Health Care Reform: A Guide for Employers

1. Health Care ReformHealth Care Reform What it means to EmployersNeil CrosbyDirector of Sales – Warner PacificVice President of Public Affairs - CAHU

2. How did we get here? • Health Care Cost Increases • Health Insurance Rate increases • Under Insured • Un Insured

3. The New Law • House Bill • Senate Bill • Reconciliation • Like it or not…It’s the Law

4. The Public wants to know… • Service Clubs • Chamber of Commerce • Business Associations • Employer Groups

5. Employers Want To Know ? • Effects on me as the Employer? • Effects on my Employees? • How much is it going to cost me? • What do I have to do?

6. HR 3590 – An Outline • Details are few • General Provisions • Basic Timelines • All subject to Change

7. Information Portals • HHS created an Information Portal • www.HealthCare.gov

8. High Risk Pools • Begins in 2010 • Creates ‘new’ Pool – PCIP – Pre-Existing Condition Insurance Plan • Un-Insured for 6 months, Declined Coverage, US Citizen • Safety Net Program funded by Federal Gov

9. Grandfathered Plans • Lots of Questions… • Plans in place on March 23, 2010 • If my Employer makes even a simple change in their plan, does it lose Grandfathered status…stay tuned • Employers that had Renewals: April, May, June

10. Grandfathered Details • Cannot Cut or Reduce Benefits for Diseases • Cannot Raise Co-Insurance • Cannot raise Co-Payments • Cannot raise Deductibles • Cannot significantly lower ER Contribution: 5% • Cannot change Insurers • Stay GF: Accept Renewals with No Changes

11. Why Stay Grandfathered ? • New Discrimination Rules • Cannot ‘favor’ the more highly compensated • Management Carveouts • Salaried verses Hourly • Management verses Non-Management • Better Plan for one Class • Pay more of the Premium for some Employees

12. Small Business Tax Credits • Begins with the 2010 Tax Year • Credit on Business’ Annual Tax Return • Retro tax credit to January 2010

13. Tax Credits- Who is Eligible • Small Business only • Less than 25 Full Time Employees (FTE’s) • Income ‘average’ less than $50K per FTE • Owners & Families excluded from Calculation

14. Tax Credit - Guidelines • Only Premium paid by the Employer is eligible for the Credit • Employer must pay a minimum of 50% of EE premium. • Premium counted toward Credit may not exceed an ‘average premium’ as set by HHS EE: $ 385 Family: $ 913

15. Tax Credit - Amounts • 2 – 9 FTE’s • Income average less than $25K per FTE • Maximum Credit: 35% • 10 – 24 FTE’s • Income average less than $50k peer FTE • Credit varies based on a ‘reduction formula ‘ reducing from the Maximum Credit of 35%

16. Tax Credit Goals • Encourage small Employers to Obtain new coverage, or Retain current coverage • On average… • Only 10-15% Qualify for the Tax Credit • Only 10-15% is received in a Tax Credit

17. Expansion of Child Coverage • Begins October 1, 2010 and sooner with most Carriers • All Group & Individual Plans, including Self Insured • Through age 25 up to age 26 • Currently enrolled Dependents • Not currently enrolled, upon renewal 10-1-10 or later • Dependents may be Married and even live elsewhere • Covers only the Dependent, not Spouse or Children

18. Maximum Benefit Limits • Begins 2010 • Lifetime Benefit Limits will be prohibited

19. Various Provisions • Begin 2010 • Children not subject to Pre-Existing Condition Limitations / Guarantee Issue ? • Federal Grant program for small Employers offering Wellness programs

20. Rate Review • Begins 2010 • HHS – May prevent ‘unreasonable’ rate increases

21. Mass as an Example • No Rate increase allowed in 2010 • 6 Carriers denied • For Profit / Not for Profit • Official's email warning • Ins Commissioner – “Statements unprofessional and counterproductive”

22. 2011 Provisions • Employer sponsored premiums on W-2 • Prohibits ‘OTC’ drug reimbursements from FSA’s, HSA, HRA • Penalties for HSA non-qualified withdrawals increase from 10% to 20%

23. The CLASS Act • Community Living Assistance Services and Supports Act ( CLASS Act ) • Creates a new MediCare like program – LTC • Begin paying into – 2011 • Won’t start until 2013 • 5 Year Deductible Period (2018?) • Estimated Premium: $240 per month/per employee • Maximum potential benefit: $75 per day • Must meet Minimum Income 3 of 5 years /No Benefit

24. 2013 Provisions • New cap on ‘Medical’ FSA contributions of $2,500 annually • MediCare Hospital Tax: • 1.45% to 2.35% for high income earners • New 3.8% Tax on net investment income • Could even be when selling a Home • Both: $200k Indvl / $250K Joint

25. Exchanges • Begins 2014 • Requires States to create an Exchange for Individuals • A ‘Shop Exchange for small Groups • Or may combine into one Exchange

26. Market Reforms • Begins 2014 • Guarantee Issue in all markets • No Pre-Ex Condition Limitations • Waiting Periods may not exceed 90 days • Low income subsidies begin – Affordability Credits up to 400% of FPL • Redefines Small Group as 1-100

27. Rating Methods • Begins 2014 • Individual & Group – Strict modified community rating standards • Premium variations allowed only for: Tobacco(50%), Family, Geography • Premium Ratio: 3/1

28. Employer Mandate • Begins 2014 • Applies to Employers of 50+ • Don’t have to provide coverage • If even 1 employee receives a subsidy and buys coverage through the Exchange the Employer will face penalties • $2000 Fine Per Employee

29. Affordable Plans • Employer offered plans • EE portion exceeds 9.5% of household income • $3,000 Fine • One third of Employers

30. Employer Vouchers • Begins 2014 • Notification to Employees about the Exchange begins March 1, 2013. • Employers must issue Vouchers in the amount they contribute now, to employees who wish to buy through the Exchange • Only to Employees under 400% of FPL • Employees may ‘keep the change’…

31. Auto Enrollment • Begins 2014 • Employers with 200+ • Must ‘enroll’ all new employees

32. Benefit Requirements • Begins 2014 • Limited Benefit packages

33. Deductible Maximum • Begins 2014 • Deductible cannot exceed: • Individual: $ 2,000 • Family: $ 4,000

34. Individual Mandate • Begins 2014 • Requires all American Citizens and Legal Residents to buy qualified coverage • Unless…

35. Individual Mandate - Exclusions • Religious objectors • Those not lawfully present • Incarcerated individuals • Members of Indian Tribes • Taxpayers under 100% of FPL • Those with No tax liability • Those who were not covered for ‘less than 3 months’

36. Individual Penalties • 2014 Lesser of 1 % of Income or $ 95 • 2015 Lesser of 2 % of Income or $ 325 • 2016 Lesser of 2.5% of Income or $ 695

37. Insurer Fees • 2014 $ 8 Billion • 2018 $ 14.3 Billion

38. Cadillac Tax • Begins 2018 • Meant as a Revenue builder • 40% Excise Tax • Individuals: $10,200 • Families: $27,500

39. Potential Scenarios • November 2010 Congressional Elections • November 2012 Presidential Election • Political Movement within America & California

40. Rasmussen Report • 57 % Americans - Favor Repeal • 59% Americans – Costs will Increase due to the Law • 51 % Americans – Law is ‘bad for the Country’

41. US Chamber of Commerce • 78% of Employers feel their Costs will Increase due to the new Law • 65% Oppose the new Law altogether • 55% Less likely to hire new Employees due to the new Law

42. NBC / WSJ • 51% of Americans feel it would be acceptable if the November Elections result in an Appeal of the new Law

43. What happens next… • Not much detail yet • Changes will be made • New information learned and applied

44. What you can do… • Stay informed • Read all that you can • Go to meetings

45. Questions • Contact information: • Neil Crosby • NeilC@WarnerPacific.com • 800-801-2300