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Health Insurance Exchanges and Employers’ Shared Responsibilities

Health Insurance Exchanges and Employers’ Shared Responsibilities. Layna Cook Dan Guillory Baker, Donelson, Bearman, Caldwell & Berkowitz, PC 450 Laurel Street, 20 th Floor Baton Rouge, LA 70801 (225) 381-7000 lcook@bakerdonelson.com dguillory@bakerdonelson.com.

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Health Insurance Exchanges and Employers’ Shared Responsibilities

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  1. Health Insurance Exchanges and Employers’ Shared Responsibilities Layna Cook Dan Guillory Baker, Donelson, Bearman, Caldwell & Berkowitz, PC 450 Laurel Street, 20th Floor Baton Rouge, LA 70801 (225) 381-7000 lcook@bakerdonelson.com dguillory@bakerdonelson.com

  2. Topics We Will Cover • Health Insurance Exchanges • Overview • Louisiana’s Response to the Exchanges • What Other States Are Doing Toward Implementing Exchanges • Shared Responsibility of Employers • Requirements of “Large Employers” • Potential Employer Penalties • Current Status of Guidance –Safe Harbors

  3. Full Steam Ahead • On June 28, 2012, the U.S. Supreme Court issued NFIB v. Sebelius, No. 11-393 • In a 5-4 vote, Court upheld the Individual Mandate provision included in the Patient Protection and Affordable Care Act (“Affordable Care Act” or “ACA”) • Court determined that Congress had the right to enact the penalty for failing to obtain health insurance under the Taxing Clause • Affordable Care Act now moves full steam ahead

  4. Health Insurance Exchanges • Purpose of the Exchanges • Offer consumers a choice of health plans focusing competition on price • Provide transparent information to consumers • Create administrative mechanisms for enrollment • Move towards portability of coverage • Predicted to provide access to health insurance to 24 million Americans

  5. Establishment of Exchanges • The ACA requires each state to establish a Health Insurance Exchange • Exchanges are required to be fully operational in every state by January 1, 2014 • The federal Department of Health and Human Services (“HHS”) will evaluate the readiness of each state’s Exchange by January 1, 2013 • States are required to submit an Exchange blueprint by November, 2012

  6. Establishment of Exchanges If a state fails or refuses to establish an exchange, then the Secretary of the HHS will establish an Exchange within the state States may also choose to establish a co-op Exchange with the federal government

  7. Key Issues Regarding Exchanges • How will the Exchange be governed and/or administered? • New state agency? • Non-profit? • Independent public entity? • All Exchanges established with some independence from state government must have a clearly-defined governing board overseen by the state

  8. Key Issues Regarding Exchanges • How will the Exchange contract with Qualified Health Plans? • What is a Qualified Health Plan? • A health plan that is certified by each Exchange • Provides the essential benefits package • Is offered by an issuer that: • Is licensed and in good standing in each state • Agrees to charge the same premium whether the plan is sold through the Exchange or outside the Exchange • Complies with other requirements of the Secretary of the HHS and the Exchange

  9. Key Issues Regarding Exchanges • Two basic contracting models: • 1) Clearinghouse model • Exchanges are required to contract with all QHPs which meet specified criteria • 2) Active purchaser Exchanges • The Exchange acts as an active purchaser and selectively contracts with QHPs • This model would be chosen to achieve certain goals regarding plan choice, quality or value • States choosing an active purchaser model will need to ensure that industry representatives are not present on boards, etc. to avoid unfair advantage

  10. Consumer Assistance – “Navigators” • The ACA requires Exchanges to allow consumers to apply for and enroll in coverage online, in person, by phone, by fax, or by mail • Exchanges must ensure consumers can acquire linguistically and culturally appropriate assistance with information • The solution: Navigators • Community groups, professional associations, unions, and/or licensed brokers and agents

  11. Key Issues Regarding Exchanges • States’ coordination of Medicaid/CHIP information with Exchange • The Exchange’s interface must seamlessly determine premium eligibility for public programs • This will help determine the premium tax credits and/or cost-sharing subsidies for the individual

  12. Financing of Exchanges • Federal grants were available for planning and implementation • All but 5 states accepted some amount of funding to study Exchange implementation • Some governors have advised that their states will hold off on implementation until after the November, 2012 election • Those states that do not have an approved Exchange by January 1, 2013 will face a federally run Exchange • States must be able to fully finance the cost of Exchange operations beginning on January 1, 2015

  13. Louisiana’sResponse Governor Jindal has rejected federal grants to study and/or implement a state-run Exchange He has also rejected expansion of the state’s Medicaid system Louisiana will “default” to a federally run Exchange In the 2012 legislative session, a senate committee rejected a bill that would have set up a body of elected and appointed officials to craft a state Exchange

  14. Louisiana’s Exchange • Run by the federal government • Guidance suggests: • Clearinghouse model • Navigator programs will have a role for agents and brokers • What will the governing board look like? • Louisiana will have some involvement for coordination issues • Will this lead to a co-op program in the future?

  15. Other States 7 states have decided not to establish an Exchange 14 states have established an Exchange (along with the District of Columbia) 3 states have indicated they intend to establish a partnership Exchange 17 states have indicated they are studying options 9 states have had no significant activity

  16. Coverage Through Exchanges • 2 types of markets: • 1) Individual Market • 2) Small Business Health Options (“SHOP”) • Allows small business to pool together to obtain cheaper plans • “Small business” = 1-100 employees • Between January 1, 2014 and January 1, 2016, states may restrict “small” businesses to 1-50 employees • These markets may be combined • How will Louisiana’s federally-run SHOP Exchange be set up?

  17. Subsidies and Tax Credits • Extension of Medicaid • The ACA allows states to extend coverage in Medicaid to most people with incomes under 133% of the federal poverty level • The federal government would fund the expansion for the first 3 years, with Louisiana ultimately funding 10% • Louisiana has decided not to expand • Will loss of Disproportionate Share funding hurt Louisiana?

  18. Subsidies and Tax Credits • Tax Credits • For people who make up to 400% of the federal poverty level • Based on premium for the second lowest cost silver plan in the Exchange • Silver plan provides essential benefits and has an actuarial value of 70% (the plan pays 70% of the cost of covered benefits for a standard population of enrollees)

  19. Subsidies and Tax Credits • Tax Credits • The amount of tax credit varies with income • The premium the individual will have to pay will not exceed a certain % of their income (up to 9.5% of the their income for 300-400% of FPL) • The tax credit will be the difference between the % of income and the cost of the second lowest cost silver plan

  20. Subsidies and Tax Credits • Tax Credits • Tax credits will be refundable and advanceable • Refundable even if the individual has no tax liability

  21. Subsidies and Tax Credits • Premium Subsidies • ACA allows families with incomes at or below 250% of the FPL to enroll in health plans with higher actuarial values • Actuarial values vary with Income: • 100-150% of FPL – 94% • 150-200% of FPL – 87% • 200-250% of FPL – 73%

  22. Subsidies and Tax Credits • Premium Subsidies • ACA does not specify the amount of co-pays, deductibles and coinsurance plans must use to reach actuarial value • ACA does cap the maximum out-of-pocket expenses for cost sharing for essential benefits for individuals making less than 400% of FPL

  23. Employers’ Shared Responsibility ACA does not mandate an employer to offer employees health insurance “Large Employers” will face penalties beginning in 2014 if one or more of their full-time employees obtains a premium credit through an Exchange

  24. Employers’ Shared Responsibility • Determining a “Large Employer” • Based on the # of Full-Time Equivalents • 50 FTE during the preceding calendar year • Full-Time employees = those working 30 or more hours a week • Excludes “seasonal” workers (working less than 120 days a year)

  25. Employers’ Shared Responsibility • Determining a “Large Employer” • Hours worked by part-time employees are included on a monthly basis • Total number of hours worked divided by 120 • Example: • Company has 40 full-time employees (30+ hours) • Company has 24 part-time employees who all work 20 hours per week (total of 80 hours a month) • 24 employees x 80 hours /120 = 16 FTE • Therefore, Company has 56 FTE and is a “Large Employer”

  26. Employers’ Shared Responsibility • Penalties • 2 scenarios: • 1) Large Employer fails to offer its full-time employees (and their dependents) minimum essential coverage • 2) Large Employer offers minimum essential coverage, but that coverage is either “unaffordable” relative to a full-time employee’s income or does not provide “minimum value”

  27. Employers’ Shared Responsibility • Large Employer Fails to Provide Coverage • If any full-time employee receives a premium credit toward a health plan obtained through the Exchange, employer will pay penalty • The fact that an employee obtains coverage through the Exchange is not the trigger • Monthly penalty = # of full-time employees minus 30 multiplied by 1/12 of $2,000

  28. Employers’ Shared Responsibility • Large Employer Fails to Provide Coverage • Number of employees receiving premium credit is not used in penalty calculation • Example: • 50 full-time employees (not FTE) • at least 1 full-time employee receives credit • monthly penalty = (50-30) x $2,000/12 = $3,333.33

  29. Employers’ Shared Responsibility • Large Employer Fails to Provide Coverage • Employers not offering coverage must file a return with the HHS stating they do not offer coverage and the # of full-time employees

  30. Employers’ Shared Responsibility • Large Employers Whose Coverage is Unaffordable or Does not Provide Minimum Value • “Unaffordable” = Employee’s required contribution exceeds 9.5% of the employee’s household income • “Minimum Value” = Plan offered by employer pays for less than 60% of covered expenses

  31. Employers’ Shared Responsibility • Large Employers Whose Coverage is Unaffordable or Does not Provide Minimum Value • Penalties: • Not triggered by fact that an employee obtains coverage through Exchange • Must receive a credit AND meet the “unaffordable” or “minimum value” threshold

  32. Employers’ Shared Responsibility • Large Employers Whose Coverage is Unaffordable or Does not Provide Minimum Value • Penalties: • Monthly penalty = 1/12 of $3,000 for each full-time employee receiving credit and meets other requirements • Total penalty would be limited to the total number of full-time employees minus 30, multiplied by 1/12 of $2,000 (the penalty for failing to offer coverage)

  33. Employers’ Shared Responsibility • Automatic Enrollment • Companies with more than 200 full-time employees that offer coverage will be required to automatically enroll new full-time employees • Guidelines will not be ready by 2014 • Department of Labor has indicated that employers will not have to comply until guidance become applicable

  34. Employers’ Shared Responsibility • Safe Harbors • How to determine status of “on-going employees?” • Employers may have a “standard measurement period” which cannot exceed 12 months for determining full-time employees • On-going employees are employees who have been employed for at least one complete standard measurement period

  35. Employers’ Shared Responsibility • Safe Harbors • If on-going employee is found to be full-time • Must be treated as such during subsequent “stability period” • Stability period must be at least 6 calendar months, and cannot be shorter in duration than the standard measurement period

  36. Employers’ Shared Responsibility • Safe Harbors • If on-going employee is found not to be full-time • Employer may treat employee as part-time during the stability period • This stability period cannot be longer than the standard measurement period

  37. Employers’ Shared Responsibility • 90 Day Administrative Waiting Period • Employers will be allowed up to 90 days between standard measurement period and stability period to determine full-time employees • Coverage must be offered to include this administrative period to avoid gaps

  38. Employers’ Shared Responsibility • Newly Hired Employees • - If employee is reasonably expected to be full-time, must be offered coverage after 3 months

  39. Employers’ Shared Responsibility • Newly Hired Employees – Variable or Seasonal Employees • Employers will be allowed to use “initial measure period” of between 3 and 12 months • Employers will determine whether new employee completed an average of 30 hours per week • Also allowed a 90 day administrative period

  40. Employers’ Shared Responsibility • Newly Hired Employees – Variable or Seasonal Employees • The measurement period and the administrative period combined may not extend beyond the last day of the first calendar month beginning on the 1st anniversary of the employee’s start date (13 months and a fraction of a month)

  41. Employers’ Shared Responsibility • Newly Hired Employees – Variable or Seasonal Employees • Stability period for these employees must be the same as for on-going employees • If determined to be full-time, stability period must be at least 6 months and no less than initial measurement period • If determined not to be full-time, stability period must not be one month longer than the initial measurement period and cannot exceed the remainder of the standard measurement period

  42. Employers’ Shared Responsibility • Example: • For new variable employees, Employer uses 12 month initial measurement period that begins on the start date • Also applies an administrative period from the end of the initial measurement period through the end of the first calendar month beginning on or after the end of the initial measurement period

  43. Employers’ Shared Responsibility • Employer hires Joe on May 10, 2014 • Initial measurement period runs through May 9, 2015 • Joe works an average of 30 hours per week during this initial measurement period • Employer must offer coverage on July 1, 2015 • Employer offers coverage for 12 month stability through June 30, 2016

  44. Employers’ Shared Responsibility - Once Joe works thorough an entire standard measurement period - Employer must also test Joe (as it would all on-going employees) for full-time status during the first standard measurement period after Joe’s start date

  45. Employers’ Shared Responsibility • e.g., Employer’s standard measurement period is from October 15 – October 14 • Joe must be tested as an on-going employee for the period of October 15, 2014 through October 14, 2015 • Remember, Joe is already covered through June 30, 2016 (during his stability period)

  46. Employers’ Shared Responsibility • Safe Harbors • An Employer Cannot Determine an Employee’s Household Income? • For purposes of “affordability” of coverage • IRS and Dept. of Treasury have indicated that the regulations will include a safe harbor allowing employers to use employee’s W-2 forms when determining the 9.5% premium

  47. Questions?

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