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slide1

Affordable Care Act Update

Rev 10/07/2013

Your Presenter:

Jerry Rhinehart, CIC, CLU, ChFC, RHU

Panama City, FL

slide3

93 TOTAL provisions will be enacted over the 10 year time span that will impact: every US citizen, health insurance coverage, health insurance companies, pharmaceutical companies, employers, Medicare, Medicaid, taxes (21 major), substantial regulations for hospital & physicians, … and even required posting of nutritional content at your favorite fast food restaurant.

slide7

Health Insurance Premiums and Cost-Sharing Subsidies (2014)

  • Provides refundable and advanceable tax credits and cost sharing subsidies to eligible individuals. Premium subsidies are available to families with incomes between 133-400% of the federal poverty level (FPL) to purchase insurance through the Exchanges, while cost sharing subsidies are available to those with incomes up to 250% of the poverty level.
slide8

Understanding Health Insurance Subsidies (2014)

Required to show proof of a QHP- but no financial assistance of any form

400% FPL _

_400% FPL

Required to show proof of a QHP- and eligible for advanced premium tax credits

250% FPL _

_250% FPL

Required to show proof of a QHP- and eligible for advanced premium tax credits and cost-sharing reductions

133% FPL _

_133% FPL

Eligible for Medicaid – little or no cost

100% FPL _

_100% FPL

2013: CMS

slide9

Those Having (and Not Having) Health Insurance

2011: KFF.org – State Health Facts

slide10

Introduction to Key ACA Terms

MLR (Medical Loss Ratio – 80% Small Group and Individual – 85% Large Group) (eff 01-01-2011)

NOTE: The MLR requirement does NOT apply to ERISA plans - fully or partially self-funded.

slide11

Introduction to Key ACA Terms

MLR (Medical Loss Ratio – 80% Small Group and Individual – 85% Large Group) (eff 01-01-2011)

FPL (Federal Poverty Level – 133% - 400%) (eff 01- 01-2014) (NOTE: Box #1 on the Employees W-2)

slide12

Introduction to Key ACA Terms

Federal Poverty Level (FPL) – National Incomes (Gross) except for Hawaii and Alaska – 2012-2013

Source: http://www.familiesusa.org/resources/tools-for-advocates/guides/ federal-poverty-guidelines.html

NOTE: Median Household Income for US in 2011 - $50,054

U.S. Census Bureau – http://www.census.gov/prod/2011pubs/p60-239.pdf

Median Income for NC: $45,236 (2012)

slide13

Health Reform Implementation Timeline

2013

 Insurance Reforms (CO-OP; enhanced use of e-filing)

 Employer Notice Requirements –(03-01-13) Requires employers to provide written notice informing employees about the Exchange and potential eligibility for premium credits. (Released 06/2013 – one for coverage / one for no coverage)

slide17

Health Reform Implementation Timeline

2013

  •  Insurance Reforms (CO-OP; enhanced use of e-filing)
  • Employer Notice Requirements –(03-01-13) Requires employers to provide written notice informing employees about the Exchange and potential eligibility for premium credits. (Released 06/2013 – one for coverage / one for no coverage)
  • Tax Change
slide18

Key Provisions of Tax Changes (2013)

New or revised taxes to help pay for NHCR

-Increase threshold for the itemized deduction for un-reimbursed medical expenses from 7½% to 10% of AGI

-Increase the Medicare Part A tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200K (individual) and $250K (married/ filing jointly). 3.8% assessment on unearned income (high income tax payers)

-Max ‘EE contribution to FSA for medical - $2,500 per year

-Excise tax (2.3%) on medical devices (hip replacement, x- ray machine, etc. – numerous exceptions exists)

-Eliminated ‘ER deduction for retiree Medicare Part D

slide19

Health Reform Implementation Timeline

2014

 Individual and Employer Requirements

slide20

Individual and Employer Requirements (2014)

Require U.S. citizens and legal immigrants to have qualified health coverage

-For Individuals: Phased-in tax penalty

-For Large Employers: Possible penalties to “Large ‘ER” (50 or more FTEs – 30 hrs)

-Complex rules and variables exist

This was the “individual mandate” litigation ruled upon by the SCOTUS in June of 2012

slide21

Individual Non-Compliance - ACA (2014)

  •  Those who fall under the “requirement” but fail to carry at least the “Bronze” plans will be subject to a penalty: (the greater of…)
    • $95 per year in 2014, $325 in 2015, $695 in 2016 (half that amount for children under age 18), up to maximum of three times those penalty amounts per family, OR,
    • 1% of income above the tax filing threshold in 2014, 2% in 2015, and 2½% in 2016
slide22

Individual Non-Compliance - ACA (2014)

What are the Potential Financial Penalties to Individuals who do NOT carry insurance?

- Family of Four (includes 2 children under age 18) $100K Taxable -

slide23

Employer Responsibility / Penalties (2014)

Large Employer (50+ EEs) (* Delayed until 2015)

-Full time employees (30 hrs)

- Part time employees

Small Employer (1 to 49 EEs)

slide24

Employer Responsibility / Penalties (2014)

Possible financial penalties for an ‘ERs that DOES NOT offer coverage *

-If ANY FTE receives premium assistance (due to FPL) from the government (and through the Exchange) the ‘ER will face an annual fee of $2,000 imposed on every full-time ‘EE (excluding the 1st 30 ‘EEs). Penalties are pro-rated monthly.

- EXAMPLE …

slide25

Employer Responsibility / Penalties (2014)

For Employers That DO NOT Offer Coverage *

“Shared Responsibility Payment”

slide26

Employer Responsibility / Penalties (2014)

Possible financial penalties for an ‘ERs that DOES offer coverage *

-If ANY FTE receives premium assistance (due to FPL) from the government (and through the Exchange) the ‘ER will face an annual fee of the lesser of $2,000 imposed on every full-time ‘EE (excluding the 1st 30 ‘EEs), OR $3,000 for each FTE that receives a premium subsidy. Penalties are pro- rated monthly.

- EXAMPLE …

slide27

Employer Responsibility / Penalties (2014)

For Employers That DO Offer Coverage *

slide28

Employer Responsibility / Penalties (2014)

Joe’s Burgers & Shakes *

- 3 locations

- 40 FTEs

- 20 PTEs

20 PTEs at 24 hrs per week (1920 hrs / month)

1920 ÷ 120 = 16 PTEs + 40 FTEs =

- Joe is now considered a “LARGE EMPLOYER”

20 PTE x 24 hrs x 4 = 1920 hrs / 120 (minimum FTE work hrs in a calendar month) = 16 EEs

56

slide29

Employer Responsibility / Penalties (2014)

Joe’s Burgers & Shakes – Coverage NOT Offered

slide30

Employer Responsibility / Penalties (2014)

Joe’s Burgers & Shakes – Coverage IS Offered

slide31

Employer Responsibility / Penalties (2014)

How Do Employers Determine Full-Time Status?

Google: Towers Watson health care bulletin 7943

-Guidance on Safe-Harbor methods to determine Full-Time Employee status

- Variable-Hour employees

- Seasonal Employees

slide32

Employer Responsibility / Penalties (2014)

Consider this Potential Scenario for the Uninformed Business Owner in 2014 (Delayed until 2015)

 Mountain Top Resort - Golf Course, Lodge & Spa

- 49 FETs

- Provides NO Qualified Health Plan to its EEs

- So … it pays no ACA “shared responsibility payment”

- But business improves … so, they hire a new FTE (#50) for the entire year. Look what it will cost as mandated by the ACA if only ONE FTE receives a subsidy:

- $2,000 x 20 (50 – 30) = $40,000

slide33

Employer Responsibility / Penalties (2014)

FPL and how it will work in 2014 (and later)

-Premium assistance for those individuals earning less than 400% of FPL. Currently (2013 numbers), this is income at $45,980 for an individual and $94,200 for a family of four.

-The premium assistance will INCREASE to eligible individuals / families as the percentage of FPL goes DOWN.

The CBO’s estimates of the average individual subsidy: 05/2010 was $3,970; 10/2012 was revised to $4,780; 02/2013 was revised to now be $5,510

slide34

Employer Responsibility / Penalties (2014)

In terms of calculating potential penalties, part-time employees (and their hours) are only used to see if an employer is a “large employer”.

-Penalties (if any) are ONLY calculated on FTEs

-No penalties on part-time employee, even if that part-time employee received Premium Assistance.

- If no FTE receives Premium Assistance (only part-time) the employer will have no possibility of a penalty.

slide35

Employer Responsibility / Penalties (2014)

In 2014, Employers (50 + FTE) must decide … *

-Whether to offer medical coverage or potentially face a financial penalty;

-If coverage is provided to employees … is it considered “affordable” enough to avoid a potential financial penalty?

NOTE:The FPL issue is actually a multiple part question / test: 1) Is the ‘EE under 400% FPL?; 2) Does the ‘ER provide a plan that pays least 60% of the health expenses (for the typical population); 3) Is the ‘EEs required premium contribution “unaffordable” - meaning …does it exceed 9.5%* of the employee’s income for self-only coverage?

slide36

QHP Premium Paid by the Employee – Is It Affordable?

- Sarah’s annual salary is $40,000. Her husband’s salary with another ‘ER is also $40,000. They have two children under age 18. They would be eligible for premium assistance due to the FPL rule. Sarah’s ‘ER provides her a QHP.

- Sarah’s QHP covers all family members. The annual cost of the self-only portion is $4,800 annually ($400 per month).

- The ‘ER pays 90% of Sarah’s premium ($360 per month) and Sarah pays the remaining 10% ($40 per month). She pays 100% of the family member’s premium.

- 9.5% of Sarah’s annual income (40,000 x 9.5%) is $3,800. That works out to be $316.66 per month. Thus the ‘EE required premium is considered “affordable”. Sarah is NOT eligible for any premium assistance.

slide37

Employer Responsibility / Penalties (2014)

Maximum Premium Payment Under ACA

slide38

ACA Subsidy – ER’ and EE’ Rules

Jimmy – Bartender for Beach Grill (has 15 EEs)

Jimmy is single - his W-2 shows $34,000 (@300% FPL)

 Scenario #1 - Beach Grill provides NO QHP

 Jimmy can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them for not providing a QHP.

slide39

ACA Subsidy – ER’ and EE’ Rules

Jimmy – Bartender for Beach Grill (has 15 EEs)

Jimmy is single - his W-2 shows $34,000 (@300% FPL)

 Scenario #2 - Beach Grill provides a plan of health that is classified as a ‘Mini-Med’ ($50,000 annual limits)

 This plan of insurance is NOT a QHP. Jimmy can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them for not providing a QHP.

slide40

ACA Subsidy – ER’ and EE’ Rules

Jimmy – Bartender for Beach Grill (has 15 EEs)

Jimmy is single - his W-2 shows $34,000 (@300% FPL)

 Scenario #3 – ER provides a Bronze Plan (QHP) and pays 70% of Jimmy’s premium. What Jimmy has to pay works to be 15% of his income.

 Jimmy’s premium is ‘unaffordable’. He can go to the Marketplace and apply for a subsidy and select the plan he desires. He will pay the balance of the un-subsidized premium. Beach Grill will have no ACA penalty placed on them when Jimmy receives a subsidy.

slide41

ACA Subsidy – ER’ and EE’ Rules

Jimmy – Bartender for Beach Grill (has 15 EEs)

Jimmy is single - his W-2 shows $34,000 (@300% FPL)

 Scenario #4 – Beach Grill provides a Bronze Plan (QHP) and pays 90% of Jimmy’s premium. What Jimmy has to pay works to be 8% of his income. But Jimmy wants a Gold plan… one that will pay more of covered claims.

 The premium is considered ‘affordable’. Jimmy is NOT eligible for a subsidy since the employer’s plan is both a QHP and is ‘affordable’. If he wants a broader plan he will pay the FULL cost. Beach Grill will have no ACA penalty - even if they were to have 50+ EEs.

slide42

Health Reform Implementation Timeline

2014

 Individual and Employer Requirements

 Insurance Reforms

slide43

Key Provisions of Insurance Reform (2014)

Create state-based Health Benefit Exchanges (Marketplace) & SHOP

QUESTIONS:

What is an Exchange?

Who will operate it?

What will it physically look like?

What if a state says “NO”? (which 27 states – including North Carolina – have done so)

states health insurance marketplace decisions may 10 2013
States Health Insurance Marketplace Decisions, May 10, 2013

VT

WA

ME

ND

MT

NH

MN

OR

MA

NY

WI

SD

ID

RI

MI

CT

PA

WY

NJ

IA

DE

OH

NE

NV

IN

IL

MD

CO

UT*

WV

VA

CA

DC

KS

MO

KY

NC

TN

OK

SC

AZ

AR

NM

GA

AL

MS

AK

TX

LA

FL

HI

State-based Marketplace (16 states and DC)

Partnership Marketplace (7 states)

Federally-facilitated Marketplace (27 states)

* In Utah, the federal government will run the marketplace for individuals while the state will run the small business, or SHOP, marketplace.

slide45

Health Insurance Marketplace (2014)

 Goal of PPACA: 1) provide health care to millions of uninsured Americans, and, 2) making that coverage more affordable.

- Introduce managed retail competition into the marketplace and encourage better pricing and quality coverage

- Easier “comparison” shopping

- Offer choices in standard benefit plans and levels of coverage

- Clear communication regarding plans and rates

slide46

Health Insurance Marketplace (2014)

PPACA – Four Levels (“Tiers”) of Coverage:

Note: Insurance carriers can sell in or out of the Marketplace. The PPACA will allow states the option to require additional “state specific mandates”. Additionally, insurance carriers (and agents) may find a niche sales area in the FSA, supplemental accident, critical illness, or similar products.

slide47

http://www.zanebenefits.com/blog/bid/315824/North-Carolina-Health-Insurance-Exchange-Update-Health-Plan-Rates-Previewhttp://www.zanebenefits.com/blog/bid/315824/North-Carolina-Health-Insurance-Exchange-Update-Health-Plan-Rates-Preview

Only three insurance carriers, Blue Cross Blue Shield, Coventry and FirstCarolinaCare Insurance Co. in Pinehurst, will participate in the individual exchange for 2014.

slide49

http://www.forbes.com/sites/theapothecary/2013/09/25/double-down-obamacare-will-increase-avg-individual-market-insurance-premiums-by-99-for-men-62-for-women/http://www.forbes.com/sites/theapothecary/2013/09/25/double-down-obamacare-will-increase-avg-individual-market-insurance-premiums-by-99-for-men-62-for-women/

slide52

Applicant Qualifying for a Subsidy (FPL) – Eff: 01-01-2014

Exchange / Marketplace

(State or Federal)

After Approval – Selects Ins Company and Medal Plan

Tax “Dumpster” (Subsidy)

Application (on-line or paper)

Social Security

Homeland Security

Internal Rev Service

Subsidy $$ Goes to Insurance Company

Applicant Pays Balance of Premium

slide54

Applying For, Renewals and Making Changes - ACA

Applying for and Renewal – including new and revised subsidy

- Oct 1st and then for approximately three month each year

What about changes during the calendar year?

- Only for special events:

M - Marriage

A - Adoption

D - Death

M - Maternity

D - Divorce

slide55

Health Insurance Marketplace (2014)

“The Ten Things to Know About Exchanges” - a very good overview and description of the operational procedures of the Marketplace

slide56

Health Reform Implementation Timeline

2014

 Individual and Employer Requirements

 Insurance Reforms / Delivery System

Released December 09, 2012: starting 01-01-2014 every Qualified Health Plan will contain a $63.00 annual per-enrollee fee ($5.25 per month). It will continue for 3 years and raise @ $25 billion. It will be split as follows: 17½% going to the ACA to “for various ACA plans” and the balance (82½%) will go to the health insurance companies to “cushion the potential initial expenses and potential losses” regarding “guaranteed issue and no-pre-existing conditions” starting in 2014.

slide58

The 2014 Transitional Reinsurance Fee in Action …

  • - 176 ‘EEs (‘ER currently pay 80% of premium for ‘EE only)
  • - 164 Individuals covered
  • - 103 Spouses
  • - 109 Dependents
  • - 476 Total covered “heads” (2.7 “covered heads” per ‘EE)
  • 11 COBRA QB & 9 retirees = 496 total “heads”
  • $63 x 496 = $31,248
    • - $31,000 … plus renewal premium that everyone feels will increase in 2014 over 2013 levels!
slide59

Key Provisions of Insurance Reform (2014)

Create state-based Health Benefit Marketplaces

Require Guaranteed Issue and Guaranteed Renewable plans in the individual, small groups and Marketplaces

-Premiums / rates must follow required thresholds concerning ages (3 to 1 limit), rating area, familycomposition and tobacco use * (max ratio: 1.5 to 1).

Note:No FPL subsidy is allowed for the tobacco surcharge portion on individual plans. Nor is it eligible for a group coverage participation UNLESS they enroll in a “smoking / tobacco cessation program”.

slide60

How Might Tobacco Use Impact Your Health Insurance Premiums and Potential Subsidy in 2014 and Beyond? *

-Consider this possibility: (assuming Nat Avg Prem - @$14,000)

- Husband & wife (no dependants) / $100,000 annual income … thus, NOT eligible for a premium subsidy

- Both are tobacco users and their health insurance carrier uses the maximum allowable surcharge (1.5)

- $14,000 x 1.5 = $21,000

- Options: 1) Pay the premium; 2) Shop the Marketplace for a better deal; 3) forgo the insurance and pay the annual penalty ($1,000) – But They Risk Bankruptcy!

slide61

The ACA and Tobacco Rating*

The tobacco surcharge rating can be “state-specific” (Meaning: YES; NO; Percentage less than 1.5)

 A carrier may charge less than 1.5 – some have announced there will be no tobacco rating

Tobacco usage is defined in terms of regular usage and time last used: average of 4+ in a week / within the last 6 months

 An interesting fact: there are no provisions, questions nor surcharge regarding the usage of marijuana, cocaine, etc.

slide62

“Coverage Requirements” (2014)

  •  … will be included in ALL PLANS …
    • various government-sponsored programs
    • eligible employer-sponsored plans
    • plans in the individual market
    • grandfathered group health plans
    • others (as recognized by HHS)

So… who has to comply with the ACA? All for-profits companies, all non-profits (churches, universities, schools, etc.), governmental entities (state, local, municipalities, etc.), and, of course, individuals. Basically, NO one is exempt!

slide63

“Coverage Requirements” (2014)

  •  Coverage must include benefits for:
  • 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/ wellness/ disease management;
  • pediatric services, including oral and vision care.
slide64

“Coverage Requirements” (2014)

  • Coverage will be required to be maintained by all individuals, with EXCEPTION:
  • - religious objections,
  • - financial hardships,
  • - undocumented immigrants,
  • - American Indians,
  • - those incarcerated,
  • - citizens not residing in the U.S.,
  • - people earning under the tax-filing threshold, and,-- those with short gaps in coverage
slide65

“Coverage Requirements” (2014)

Recently announced by HHS: If an Employer provides a QHP for its employees, it must also make available:

- Mandatory Dependent Coverage

… but the employer is NOT required to make any contribution toward the dependant coverage

- But there is NO Mandatory Spouse Coverage Requirement

slide66

Health Reform Implementation Timeline

2014

 Individual and Employer Requirements

 Insurance Reforms

 Premium Subsidies

NOTE: As of January 1, 2014 … an individual / family that receive an ACA subsidy (Exchange) will have a 90 DAY grace periodfor premium payments! For non-subsidy contracts, it will be 30 days.

slide67

Insurer Requirements from Day 1 - 90

    • Continue coverage – Insurer covers for 1st 30
  • Notify HHS of non-payment
    • Notify providers of the possibility of denied claims during 2nd and 3rd months (providers on the hook!)
    • Notify the insured he / she is delinquent
  • Continue to collect the advanced tax credit on behalf of the policyholder (in case they catch-up premiums!)
    • Return the tax credit for the 2nd and 3rd month to the Treasury Department (if insured fails to pay)
    • Issue a termination notice at end of grace period
slide68

Insurer Requirements from Day 1 - 90

  • … AND – the insurance carrier must also determine whether the insured has a disability as defined by the Americans With Disability Act … and if so, then make “reasonable accommodations” for such individuals.

All these mandated provisions could have a profound impact on the carrier’s MLR calculation and ultimate profitability.

http://healthblog.ncpa.org/obamacares-biggest-wrong-collecting-the-premiums/

slide69

“Controlled Groups”

Mom & Dad, Inc. – 60 ‘EEs in 2013

Mom, Inc – 30 ‘EEs in 2014

Dad, Inc – 30 ‘EEs in 2014

 Be VERY Careful! Potential HEAVY penalties under ACA!!

slide70

Employer Responsibility / Penalties (2014)

So … Let’s Review – Potential Employer Penalty

slide71

Employer Incentives / Penalties (2014)

In 2014 will be a critical year for Employers as it relates to National Health Care Reform

-Certain tax incentives will be in place for a business that has 25 or fewer FTEs (tax incentives will vary depending on “average income”)

-Potential penalties will exist for a business that has 50 or more FTEs

-At present there are no tax incentives nor potential penalties for a business that has 26 to 49 FTEs

Premiums Will Still Be Deductible by the ‘ER

slide72

Are Changes Ahead for the ACA?

Various components of the ACA has been challenged in several courts. SCOTUS ruled (June 28, 2012) that the “individual mandate” is constitutional. There are still a few challenges in the courts regarding various components of the law. But the Presidential election has settled the issue regarding the law’s implementation.

slide73

- Affordable Care Act Update-

THANK YOU FOR YOUR ATTENDANCE

Jerry Rhinehart, CIC, CLU, ChFC, RHU

Panama City, FL

jerhinehart@comcast.net