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FMI Independent Operators

FMI Independent Operators. Patient Protection and Affordable Care Act: Plan Impact Coverage Mandates and Employer Requirements Groom Law Group December 7, 2010. Overview. The Patient Protection and Affordable Care Act (“ACA” or “Act”) was effective March 23, 2010 2010 Changes

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FMI Independent Operators

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  1. FMI Independent Operators Patient Protection and Affordable Care Act: Plan Impact Coverage Mandates and Employer Requirements Groom Law Group December 7, 2010

  2. Overview • The Patient Protection and Affordable Care Act (“ACA” or “Act”) was effective March 23, 2010 • 2010 Changes • Small employers will be eligible for tax credits for providing health coverage, if they employ no more than 25 full-time equivalent employees • 2011 Changes • For plan years beginning on or after 9/23/2010, plans will be required to comply with coverage mandates for all employees (including part-time employees) covered under the plan • OTC medicines and drugs reimbursable only with a prescription • 2014 Changes • Employers may be penalized if an employee receives federal assistance to purchase health coverage in an Exchange, if they employ at least 50 full-time equivalent employees • Individuals will be required to have health care coverage and will be eligible for federal assistance to purchase health coverage, if meet certain criteria • Additional coverage mandates take effect • State-based Exchanges will be established through which individuals and small businesses may purchase health insurance coverage • Various other ACA provisions will go into effect over the next eight years 2

  3. Key Concepts

  4. Key Concepts

  5. Essential Health Benefits • Secretary to define, but must include categories listed below. • Ambulatory patient services • Emergency services • Hospitalization • Maternity & newborn care • Mental health and substance use disorder services • Prescription drugs • Rehabilitative & habilitative services & devices • Laboratory services • Preventive & wellness services and chronic disease management • Pediatric services, including oral & vision care

  6. What Plans Must Comply with Coverage Mandates? • Group health plans (insured and self-insured) & health insurance issuers offering coverage to group health plans • Enforced through the PHSA, ERISA and the Code • ACA does not apply to HIPAA Excepted Benefits • Retiree-only plans (stand-alone) • Accident, life, disability, long-term care • Limited scope dental & vision • Specified disease (cancer policy) • Fixed indemnity • Supplemental plan

  7. Key Coverage Mandates for Group Health Plans

  8. Costs and Benefits of Maintaining Grandfather Status

  9. Key Coverage Mandates - 2011

  10. Key Coverage Mandates - 2011

  11. OTC Drug Changes • Restrictions on OTC medicine or drug reimbursements • Effective for expenses incurred after 12/31/10 • Regardless of plan year or any grace period • OTC medicines and drugs reimbursable only with a prescription • Written or electronic order meeting legal requirements in state in which expense incurred • Issued by individual legally authorized to issue prescription in state • Restrictions do not apply to OTC items that are not medicines or drugs

  12. OTC Drug Changes • Debit cards generally may not be used to purchase OTC medicines or drugs • Transition relief through 1/15/11 • 90% pharmacies • Could affect debit card purchases of prescription-only drugs

  13. W-2 Changes • Requires employers to report the aggregate cost of applicable employer-sponsored health coverage on employee's W-2 • Aggregate cost determined under rules similar to COBRA valuation rules • Voluntary for 2011

  14. FSAs, HRAs and HSAs • Restrictions on the reimbursement of over-the-counter (“OTC”) drugs from FSA, HRA and HSA, effective 2011. • Increases additional tax on distributions from HSAs that are not used for qualifying medical expenses from 10% to 20% of the distribution, effective 2011. • Employee salary reduction contributions to FSAs limited to $2,500, indexed to CPI-U, effective 2013.

  15. Changes in 2012 and 2013 • Summary of Benefits document • The Department of Health and Human Services will issue a template • Must summarize benefits in 4 pages, 12 pt. font • Auto-enrollment for Large Employers • Employers with more than 200 full-time employees must automatically enroll new full-time employees in coverage and continue enrollment of current employees • Inform employees about the existence of the Exchange and eligibility for federal subsidies

  16. Key Coverage Mandates - 2014

  17. Play or Pay - 2014 • Grandfather status does not affect play or pay requirement. • Large Employer = at least 50 Full-Time Equivalent (FTE) employees • Insufficient minimum essential coverage is not “affordable” or does not provide “minimum value”

  18. Play or Pay – Insufficient Minimum Essential Coverage • Minimum essential coverage must be • “Affordable” - which means it costs 9.5% or less of an employee’s gross income, and • Provide “minimum value” - which means that the plan’s share of the costs of benefits under the plan is 60% or more • If employer-sponsored coverage does not meet this threshold (if not “affordable” or does not provide “minimum value”), the employee may go to the Exchange to purchase coverage and may be eligible to receive a federal subsidy

  19. Play or Pay –Free ChoiceVouchers • Employers must provide free choice vouchers to employees whose contribution for coverage through the employer’s plan is between 8% to 9.8% of the employee’s income and whose family income is less than $88,000. • Amount of the Voucher: The most generous amount the employer would have contributed for self-only (or family, if applicable) coverage under the employer’s plan. • This provision does not specify that a qualified employee must be full-time. Guidance could require that employers provide free choice vouchers to part-time employees.

  20. “Cadillac Plan” Tax – 2018 • 40% excise tax on health insurers and/or persons administering self-insured plans on amounts in excess of high cost health plan limits • High cost = $10,200/single; $27,500/family (increased by a “health cost adjustment percentage”) • Tax imposed on amounts in excess of limit • Limits indexed based on CPI-U (not medical inflation) • Higher limits for “qualified retirees” and “high risk” professions • Limits may be increased by age and gender characteristics • Likely to be passed through to employers

  21. “Cadillac Plan” Tax – 2018 • 40% excise tax on high cost plans (continued) • Include employee-paid portion in valuation • Include FSAs, HSAs, HRAs • Tax imposed on insurer, employer, or person administering plan benefits • Employer required to calculate excess benefit amounts and allocable share of each provider and notify provider and IRS. • Dental, vision, LTC, accident/disability, and fixed indemnity plans paid with after tax-dollars are excluded.

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