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PARTNERS BENEFIT GROUP 2010 Federal Health Care Reform: The ...

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PARTNERS BENEFIT GROUP 2010 Federal Health Care Reform: The ...

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    1. PARTNERS BENEFIT GROUP 2010 Federal Health Care Reform: The Impact on Employers and Group Health Plans March 26, 2010 | Waltham, Massachusetts Alden J. Bianchi, Esq., Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts

    3. Status of Legislation Senate Bill: the Patient Protection and Affordable Care Act (H.R. 3590) Passed December 24, 2009 (including a subsequent Manager’s amendment) House reconciliation bill: Health Care and Education Affordability Reconciliation Act of 2010

    4. High Level Organization Early “deliverables” Initial insurance reforms/consumer protections New insurance pooling arrangements Enhanced scrutiny of rate increases Community health investments/Medicare Substantive reforms Coverage/mandates/exchanges, etc. Financial assistance, etc.

    5. Early Deliverables Restrictions on annual and lifetime limits Prohibition on rescissions absent fraud or non-payment of premiums High-risk pool for individuals with pre-existing conditions Insurance rebates tied to loss ratios Require public reporting of financial data

    6. Substantive Reforms Individual coverage mandate Employer mandate Insurance reforms, e.g. Minimum benefits standards, and Creation of insurance “exchanges” Sliding scale financial assistance to low-income individuals (up to 400% of FPL) Selected Medicare improvements

    7. Impact on Employers/Plans Requirements imposed directly on employers, e.g. Pay-or-play/free rider mandate Basic benefit package Requirements imposed on health insurance carriers affecting employers and group health plans, e.g. Guaranteed issue and renewability Bans on pre-existing condition exclusions and lifetime limits Other important provisions, e.g. individual mandate, health insurance exchanges 

    8. “Free-Rider” Surcharge Applies to “applicable large employers” (i.e., 50 or more employees) Employer must pay an assessment only if one or more full-time employee(s) receives a “premium tax credit” A full-time employee is an employee who works 30 or more hours per week on average

    9. Free-Rider (cont’d) Seasonal employees excluded Employers who do not offer coverage must pay an assessment of $750 for each full-time employee ($2,000 under House amendment) Employers who offer coverage but have employee(s) receiving premium tax credits must pay the lesser of (i) $3,000 for each such employee or (ii) $750 per full-time employee ($2,000 under House amendment) House amendment provides a free “pass” on the first 30 employees

    10. Free-Rider (cont’d) There is an additional $600 per employee assessment for employers with waiting periods longer than 60 days This provision is dropped in the House amendment, and waiting periods can be 90 days Penalties are determined month-by-month Alternatively, employer can offer to provide certain low-income employees with a “free choice” voucher in an amount equal to what the employee would have paid for coverage

    11. Free-Rider (cont’d) Voucher eligibles include employees With incomes less than 400% of FPL Whose employee contribution is greater than 8% but less than 9.8% of income Who choose to decline employer coverage An employer that offers vouchers pays no other assessment Auto-enrollment required for groups with more than 200 employees

    12. Essential Benefits “Coverage” for purposes of the assessment means coverage with “essential benefits” 60% of the actuarial value of the covered benefits Limits annual cost-sharing under HSAs ($5,950/individual and $11,900/family in 2010) HHS establishes rules re: benefit package Exception for grandfathered plans

    13. Essential Benefits (cont’d) Ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health/substance abuse (including behavioral health treatments), Rx coverage, rehabilitative services and devices, laboratory services, preventative and wellness services and disease management, and pediatric services (including oral and vision care)

    14. Senate Bill: Exchange Four coverage options with varying actuarial values Platinum Gold Silver Bronze All individual and group carriers must offer Certain employer plans grandfathered

    15. Medical FSA/OTC Drug Limits Impose annual caps on medical FSAs $2,500 (indexed for increases in the cost-of-living) House bill delays until 2013 Deny coverage for OTC drugs under a medical FSA, health reimbursement account, health savings account or Archer medical savings accounts

    16. Wellness Programs Provides grants and assistance for small employers to establish wellness programs Permits up to 30% premium discounts (can be expanded to 50% by regulation) under rules similar to current HIPAA rules

    17. Small Employer Subsidies “Small employer” means 25 or fewer employees (Credit is phased in: 2010 to 2013, 35% if employer contributes at least 50% of premium cost) 2014 and later, 50% if employer contributes at least 50% of premium cost 100% for employer with 10 or fewer employees /average annual wages of less than $25,000

    18. Other Employer Requirements New reporting requirements (e.g., reporting of the value of medical benefits on IRS Form W-2) Tax employers who receive the retiree drug subsidy under the Medicare Modernization Act of 2003 (but reduce the Part D coverage gap)

    19. Effect on Self-Funded Plans Impact of bar on lifetime and annual limits on plan design—how will (and will) stop-loss vendors underwrite? Code Section 105(h) extended to insured plans—will this focus new attention on self-funded plan non-discrimination?

    20. Carrier Mandates Guaranteed issue and renewability Extended “dependent” requirements up to age 26 Ban on annual and lifetime limits Non-discrimination testing requirements extended to insured plans

    21. Individual Mandate All U.S. citizens and legal residents must have “qualified health insurance coverage” Qualified health insurance coverage is similar to House’s acceptable coverage Waivers available for hardship and for religious objectors Penalty is $750 per person (phased in) for whom the taxpayer is liable, with certain limits

    22. House Amendment Lowers the flat dollar assessments from $495 to $325 in 2015 and $750 to $695 in 2016, (subsequent years indexed at $695) Raises the percent of income assessment that individuals pay if uninsured Alternative payment amount goes from 0.5 to 1.0% (2014), 1.0 to 2.0% (2015), and 2.0 to 2.5% (2016 and later years)

    23. Exchanges Exchanges established state-by-state Each state must create: An exchange to facilitate sale of qualified benefit plans to individuals A “SHOP” (Small business Health Options Program) exchange for small businesses These functions can be combined into a single exchange

    24. Exchanges (cont’d) States may waive exchange requirement or establish regional or local exchanges with HHS approval Insurers in exchange must offer at least one “silver”-level and one “gold”-level plan All plans must meet state and Federal certification procedures

    25. Low Income Tax Credit Available for individuals and families with incomes between 100% and 400% of FPL (but Medicaid is available at 133% of FPL) Credits tied to a “benchmark” plan based on a sliding scale; premium contributions would be capped as a % of income: 2.8% at 100% of FPL, up to 9.8% at 400% of FPL

    26. Tax Credit (cont’d) House amendment lowers premiums for families with income below $44,000 and above $66,000 Employees with access to employer-provided coverage are eligible for premium tax credits only if the employee share of the premium exceeds 9.8% of their income and employer plan provides certain levels of benefits

    27. Financing: Senate Bill 40% tax on “Cadillac” health plans $8,500 for individual coverage/$23,000 for family coverage Includes medical FSAs, HRAs, HSAs, etc. Increase HI portion of payroll tax to 2.35% HSA penalty rises to 20% from 10% Increase threshold on itemized deductions

    28. Financing: House Amendment Increases the threshold for the excise tax on the most expensive health plans from $23,000 for a family plan to $27,500 and starting it in 2018 for all plans; Establishes a “rate authority” to provide Federal assistance and oversight to States in conducting reviews of unreasonable rate increases and other “unfair” insurance practices

    29. Misc. House Items Eliminating state-specific provisions Increase Federal financing to all States for the expansion of Medicaid Close the Medicare Rx “donut hole” Strengthening the provisions to fight fraud, waste, and abuse in Medicare and Medicaid

    30. Questions and Answers Alden J. Bianchi | Member Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. One Financial Center | Boston, MA 02111 Phone: 617.348.3057 | Fax: 617.542.2241 E-mail: abianchi@mintz.com

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