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This UBA Employer Webinar Series is brought to you by United Benefit Advisors in conjunction with Jackson Lewis. For a copy of the following presentation, please visit our website at Go to the Wisdom tab and then to the HR webinar series page. Presented by:

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This UBA Employer Webinar Series is brought to you by United Benefit Advisorsin conjunction with Jackson Lewis

For a copy of the following presentation, please visit our

website at Go to the Wisdom tab and then to the HR webinar series page.

patient protection and affordable care act impact on employer provided benefits
Presented by:

Jason Stein | New Orleans

Lisa M. deFilippis | Cleveland

January 8, 2013

Patient Protection and Affordable Care Act: Impact on Employer-Provided Benefits

about the firm
About the Firm

Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation

Over 700 attorneys in 49 locations nationwide

Current caseload of over 5,000 litigations and approximately 300 class actions

Founding member of L&E Global


This presentation provides general information regarding its subject and explicitly may not be construed as providing any individualized advice concerning particular circumstances. Persons needing advice concerning particular circumstances must consult counsel concerning those circumstances.  Indeed, health care reform law is highly complicated and it supplements and amends an existing expansive and interconnected body of statutory and case law and regulations (e.g., ERISA, IRC, PHS, COBRA, HIPAA, etc.).  The solutions to any given business’s health care reform compliance and design issues depend on too many varied factors to list, including but not limited to, the size of the employer (which depends on complex business ownership and employee counting rules), whether the employer has a fully-insured or self-funded group health plan, whether its employees work full time or part time, the importance of group health coverage to the employer’s recruitment and retention goals,  whether the employer has a collectively-bargained workforce, whether the employer has leased employees, the cost of the current group health coverage and extent to which employees must pay that cost, where the employer/employees are located, whether the employer is a religious organization, what the current plan covers and whether that coverage meets minimum requirements, and many other factors. 

IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or enclosures) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant to U.S. Treasury regulations governing tax practitioners.)

ppaca terms

Essential Health Benefits?

Minimal Essential Coverage?

Affordable Coverage?

Minimum Value?

Actuarial Value?

Preventive Care?

what does it all mean
What Does It All Mean?

What do all of these terms mean

for compliance with PPACA

for you and your clients?

overall goals of ppaca
Overall Goals of PPACA

Near-Universal Health Coverage

Affordable Coverage of “Essential” Medical Services

Health Plans that Provide Minimum Value of Coverage

Patient’s Rights and Protection

Promote Wellness

universal coverage two mandates
Universal Coverage: Two Mandates

Individual Mandate – PPACA requires essentially all individuals to have minimum health coverage beginning in 2014 or pay penalty

“Large” Employer Mandate – Employers with 50 or more full-time employees in 2014 must provide minimum coverage or be subject to “pay or play” penalties

two terms different meanings
Two Terms, Different Meanings

“Essential Health Benefits”


“Minimum Essential Coverage”

Who do these standards apply to?

Are they the same?

what is a grandfathered plan
What is a Grandfathered Plan

A Plan in existence on March 23, 2010 that has not been changed in any but insignificant ways

The term applies to large and small group market plans and to both insured and self-insured plans

A grandfathered plan does not have to comply with some mandates as long as grandfathered status is maintained

how is grandfathered status maintained
How is Grandfathered Status Maintained
  • A health plan will lose grandfathered status by:
    • Eliminating benefits
    • Increasing cost-sharing percentages
    • Increasing deductible or out-of-pocket costs by more than 15% + medical inflation
    • Increasing copayment by more than 15% + medical inflation
    • Decreasing employer contribution by more than 5%
grandfathered plans exempt from some requirements
Grandfathered Plans Exempt From Some Requirements
  • Grandfathered small group market plans do not have to provide Essential Health Benefits
  • Grandfathered small and large employer plans do not have to comply with:
    • Claims appeals process requirements
    • Emergency service requirements
    • Preventive care without cost-sharing
    • OB/Gyn and pediatrician designation requirements
who must provide essential health benefits
Who Must Provide Essential Health Benefits

All non-grandfathered health insurance coverage in the individual and small group markets will be required to cover Essential Health Benefits beginning in 2014  regulations mandate a list of Essential Health Benefits

Insurance issuers in the individual and small group market will be required to write plans that comply with the Essential Health Benefits mandate

who must provide minimum essential coverage
Who Must Provide Minimum Essential Coverage
  • Large employers (50+ employees) must offer Minimum Essential Coverage to all full-time employees or be subject to penalties
  • The term “Minimum Essential Coverage” includes an eligible employer-sponsored plan
what is an eligible employer sponsored plan
What is an Eligible Employer-Sponsored Plan

Defined in PPACA as a group health plan or group insurance coverage offered by an employer to an employee that is:

A government plan; or

Any other plan offered in small or large group market; and

Includes self-insured plan

what must large employers provide
What Must Large Employers Provide

In 2014, large employers must offer a health plan which provides:

Minimum Essential Coverage

Minimum Value

Affordable Coverage

Or be subject to “pay or play” penalties

minimum essential coverage clarified
Minimum Essential Coverage Clarified

Employer-sponsored self-insured and insured large group health plans are not required to offer all categories of Essential Health Benefits or conform to any essential benefit benchmark plan

These plans will comply with PPACA by offering an employer-sponsored plan that is affordable and offers minimum value

minimum value and affordability
Minimum Value and Affordability

In 2014, large employers must offer Minimum Essential Coverage that is affordable and provides minimum value to substantially all full-time employees and dependents (but not spouses)

If a large employer fails to offer any coverage, or coverage that does not meet the affordability or minimum value requirements and a full-time employee obtains subsidized coverage, employer will be assessed “pay or play” penalties

minimum value
Minimum Value

The plan’s share of the total allowed costs of benefits provided under the plan must be at least 60% of the Actuarial Value of those costs

“Actuarial Value” is a general summary measure of health plan generosity

  • Employer coverage meets affordability test if the employee is required to pay no more than 9.5% of household income for self-only coverage

Affordability Safe Harbors:

    • Employee’s W-2 reported wages
    • Based on monthly rate of pay (cost does not exceed 9.5% of monthly pay)
    • Coverage does not exceed 9.5% of Federal poverty level for single individual
summary minimum essential coverage
SummaryMinimum Essential Coverage

No penalties if large employer offers:

Eligible employer health plan

Plan provides minimum value

Plan is affordable

cost sharing limits for large employer plans
Cost-Sharing Limits for Large Employer Plans

No lifetime limits and phase out of annual limits on Essential Health Benefits that exceed high-deductible HSA plan limits (for 2013 - $6,250 / $12,500)

essential health benefits package
Essential Health Benefits “Package”

Coverage of ten listed services comprising Essential Health Benefits


Cost-sharing Limitations


Actuarial Value corresponding to “metal tiers” (bronze - 60%; silver – 70%; gold – 80%; platinum - 90%) or catastrophic

Deductible limit for small group plans ($2,000 / $4,000)

essential health benefits requirement
Essential Health Benefits Requirement

Non-grandfathered Health Plans offered in individual and small group markets (both inside and outside of exchanges) must offer a core package of EHBs and services starting first plan year (policy year for individual market) beginning on or after January 1, 2014

“Small Group Market” is defined in Section 1304 of the PPACA as plans for employers with 1-100 employees, though states have the option to define it as 1-50 employees until January 1, 2016

essential health benefits services
Essential Health Benefits Services

Ambulatory patient services

Emergency services


Maternity and newborn care

Mental health and substance abuse disorder services, including behavioral health treatment


essential health benefits services1
Essential Health Benefits Services

Prescription drugs

Rehabilitative and habilitative services and devices

Laboratory services

Preventive and wellness services and chronic disease management

Pediatric services, including oral vision and care

benchmark plans
Benchmark Plans

Proposed regulations define EHB based on state-specific “benchmark” plans, including the largest small group health plan in the state

States have the option to choose the benchmark plan that will apply to the individual and small group market plans in their state. If the state does not designate a benchmark plan, the benchmark plan will be the default plan (defined in the regulations as the largest small group product in the state)

benchmark plan benefits essential health benefits
Benchmark Plan Benefits = Essential Health Benefits

Benchmark plans selected by each state (or the default plan) establish the Essential Health Benefit standards for plans in that state

All plans in the individual market and all non-grandfathered small group market plans must offer benefits that are substantially equal to benefits offered by the benchmark plan in that state

states may select from benchmark plan options
States May Select FromBenchmark Plan Options

The largest (by enrollment):

Plan in any of the 3 largest products in the state’s small group market

Any of the largest 3 state employee health benefit options

Any of the largest 3 National Federal Employees Health Benefits Program Plan options

Insured HMO in the state

multistate small group employer
Multistate Small Group Employer

If a non-grandfathered insured small group market plan offers coverage to employees in more than one state, the insurance policy should conform to the benchmark plan in the state where the policy is issued (generally the state where the employer’s primary place of business is located)

special benchmark plan rules
Special Benchmark Plan Rules

If Benchmark Plan is missing any of 10 categories of EHB, proposed regulations require the state or HHS to supplement the benchmark plan

Benefit designs may not discriminate against potential or current enrollees

Special standards and options for benefits not typically covered by individual and small group policies today, including habilitative services

Includes standards for prescription drug coverage

actuarial value
Actuarial Value

Calculated as the percentage of total coverage costs for covered benefits that a plan will cover. Like plans in the large group market, small group market and individual plans must meet certain actuarial values:

Known as “metal levels” (60% - bronze; 70% - silver; 80% - gold; 90% - platinum)

Catastrophic coverage also available for eligible individuals

actuarial value1
Actuarial Value

HHS will provide an AV calculator

High deductible plans and HSAs are compatible with calculator

Proposed rules provide flexibility for plans with AV within 2 percentage points of the standard

Issuers in small group market are permitted to exceed annual deductible limits to achieve a particular metal level

reporting and disclosure
Reporting and Disclosure
  • Beginning in 2014, insurers and/or employers (if self-funded) who provide Minimum Essential Coverage during calendar year must report to IRS:
    • Name, address, SSN of primary insured and dependents; dates of minimum essential coverage; whether coverage is qualified plan through an Exchange; premium credits or cost-sharing subsidies
    • If employer-sponsored plan, must also report: name, address and EIN of employer; portion of premium to be paid by employer, and whether coverage is in the small group market and offered through an Exchange
reporting and disclosure1
Reporting and Disclosure

In 2014, the Summary of Benefits and Coverage must include notice of whether the plan provides Minimum Essential Coverage and actuarial value not less than 60%

The SBC must also include a description of Essential Health Benefits

Penalties for failure to provide an complete SBC = $1000 for each failure

preventive care
Preventive Care

All non-grandfathered plans have been required to cover preventive care without cost sharing beginning in Plan Year 2011

Preventive care is included in definition of Essential Health Benefits

preventive care1
Preventive Care
  • Included in preventive care:
    • Evidence-based care with an A or B rating recommended by the U.S. Preventive Services Task Force (includes screening for diabetes, cholesterol abnormalities, depression and numerous other conditions)
    • Routine immunizations
    • Additional types of preventive care and screenings for women and children
2012 women s preventive services
2012 Women’s Preventive Services
  • Annual well-woman visits
  • Screening for gestational diabetes
  • HPV testing
  • Contraceptive and methods counseling*
  • Counseling for sexually transmitted disease
  • Screening and counseling for interpersonal and domestic violence
  • Breastfeeding support, supplies and counseling

*Certain religious organizations are exempt from covering contraceptive services and supplies

Women’s preventive services must be covered with no cost sharing for Plan Years on/after August 1, 2012 (except grandfathered plans):

religious exemption for contraceptive care
Religious Exemption for Contraceptive Care
  • Religious exemption only for organization that:
    • Has inculcating religious values as its purpose
    • Primarily employs and serves persons who share its religious tenets, and
    • Is a non-profit church
religious exemption for contraceptive care1
Religious Exemption for Contraceptive Care
  • Temporary enforcement of safe harbor (at least until first plan year beginning on/after August 1, 2013) for nonprofit that on/after February 10, 2012 did/does not provide contraceptive coverage due to its religious beliefs:
    • Notice
    • Certification
  • Status of Litigation
penalties for noncompliance
Penalties for Noncompliance

Penalties for noncompliance with coverage mandates (no lifetime or annual limits when applicable; preventive care, if not grandfathered; age 26 child coverage; excessive waiting periods; etc.):

  • IRC 4980D excise tax penalty:
    • $100 per day per individual affected
    • Capped at lesser of 10% of GHP cost for preceding year or $500,000
  • Additional penalties for noncompliance with other applicable requirements of IRC, ERISA, PHSA, FLSA, etc.

Thank you for your participation

in the UBA Employer Webinar Series

 If your question was not answered during the webinar or

if you have a follow-up question, you can email the presenters today or tomorrow at:

To obtain a recording of this presentation, or to register for future presentations, contact your local UBA Partner Firm.