during the MP, EтАЩees must be treated as full-time,
regardless of actual hours worked, during the SP & EтАЩee must remain employed
тАУтАпMust be at least 6 months and cannot be shorter than the MP
тАвтАп Optional Administrative Period (AP):
тАУтАп Employers may need time after the MP ends to decide which EтАЩees must be offered coverage during
the ensuing SP
тАУтАп Cannot exceed 90 days or be applied in a way that imposes a gap in EтАЩeesтАЩ coverage
тАУтАп Provides time for open enrollment of eligible employees
тАвтАп The MP begins for a new hire based on their start dates.
тАвтАп This may overlap the new hiresтАЩ Initial MP and SP with the
standard MP and SP for ongoing employees (say what?!)
тАвтАп Will apply to MPs beginning through 2014 and related SPs that
may extend into 2016.
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Safe Harbor (Ongoing Employees)
Applies to those employees who have worked for the
employer throughout at least one тАЬstandardтАЭ MP
тАЬStandardтАЭ MP and SP are the MP and SP that an
employer selects to apply to its ongoing employees
Optional administrative period (AP)
тАУтАп Where employers decide to use this option, the AP adopted canтАЩt
reduce or increase the length of the standard MP or standard SP
тАУтАп To prevent the AP from causing any gaps in a personтАЩs coverage
(once the periods have completed a full cycle), the AP must overlap
with the prior standard stability period (SP)
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
тАвтАп Example of Ongoing Employee Safe Harbor and Calendar Year Plan:
Confidential and Proprietary
2014: Pay or Play (FT EтАЩee?) Another View
(MP) ┬а
(AP) ┬а
(SP) ┬а
10/15/2012 ┬атАУ ┬а10/14/2013 ┬а
10/15/2013 ┬атАУ ┬а12/31/2013 ┬а
1/1/2014 ┬атАУ ┬а12/31/2014 ┬а
10/15/2013 ┬атАУ ┬а10/14/2014 ┬а
10/15/2014 ┬атАУ ┬а12/31/2014 ┬а
1/1/2015 ┬атАУ ┬а12/31/2015 ┬а
Track ┬аhrs ┬аof ┬аservice ┬аfor ┬аall ┬а
employees ┬а
Iden=fy ┬аFull-┬нтАР=me ┬аemployees ┬а Provide ┬аcoverage ┬аwithout ┬а
and ┬аoямАer ┬аcoverage ┬а
regard ┬аto ┬аhours ┬аor ┬аservice ┬а
during ┬аthis ┬аperiod ┬а
Note: ┬аFull-┬нтАР=me ┬а= ┬аaverage ┬аof ┬а
130 ┬аhrs./month ┬а
Note: ┬аOpen ┬аenrollment ┬а
period ┬а
Note: Ongoing employee is employed the entire measurement period (MP).
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Safe Harbor (New Employees)
Applies to new employees to determine if they meet the minimumhours threshold
Simple rule for new full time hires тАУтАп If they are reasonably expected to meet the 30+ hours threshold
from their start dates, coverage must be offered
тАУтАп Waiting period cannot exceed 90 days, though!
But more complex rules for new variable-hour and seasonal
In addition, an employer must establish separate тАЬinitialтАЭ MPs and
that may overlap with its тАЬstandardтАЭ MPs and SPs for ongoing
Can use MP and SP Method for variable/seasonal employees
тАУтАп If based on facts/circumstances, it cannot reasonably be determined
that employee is reasonably expected to work FT status
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Safe Harbor (New Employees)
The initial MP and SP are unique to each new variable-hour or seasonal employee,
reflecting the individualтАЩs actual start date or, alternatively, the start of the first calendar
month after that date
тАвтАп Many employers might want to have all initial MPs start on the first of a calendar
month; otherwise, every day of the year potentially could start a new MP
тАвтАп MP and AP combined cannot extend beyond the last day of first calendar month
beginning on or after employeeтАЩs 1-year anniversary
тАвтАп 13 months plus a fraction of a month
тАвтАп Practice TIP: If you use an 11-month initial MP beginning first of month following
date of hire, this will allow for an AP of 2 months
тАвтАп Initial SP must be same length (not shorter) as Standard SP for Ongoing Employees
тАвтАп In operation, this restriction will generally require a 12-month initial SP for new
employees if an employer uses a 12-month standard SP
Can result in loss of eligibility in middle of plan year based on hours fluctuation
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Example of Safe Harbor (New Employees)
Variable hour employee and calendar year plan with 11-month initial MP followed by
single AP
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Example of Safe Harbor (New Employees)
тАвтАпVariable hour employee and calendar year plan with 12-month initial MP using split AP
Confidential and Proprietary
2014: Pay or Play (FT EтАЩee?) Another View
(MP) ┬а
(AP) ┬а
(SP) ┬а
6/1/2014 ┬атАУ ┬а5/31/2015 ┬а
6/1/2015 ┬атАУ ┬а6/30/2015 ┬а
7/1/2015 ┬атАУ ┬а6/30/2016 ┬а
10/15/2014 ┬атАУ ┬а10/14/2015 ┬а
10/15/2015 ┬атАУ ┬а12/31/2015 ┬а
1/1/2016 ┬атАУ ┬а12/31/2016 ┬а
Track ┬аhours ┬аof ┬аservice ┬а
Determine ┬аif ┬аFull-┬нтАР=me ┬аand ┬аif ┬а Must ┬аprovide ┬аcoverage ┬а
so, ┬аoямАer ┬аcoverage ┬а
through ┬а6/30/2016; ┬а
coverage ┬аwill ┬аcon=nue ┬а
through ┬а12/31/2016 ┬аif ┬аFT ┬а
during ┬аStandard ┬аMP ┬а
Note: ┬аFull-┬нтАР=me ┬а= ┬аaverage ┬аof ┬а
130 ┬аhrs./month ┬а
Note: ┬аOpen ┬аenrollment ┬а
period ┬а
Note: Variable Hour EтАЩee hired 05/10/2014
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Establishing Safe-Harbor Time Periods
First compliance task for an employer is to determine appropriate MP,
AP and SP for its plan
Onset of first measurement and stability periods was unclear originally,
but now guidance is clearer:
тАвтАп Regulators have stated informally that the first stability period must begin
Jan. 1, 2014
тАвтАп However, the guidance only gives examples of employees hired after
Jan. 1, 2014, which has led some practitioners to believe that the safe
harbors permit employers to begin their first measurement periods on
Jan. 1, 2014, then offer coverage in the first stability period after that
тАвтАп Until further guidance is available, employers with calendar-year plans
want to play it safe and prepare for their first stability periods to begin
Jan. 1, 2014
тАвтАп Under this approach, employers should consider determining тАУ before
2014 тАУ which employees currently ineligible for health coverage will
meet the minimum-hours threshold
тАвтАп To avoid penalties , employers must offer coverage effective Jan. 1,
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Establishing Safe-Harbor Time Periods
When to start measuring тАЬhours workedтАЭ
тАвтАп Some employers may want to impose a 12-month measurement
period followed by an administrative period, with a stability period
matching the calendar year
тАвтАп To do so, employers need to begin tracking hours of service by Oct.
15, 2012, to set the first stability period equal to calendar-year 2014
тАвтАп For employers that currently record hours of service, this may simply
involve sharing already-captured payroll or workforce management
data with benefit staff and enrollment vendors
тАвтАп For other employers, however, settling on a strategy and beginning
to track needed data this autumn may prove more daunting
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Establishing Safe-Harbor Time Periods
тАвтАпWhen to set length of stability period
тАвтАп Many employers will want to use a 12-month stability period.
тАвтАп Even for employee groups with erratic schedules, using a long
measurement period should help reduce the odds that short periods
of intense work will cause an employee to meet the minimum-hours
тАвтАп A 12-month stability period also facilitates the traditional practice of
offering ongoing employees an annual enrollment opportunity, which
is easier for employers and their service vendors to administer than
more frequent enrollment chances.
тАвтАп Employers adopting this approach could still limit midyear enrollment
to employees experiencing infrequent life events (such as a change
in dependents), so newly eligible variable-hour workers could not exit
and re-enter the plan every three or six months.
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Establishing Safe-Harbor Time Periods
тАвтАп Some employers that want their first stability period to
begin Jan. 1, 2014, may be unable to begin capturing
needed data early enough (e.g., as of Oct. 15, 2012) to
allow a 12-month first measurement period, followed by a
nearly 90-day administrative period ending Dec. 31, 2013
тАвтАп Consequently, those employers may need to adopt a
measurement period shorter than 12 months
тАвтАп Does this mean you canтАЩt have a longer period the next
Confidential and Proprietary
2014: Pay or Play (Full-Time Employee?)
Special Considerations for January 2014 strategy
That decision may impact the length of the first stability period starting
Jan.1, 2014:
тАУтАп For ongoing employees not qualifying as full-time during the
measurement period, the stability period cannot be longer than that
measurement period, so the employer may not be able to adopt a
12-month first stability period for those employees
тАУтАп For employees qualifying as full-time during the measurement
period, the employer can use a 12-month first stability period, even
though that measurement period was shorter
Regulators havenтАЩt given any specifics but have informally
acknowledged that employers may need flexible transition approaches
Confidential and Proprietary
2014: Pay or Play Planning
Employer Next Steps
Decide whether or how to adjust plan waiting periods
Gather data to determine whether or how the safe harbors
are relevant
Consider safe-harbor approaches for offering 2014 health
If using safe harbors, determine optimal measurement,
administrative and stability periods
Amend plan documents and other related materials
Confidential and Proprietary
HCR: New 2014 Aspects
Wellness Guidance
тАвтАп Law increases maximum amount of incentive from 20% to
30% of cost of employee-only coverage under the plan
тАУтАп Up to 50% for wellness programs designed to prevent or
reduce tobacco use (i.e., addтАЩl 20%)
Two types of wellness programs: participatory and
performance based
Participatory Wellness Samples:
тАУтАп Not related to a health factor
тАУтАп Fitness center memberships
тАУтАп Health education seminars
Confidential and Proprietary
HCR: New 2014 Aspects
Wellness Guidance, cont.
New guidance for Contingent Wellness programs
тАУтАпMust be reasonably designed to:
тАвтАп Promote health or prevent disease and offer a different,
reasonable means of qualifying for the reward to any
individual who does not meet the standard based on the
measurement, test or screening
тАвтАп Be available to all similarly situated individuals or provide
a reasonable alternative means of qualifying for the
reward for individuals whose medical conditions make it
unreasonably difficult to meet the wellness goal, or for
whom attaining the goal would be medically inadvisable
Confidential and Proprietary
HCR: New 2014 Aspects
Wellness Guidance, cont.
тАвтАп New guidance for Contingent Wellness programs, cont.
╠╢тАп Employees must be notified of the alternative means of
qualifying for the wellness incentive
╠╢тАп The proposal includes sample notice language
тАвтАп Doesn'tтАЩt specify what types of wellness programs an
employer may offer
тАвтАп AddтАЩl Guidance
тАУтАп What is taken into consideration with respect to 9.5%
тАвтАп Tobacco v. Non-Tobacco Wellness?
тАвтАп Effective: 1/1/14
Confidential and Proprietary
HCR: New 2014 Aspects
Essential Health Benefits (EHB)
Non-GF insurance plans in individual and small group market and
those in future exchanges will be required to :
тАвтАп Provide coverage of benefits or services in 10 separate categories (list
тАвтАп Limit any variation in premiums to variations in age, tobacco use (see
wellness benefits), family size, and geography
тАвтАп Prohibited rating factors include health status, medical history, gender, and
industry of employment
тАвтАп Proposed rule on 11/20/12 outlines future exchange and issuer
standards related to coverage of EHB and actuarial value, as well as
timeline for qualified health plans to be accredited for use in future
тАвтАп Effective:1/1/14
Confidential and Proprietary
HCR: New 2014 Aspects
The ten benefit categories of EHB:
Ambulatory patient services
Emergency services
Maternity and newborn care
Mental health and substance use disorder services, including behavioral
health treatment
Prescription drugs
Rehabilitative and habilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care
Confidential and Proprietary
HCR: New 2014 Aspects
Proposed rule тАЬdefines EHB based on state-specific benchmark plans,
including the largest small group health plan in the stateтАЭ
Once a state chooses a benchmark plan, all plans covering EHB must
include those benefits that are substantially equal to the benefits offered by
the benchmark plan
Benchmark options:
(1)тАп the largest plan by enrollment in any of the three largest products in
the stateтАЩs small group market;
тАУтАп Default if the state fails to select a benchmark
(2)тАп any of the largest three state employee health benefit plans options by
(3)тАп any of the largest three national Federal Employees Health Benefits
Program (FEHBP) plan options by enrollment; or
(4)тАп the largest insured commercial HMO in the state
If a selected benchmark plan does not include one of the 10 required
categories of benefits, the state or HHS will supplement the missing
All states have elected a benchmark as of 4/1/13
Confidential and Proprietary
HCR: New 2014 Aspects
Insurance Industry Fee
тАУтАпCarriers will be assessed a fee based on net premiums.
тАУтАпThe fee is not imposed on self-insured or governmental
тАУтАпApproximately 2.3% of premiums, or $9.00 per member
per month (PMPM).
тАУтАпThe carriers, who are responsible for paying the fee, will
pass this fee through to the employers and increase their
premium by 2.3%, or $9.00 PMPM to offset the increase.
Confidential and Proprietary
HCR: New 2014 Aspec
Actuarial Values (AV)
тАвтАп NG plans must meet specific actuarial values (AVs)
designated as metal levels:
тАУтАпBronze: 60%
тАУтАпSilver: 70%
тАУтАпGold: 80%
тАУтАпPlatinum: 90%
тАвтАп Will assist consumers in comparing plans
тАвтАп Effective: 1/1/14
Confidential and Proprietary
HCR: New 2014 Aspects
Transitional Reinsurance Fee (TRF)
тАУтАпIs temporary from 2014 to 2016
тАУтАпFunds a reinsurance program for high claimants in NG
individual market plans both on and off the Exchange
тАУтАпObjective is to stabilize the NG individual market
тАУтАпImposed on both fully insured and self-insured groups
тАУтАпAssessed on per capita basis
тАУтАпFirst due date for reporting count: 11/15/14
тАУтАпFirst payment due within 30 days of receipt of notice of
fee liability from HHS sent out on 12/15 of each year;
тАвтАп Is expected that payments may be made quarterly
тАУтАпFor 2014 = $63.00/year or $5.25/month
тАУтАпEffective: January 1, 2014 through December 31, 2016
Confidential and Proprietary
HCR: New 2014 Aspects
Insurance Exchanges
тАвтАп Available either from state or federal government to
certain segments of the population
тАвтАп Segment examples:
тАУтАп Lower-income uninsured who can qualify for subsidized coverage
only through an exchange
тАУтАп Unsubsidized individuals and small employers who may choose to
buy coverage inside or outside of an exchange
тАвтАп Will be in place by 1/1/14 (Sure about that?)
тАУтАп There will be no choice of options for small employers until 2015
Confidential and Proprietary
HCR: New 2014 Aspects
Required plan amendments (first day of the plan year in 2014)
Eliminate annual dollar limits on тАЬessential health benefitsтАЭ
тАвтАп Relates to the 10 essential health benefits under a plan
Eliminate waiting periods greater than 90 days
Allow all dependents to age 26 to remain on the plan regardless
of accessibility through their employer
Pre-existing conditions
тАвтАп Must be removed from determination of coverage for all
Limit out-of-pocket maximums to HAS-compatible limits
Provide coverage for certain clinical trials
Confidential and Proprietary
HCR: Delayed/Awaiting Guidance
тАвтАп Model notice to employees regarding insurance
exchanges, etc.
тАвтАп Not enforced until guidance is issued:
╠╢тАп Non-discrimination requirements for NG fully-insured
health plans (was to be effective for PY beginning on
or after 9/23/10 but awaiting IRS guidance)
╠╢тАп Auto enrollment requirements for employers with
200+ FT EтАЩees (awaiting DOL guidance)
Confidential and Proprietary
HCR: Other Aspects & Concerns
тАвтАп Management Carve-out Programs
тАвтАп How do we proceed? Can you still have them?
тАвтАп Currently, discrimination requirements apply to self-funded, but now
apply to fully-insured health plans and employers/plan sponsors
тАвтАп Compliance with the new discrimination rules is not required until
guidance becomes available
тАвтАп FURTHERMORE, once guidance is delivered, effective date will be
some time after such guidance to allow for implementation/
тАвтАп тАЬMini-medтАЭ Plans
тАвтАп Waivers were applied for and granted
тАвтАп How long will they last? 2014?
тАвтАп Can be offered, but not tied to other health coverage
тАвтАп Separate policy, contract or certificate
Confidential and Proprietary
HCR: Be Prepared!
тАвтАп Employers with calendar-year plans may want to play it safe
and prepare for their first stability periods to begin 1/1 2014
тАвтАп FSA documents must be amended by 12/31/14
тАвтАп Auto-enrollment for larger (200 FTE) employers? When?
тАвтАп PCORF тАУ rate indexed annually to national health
expenditures until end in 2019
тАвтАп Determine what makes financial sense: pay vs. play
тАвтАп Annual Enrollment?
тАвтАп Are PPACA grandfather limitations still met if health plan is
considered grandfathered; If not, need to comply with notice
rules regarding PPACA on enrollment materials.
тАвтАп Become educated on how Exchanges will function
тАвтАп Stay informed of current issues and newly released guidance
Confidential and Proprietary
HCR: Be Prepared!
Out-of-pocket Expenses Limited
тАвтАп Group health plans: out-of-pocket costs limited to $6250
for single/$12,500 family
тАвтАп Max deductibles: $2000 single/$4000 family for groups
with 100 covered lives and under
тАвтАп OOP limits apply to all plans: fully-insured and selffunded
Confidential and Proprietary
HCR: Be Prepared!
Employer Certification of Coverage
тАвтАп Self-insured must identify EтАЩees and dependents that
were offered coverage and dates of coverage
тАвтАп Fully insured, report must be filed by insurer
тАвтАп Employers with 50+ employees must certify whether all
FT employees and their dependents were offered
тАвтАп Must include the length of the waiting period, the time
period during which coverage was available, the
premium charged and the EтАЩor share of the cost
тАвтАп A statement containing this information must also be
provided to all FT EтАЩees (for enforcement purposes)
Confidential and Proprietary
Health Care Reform: 2015 and Beyond
тАвтАп Small business insurance exchanges (PY starting
тАвтАп Automatic enrollment (compliance not required until final
DOL regs are issued and effective)
тАвтАп Excise tax on high-cost тАЬCadillacтАЭ coverage (2018)
тАвтАп PCORF тАУ indexed annually to national health
expenditures (until 2019)
тАвтАп Reporting Requirements (2015)
Confidential and Proprietary
Health Care Reform: 2015 and Beyond
Reporting - 2015
тАвтАп Employers must prepare to report minimum essential
coverage (from form 1099-HC) and qualifying affordable
coverage (for free-rider surcharge) to govтАЩt and enrollees
for 2014 PY
тАвтАп Filing required from any EтАЩor that employed an avg of at
least 50 FT EтАЩees on business days during the preceding
calendar year
тАвтАп Filing required from any EтАЩor that offers a minimum
essential coverage to its EтАЩees and pays a portion of the
cost of such coverage, but only if any EтАЩees required
contribution exceeds 8% of wages the EтАЩor pays to such
Confidential and Proprietary
Health Care Reform: 2015 and Beyond
Reporting тАУ 2015, cont.
тАУтАпMinimum Essential Coverage = type of coverage needed
for an individual to satisfy the individual coverage
тАвтАп Additional information to be reported
тАУтАпLength of any applicable waiting period
тАУтАпMonthly premium for the lowest cost option in each of the
planтАЩs enrollment categories
тАУтАпEтАЩor share of the total allowed costs of benefits
тАУтАпOption for which the EтАЩor pays the largest portion of the
cost of the plan and the portion of that cost paid by EтАЩr in
by enrollment categories
Confidential and Proprietary
Health Care Reform: 2015 and Beyond
тАЬCadillacтАЭ Tax - 2018
тАвтАп Imposes an excise tax on insurers of employersponsored health plans with aggregate expenses that
exceed $10,200 for individual coverage and $27,500 for
family coverage
тАвтАп Implementation: January 1, 2018
Confidential and Proprietary
тАвтАп With average increase cost in health equal to 10.5% per year, health
care plans are becoming more and more costly to the employers
тАвтАп In an effort to curtail the cost, several mechanisms are provided to
lower the cost of health care
тАвтАп Idea is to provide mechanisms to produce engaged employees
(financially and educationally)
тАвтАп Opportunities for savings include:
тАУтАп Health plan design strategies
тАвтАп Consumerism
тАвтАп Medical reimbursement accounts
тАУтАп Ancillary
тАУтАп Pharmacy
тАУтАп тАЬMedical HomesтАЭ
Confidential and Proprietary
тАвтАп PPO and HDHP
тАУтАп As opposed to PPOs, HDHPs put more
empowerment and financial responsibility on the
employee/patient through the higher deductible/
out of pocket cost
тАвтАп A тАЬcost shiftingтАЭ approach
тАвтАп Allows for a lower тАЬpremiumтАЭ for employees, less cost
for employers
тАвтАп Health Care Spending Accounts
тАУтАп Health Savings Account
тАУтАп Health Reimbursement Account
тАУтАп Flexible Spending Account
Confidential and Proprietary
Control & Ownership (i.e., is
it a personal account?)
Must work for an employer who offers an
Must work for an
employer who
offers an FSA
Must be enrolled in a high-deductible
health plan and NOT enrolled in Medicare
or any other health plan;
Deductible Minimum: $1,200 single; $2,400
OOP Maximum:
$6,050 single; $12,100 family
Employee or a Third-Party may contribute
to an HSA
Employer funded
contributes to an
Max Contribution
$3,100 for single; $6,250 for family
No limit
No limit; set to what
(although limit is
curtailed via HCR)
Yes, Employee owns the account
Confidential and Proprietary
Requires Pre-funding (i.e.,
does not allow full
reimbursement of account,
ONLY what is actually in their
Tax Benefits
Qualified Medical Expenses
Dependent Care expenses
Confidential and Proprietary
Yes; it is employeeтАЩs account
No. Employer may allow carryover if
No, Employees
forfeit unused
Health Care
Account тАУ No
Dependent Care
Account тАУ Yes
Employer may deduct all qualified
employer contributions as bus.
expense. Amount contributed pre-tax
through 125 plan with w/drawal
penalty if for qualified medical
As defined by IRC 213(d)
COBRA Premiums
Long-Term Care Insurance
Retiree Health Insurance other than
Medicare Supplemental Policies
Yes (but can limit if desired).
Employer may deduct all qualified
reimbursements. The employee
does not have to claim the
reimbursement as income so that
money is given to them tax free.
Contributions to the
FSA are tax free
and so reduce
annual taxable
Yes. However, different ways to administer
(i.e., the HRA plan can reimburse the
last $1,000 of the group medical plan
deductible, etc.)
As defined by IRC
Yes (but can limit if desired).
Yes (via a separate
dependent care
spending account).
Solution: Health Plan Design
Value Based Plan Design
тАвтАп Addresses the disconnect between health care expenditures and
health care outcomes
тАУтАп The focus is on value, not volume
тАУтАп The goals are attempted to be achieved by:
тАвтАп Using financial incentives to change behavior and utilization,
тАвтАп Using wellness and disease management programs to
enable individuals to better manage their health and avoid
future events that are costly
тАвтАп How?
тАУтАп Reduce cost sharing for services where utilization should be
тАУтАп Increase cost sharing for services where utilization should be
Confidential and Proprietary
Solution: Health Plan Design
Value Based Plan Design (contтАЩd)
Oregon Educators Benefit Board and Public Employees Benefit Board (collectively covering
about 235,000 lives)
Cost-sharing was implemented on a tiered basis
тАвтАп Low cost-sharing for preventative care, medication for treating chronic disease and emergency
тАвтАп Higher cost-sharing for services that are recognized nationally as overused and are driven by
supply as opposed to need (e.g., emergency room visits for minor illnesses, back surgery for pain
that physical therapy could treat)
2012 Design Changes
тАвтАп Out-of-pocket costs increased for some employees ($25 surcharge for smokers
тАвтАп Out-of-pocket expenses increased since certain procedures will not be covered (e.g., wart removal,
breast reduction and varicose-vein surgery)
тАвтАп Co-payments for doctor visits with chronic conditions were eliminated
тАвтАп Deductibles eliminated for "value" drugs
тАвтАп Free access for spouses to Weight Watchers (?)
Colorado Springs School District
Cost-sharing regarding surgeries to keep more money & teachers in classrooms (no substitutes)
Higher co-pays for open surgeries, but requires lower co-pays for similar procedures that are minimally
тАвтАп Idea is that minimally invasive procedures have lower costs and less recovery time
тАвтАп Lower absenteeism and less money spent on substitutes (i.e., more $ and teachers kept in
тАвтАп 21.7 fewer days missed for gall bladder surgery
тАвтАп 18.9 days for colectomy
тАвтАп 21.9 days for hernia
тАвтАп 3.2 for appendectomy
Confidential and Proprietary
Solution: Pharmacy Trend in Health Plan Design
Pharmacy Therapeutic?
тАвтАп Safeway Health Example
тАУтАп RxTE: Pharmacy Therapeutic Equivalency Program creates incentives
around utilizing lower cost FDA-approved therapeutic alternatives (50
categories) to drive cost savings for the plan and the member without
compromising care, quality, and outcomes. This is done by combining
plan design, transparency tools and robust education and support.
тАвтАп 85% of members switch; plans save approximately 20% of spend and
members save too.
тАвтАп RxTE Client Example
тАУтАп 40K employees/retirees; 100K members = 28% reduction in plan
spend, 20% reduction in member spend, cost per script decrease of
22%, increased Generic utilization by 6.5% to 82%.
тАвтАп Safeway Health now provides solutions to employers that allow
them to take the reins on healthcare by creating a тАЬShoppableтАЭ
retail-like experience within healthcare, members and plans make
better choices.
тАвтАп Safeway Health offers a variety of employer solutions focused on 1)
Self-Insured Employer Health Plans; 2)Consumerism; 3)Behavior
тАвтАп The government is asking Safeway Health for HELP!!
Confidential and Proprietary
Solution: Virtual Medical Home
Medical Home Exchange (i.e., patient centered medical home)
тАвтАп Generally, itтАЩs a team based health care delivery model led by a
physician that provides comprehensive and continuous medical care
to patients with the goal of obtaining maximized health outcomes
тАвтАп Current conditions:
тАУтАп Fragmented/broken health care supply chain
тАУтАп Statistics show majority of cost of health care is preventable
тАУтАп Are we using the right tools/incentives?
тАвтАп How does a Virtual Medical Home work?
тАУтАп Connectivity & Transparency
тАвтАп Do you know how much a procedure cost before you get it?
тАвтАп Think of Compass, but on steroids and given to doctors, not
just consumers
тАУтАп Right Incentive & Tools
тАвтАп Physicians & Employers/employees
тАУтАп Works with the proper plan designs (HRAs, biometrics, VBPD,
etc.), which you should already have
Confidential and Proprietary
Solution: Wellness DC Policy?
тАвтАп Wellness Defined Contribution Plan
тАУтАпConcept is two fold
тАвтАп itтАЩs a wellness plan that provides employees a
тАЬbenefit bankтАЭ to purchase ancillary products (i.e.,
dental, vision, gap coverage, cancer coverage, life,
hospital coverage, disability, etc.)
тАвтАп Allows employers to see immediate payroll tax
savings of $300 per employee per year (minimum!)
and no out-of-pocket expenses
тАУтАпCypress HealthQuest is innovator and leader
in the market
Confidential and Proprietary
HCR: WhatтАЩs Next?
Confidential and Proprietary
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