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Key Employer Elements in Health Care Reform Changes Effective for 2010, 2011, 2012 & 2013

By Michael A. Embry, RHU NAHU Region 3 Vice President. Key Employer Elements in Health Care Reform Changes Effective for 2010, 2011, 2012 & 2013. Changes effective in 2010 2011, 2012 and 2013. Effective in 2010.

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Key Employer Elements in Health Care Reform Changes Effective for 2010, 2011, 2012 & 2013

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  1. By Michael A. Embry, RHU NAHU Region 3 Vice President Key Employer Elements in Health Care ReformChanges Effective for 2010, 2011, 2012 & 2013

  2. Changes effective in 2010 2011, 2012 and 2013

  3. Effective in 2010 • Tax-free employer coverage for children who are not otherwise tax dependents: • Tax-free treatment for adult children who have not turned age 27 as of end of year. • This change is also intended to apply to the exclusion for employer-provided coverage (that is, the value of coverage) under an accident or health plan for injuries or sickness for such a child. • This change is effective for any premiums paid or expenses reimbursed after March 3o, 2010.

  4. Effective for plan years beginning after September 23, 2010 • Dependent coverage for older children: • A plan that provides dependent coverage of children must continue to make that coverage available for an adult child until the child turns 26 years of age. • This requirement applies even to married children. • Plans are not required to make coverage available for a child of a child receiving dependent coverage (that is, for example, for a grandchild of a participant). • Must not access to other group coverage. • This requirement only applies to medical plans, not to HSAs.

  5. Effective for plan years beginning after September 23, 2010 • No lifetime limits: • A plan may not apply lifetime dollar limits on what are known as “essential health benefits.” • Essential health benefits are the types of benefits that must be included in health plans offered under the state insurance clearinghouses referred to in the new law as “exchanges. • Health and Human Services (“HHS”) will define what constitutes an essential health benefit. • Certain plans are excluded ( HSAs, Health FSAs and certain HRAs).

  6. Effective for plan years beginning after September 23, 2010 • No lifetime limits: • “Essential benefits”: These items must be included: • Ambulatory patient services. • Emergency services. • Hospitalization. • Maternity and newborn care. • Mental health and substance use disorder services, including behavioral health treatment. • Prescription drugs. • Rehabilitative services and devices. • Laboratory services. • Preventive and wellness services and chronic disease management. • Pediatric services, including oral and vision care.

  7. Effective for plan years beginning after September 23, 2010 • No annual limits: • A plan may not apply any annual dollar limits on essential health benefits for plan years beginning on or after January 1, 2014. • For plan years beginning prior to January 2014, the following restricted annual limits will apply to essential health benefits, if those limits would not violate other federal or state laws: • For plan or policy years beginning on or after September 23, 2010 but before September 23, 2011, $750,000; • For plan or policy years beginning on or after September 23, 2011 but before September 23, 2012, $1.25 million; and • For plan or policy years beginning on or after September 23, 2012 but before January 1, 2014, $2 million.

  8. Effective for plan years beginning after September 23, 2010 • Preventative services (continued): • The preamble to the regulations includes detailed information about specific preventive services that must be covered. • Information about recommendations and guidelines is also available at http://www.healthcare.gov/center/regulations/prevention.html which will be updated on an ongoing basis. • What Types of Preventive Services Are Covered? A government website provides the following examples of the types of items and services that plans and insurers must cover under the preventive services mandate: blood pressure, diabetes, and cholesterol tests; many cancer screenings; counseling from health care providers on such topics as quitting smoking, losing weight, eating better, treating depression, and reducing alcohol use; routine vaccines for diseases such as measles, polio, or meningitis; flu and pneumonia shots; counseling, screening, and vaccines for healthy pregnancies; regular well-baby and well-child visits from birth to age 21.

  9. Effective for plan years beginning after September 23, 2010 • Prohibition on insured plans discriminating in favor of highly compensated individuals: • Self-insured health plans have long been subject to nondiscrimination rules prohibiting them from favoring highly compensated individuals. • Those rules are set forth in Code § 105(h). • The consequence of a self-insured plan failing to meet those requirements is that reimbursements are included into income of the highly compensated individuals. • These provisions do not apply to the grandfather rules.

  10. Effective for plan years beginning after September 23, 2010 • Prohibition on insured plans discriminating in favor of highly compensated individuals: • For a insured health plan to be nondiscriminatory, it must pass two nondiscrimination tests under Code §105(h): • Eligibility Test and • Benefits Test. • If a insured medical plan fails to pass either test, the plan sponsor may be penalized. • The excise tax amount is $100 per day of noncompliance for each individual to whom the failure relates. • Delayed until the plan year beginning after guidance is released, 2012 0r 2013.

  11. Effective for plan years beginning after September 23, 2010 • Prohibition on insured plans discriminating in favor of highly compensated individuals: • Potential Areas of Concern in Testing: • Different medical benefit for owners and executives. • Shorter waiting period for owners and executive. • Larger employer contributions for owners and executives. • Different medical benefit for salaried employees. • Offering medical benefit options to all employees, but only the highly compensated employees choosing to be covered by the most expensive medical plan.

  12. Effective for plan years beginning after September 23, 2010 • Pre-existing conditions: • For participants (and apparently dependents) who are under age 19, no preexisting condition exclusions can apply. • For everyone else the rule is effective for plan years beginning on or after September 23, 2014.

  13. Effective January 1, 2011 • Reporting cost of health Coverage on Form W-2: • An employer must report on an employee’s Form W-2 the aggregate cost of the employee’s health insurance coverage sponsored by the employer, excluding the amount of any salary reduction contribution to a flexible spending arrangement. • “Aggregate cost” is determined under “rules similar to” the COBRA rules for applicable employer-sponsored coverage (including employee and employer contributions), including the special rules governing self-insured plans. • Delayed until 2012 for employers with 250 or more & 2013 for less than 250. • .

  14. Effective January 1, 2011 • HSAs, Health FSAs and Health Reimbursement Arrangements (HRAs): • Tougher coverage/contribution limits and penalties apply: • No tax-free coverage for nonprescribed items: • OTC expense can be reimbursed if incurred before 1/1/2011 . • Grace periods are not allowed, but run-outs are permitted. • items that are not medicines or drugs, including equipment such as crutches, supplies such as bandages, and diagnostic devices such as blood sugar test kits are reimbursable. • Amended by June 30, 2011. • Higher penalty for nonqualified HSA distributions, from 10% to 20%.

  15. Effective January 1, 2011 • Grants for workplace wellness programs: • HHS will provide grants for up to five years to small employers that establish wellness programs. (Funds appropriated for five years beginning in fiscal year 2011). • Provide technical assistance and other resources to evaluate employer-based wellness programs. • Conduct a national worksite health policies and programs survey to assess employer-based health policies and programs. (Conduct study within two years following enactment). • Program must be new.

  16. Effective during 2012 • Uniform Explanation of Coverage: • HHS is required to develop standards for plans to use in summarizing plan benefits and coverage for participants. • These standards released a few months ago. • The required summaries will be a short “highlights” description of the plan. • It must not exceed 4 pages in length and must not include print smaller than 12-point font. • The statute describes the information that must be covered by the summary. • Plans will have until March 23, 2012, to begin using these new summaries.

  17. Effective during 2012 • Deadline for summaries of material modification: • A notice of any material modification must be given to participants at least 60 days prior to the date the plan modification is to become effective. • This provision is generally effective March 23, 2012.

  18. Effective during 2012 • Penalty for failure to provide new summary or SMM: • A penalty of not more than $1,000 may apply for each willful failure to provide the required plan summary or advance summary of a material modification. • Each participant who fails to receive a required summary (or summary of material modification) is counted separately in determining the amount of the penalty, so it appears that a willful failure to timely provide 5 participants with a summary could result in a fine of up to $5,000.

  19. Effective in 2013 • Health Flexible Spending Accounts: • The $2,500 limit on annual salary reduction contributions to health FSAs offered under cafeteria plans, effective for taxable years beginning after December 31, 2012. • All health FSAs offered under cafeteria plans must comply. • The limit does not apply to Dependent Care FSAs, HRAs or HSAs.

  20. Effective in 2013 • Additional Medicare Tax: • The employee portion of the hospital insurance tax part of FICA, currently amounting to 1.45% of covered wages, is increased by 0.9% on wages that exceed a threshold amount for tax years beginning after 12/31/2012. • The additional tax is imposed on the combined wages of both the taxpayer and the taxpayer’s spouse, in the case of a joint return. • The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case.

  21. Effective in 2013 • Medicare Tax on Unearned Income: • The new tax is equal to 3.8% of the lesser of: • Net investment income (generally, net income from interest, dividends, annuities, royalties and rents, and capital gains, as well as income from a business that is considered a passive activity or a business that trades financial instruments or commodities), or • Modified adjusted gross income (basically, your adjusted gross income increased by any foreign earned income exclusion) that exceeds $200,000 ($250,000 if married filing a joint federal income tax return, $125,000 if married filing a separate return).

  22. Effective in 2013 • Itemized Deductions for Medical Expenses: • The threshold for deducting medical expenses as an itemized deduction is raised to amounts greater than 10% of AGI. • Individuals over age 65 can continue to deduct medical expenses in excess of 7.5% of AGI through 2016.

  23. Effective in 2013 • Notice of Exchange: • Employers are required provide all new hires and current employees with a written notice about the health benefit Exchange and some of the consequences if an employee decides to purchase a qualified health plan through the Exchange in lieu of employer-sponsored coverage. • This disclosure requirement is generally effective for employers in a state beginning on March 1, 2013. • Employees hired on or after the effective date must be provided the Notice of Exchange at the time of hiring. • Employees employed on the effective date must be provided the Notice of Exchange no later than the effective date (i.e., no later than March 1, 2013

  24. Effective in 2013 • With this notice, employees must be informed of the following: • The existence of an Exchange, given a description of the services provided by the Exchange, and told how to contact the Exchange to request assistance. • they may be eligible for a premium tax credit or a cost-sharing reduction (under PPACA § 1402) through the Exchange if the employer plan’s share of the total cost of benefits under the plan is less than 60%. • If they purchase a qualified health plan through the Exchange (and the employer does not offer a free-choice voucher), then they may lose any employer contribution toward the cost of employer-provided coverage; and all or a portion of employer contributions to employer-provided coverage may be excludable for federal income tax purposes.

  25. What will the future Bring?

  26. PPACA Constitutionality Challenge • Oral arguments to begin in March. • Four key issues: • Is it constitutional for the FEDERAL government to require a person to purchase anything to protect themselves. • If it is not, is the rest of the bill inseparably tied to the individual mandate. • Is the Medicaid mandate in the bill an undue infringement on states • Can this even be looked at now by the court given that no one has actually been penalized for non-compliance.

  27. Future of Employer Sponsored Health Care • Problem: • Costs increasing in double digits each year. • Employer must raise deductible, co-pays and coinsurance to lower costs. • Solution: • Cut state and federal mandates. • Allow insurance products to be purchased across state lines. • Allow alliances. cooperatives and state and local purchasing pools.

  28. Future of Health Reform • 2010, 2011 &2012: • Changes may stay in place • 2013 and beyond? • Many requirements will be changed or repealed. • What will replace them.

  29. Latest Updates • December 16th, 2011 HHS issues a “Bulletin” on Essential benefits. • This basically allows HHS to side step the requirement of publishing a cost benefit analysis of the cost of these mandates. • States will be allowed 1 of 4 benchmark plan options • Confirmed the 10 Essential Benefits categories

  30. Latest Updates • House Ways and Means committee to begin mark up of HR 1173 – Repeal of Class Act today. • Next waivers requests to be considered are from Wisconsin and North Carolina. • HHS sent 2 new regulations to OMB: • Details of 2017 State waivers • Final rule on Summary of Benefits.

  31. Latest Update on MLR • HR 1206 now has 149 cosponsors • NAIC passed resolution • Senate legislation is pending • HHS issued waivers for Maine, New Hampshire, Nevada, Kentucky and Iowa. Georgia got modified approval. North Carolina, Wisconsin and Texas are pending. • Waivers have been denied for Guam, Delaware, North Dakota, Florida, Louisiana, Michigan, Oklahoma, Kansas and Indiana

  32. Questions??????????????

  33. Contact Information • Michael A. Embry, RHU • Phone: 586-484-5745 • Email: membry@comcast.net • Website: www.nahu.org

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