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Implementing Health Care Reform Overview of the PPACA for Employers. Recap on Health Reform Legislation. President Obama signed Patient Protection and Affordable Care Act (PPACA) on March 23, 2010
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Implementing Health Care ReformOverview of the PPACA for Employers
Recap on Health Reform Legislation • President Obama signed Patient Protection and Affordable Care Act (PPACA) on March 23, 2010 • Makes significant statutory changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms • Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant • Contains employer responsibility requirements for those with 50+ employees • Individual mandate to purchase and maintain minimum coverage • Bulk of the reforms take effect in 2014, but there are still many aspects of the law employers need to be cognizant of between now and then
Health Reform and the Supreme Court • U.S. Supreme Court ruled against a challenge to the health reform law being brought by 26 states and the National Federation of Independent Business. • Four issues were under consideration: • Whether the law’s “individual mandate” to purchase coverage is constitutional • Whether the required Medicaid expansion by the states is constitutional • If the federal Anti-Injunction Act, which establishes that entities can’t sue over a tax until it has actually been levied and paid, is applicable in this case. • If the law’s lack of a “severability clause” means that the whole law is struck down if one portion is found unconstitutional. • An unprecedented six hours of oral arguments on the case occurred on March 26-28. (Normal is one hour on one day).
Aspects of the decision • Individual Mandate is unconstitutional if you say that it is OK for Congress to impose it because of the Commerce Clause of the Constitution. (CNN jumped the gun on this) • Individual Mandate IS constitutional if you say that it is a tax since Congress does have clear authority to tax. • Medicaid expansion to 133% Federal Poverty Level is within Congress’ authority BUT states cannot be punished by withholding all Medicaid dollars if they do not comply. • Anti-Injunction Act does not apply • Severability argument goes away because PPACA is deemed to be constitutional
Supreme Court—What Does the Constitution say? • Commerce Clause: “Congress has the power to regulate Commerce with foreign Nations and among the several States and with the Indian Tribes” (Article I, Section 8, clause 3) • Taxing Clause: “Congress has the power to lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but in all Duties, Imposts and Excises shall be uniform throughout the United States” (Article I, Section 8, clause 1)
Supreme Court Reasoning • Despite Obama Administration public assertions that the Individual Mandate is not a tax (“penalty”), it agued that it was a tax before the Court. • Chief Justice Roberts said it was functionally a tax because it: • It is paid into the Treasury • It does not apply to non-taxpayers • Collection requirements found in Revenue Code with IRS as the enforcer/collector • Produces revenue for the Federal Government • Thus, it is governed by the Taxation Clause
Supreme Court Outcome Spin A vindication for PPACA: Liberal, Obama Camp Major blow to our individual liberties and endorsement of government takeover of health care and insurance industries: conservatives, Republicans Win for individual liberty since Commerce Clause is clearly out of limits Win for Big Government since all Congress has to do is label something as a tax and the Supreme Court ruling here encourages that Moves the arena back to Congress and the President: See you at the polls!
Changes to PPACA Requirements for Employers • Enforcement delayed on 105 (h) non-discrimination rules for all fully insured non-grandfathered plans • IRS solicited comments in March 2011 • No word on when new guidance will be issued/enforcement could begin • Enforcement likely to be prospective and with a grace period • Auto-Enrollment for groups of 200 plus delayed • The Administration has notified employers that the guidance on auto-enrollment will not be published before 2014. • W2 Reporting Requirements Delayed Until 2012 • 1099 Reporting requirements repealed • Employee Free Choice Voucher Program eliminated • CLASS Act (Long-term care) tabled
Upcoming Employer Responsibilities Employers need to address the following new compliance issues right now: • Reporting on W-2s the value of employer provided health insurance for groups over 250 EEs required for 2012; Given to EEs in 2013 • Preventive care requirements for women August 1, 2012 • Summary of benefit requirements begin on plan years beginning on or after September 23, 2012
W-2 Reporting • Employers will be required to include the value of group health plan coverage on W-2s issued after 1/1/2013. • Reporting for 2011 was voluntary. • The new reporting requirements do not change the tax treatment of employer-provided health coverage. The reporting is for informational purposes only. • Small Employer Exception • Employers issuing fewer than 250 Forms W-2 in the preceding calendar year are exempt from the reporting requirement. • May be on an entity rather than control group basis • Note- this is not the total number of employees, but the total number for Forms W-2 • Applies to all employers who provide applicable employer sponsored coverage
What to Report • Employers are required to report the value of all “applicable employer-sponsored coverage”. Generally, group health plans, including: • Major medical • Mini-meds • On-site medical clinics • Medicare supplemental coverage • Health FSA contributions (employer) • Employee assistance & wellness programs (with separate COBRA rates) • Optional Reporting • IRS guidance permits employers to report the cost of coverage that is not required to be reported (e.g. multiemployer, HRA) if reported coverage is otherwise applicable employer sponsored coverage
How to Report: Determining the “Aggregate Cost” • Must report the “aggregate cost” • Include pre-tax and post-tax coverage • Include employer and employee contributions (e.g. employer premium contribution or employee cafeteria plan contributions) • Multiple methodologies for determining aggregate cost. • General Rule: Use cost of COBRA premium
Women’s Preventive Care • Based upon Institute of Medicine Recommendations to HHS • Effective for the first plan year on or after August 1, 2012 • Screening for gestational diabetes • Human Papillomavirus (HPV) testing • Annual counseling and screening on STDs & HIV • All FDA approved contraceptives, sterilization procedures, and counseling • Lactation support and equipment rental • Screening and counseling for domestic violence • At least one well-woman preventive visit annually • Per HHS: • Religious based, non profits, have until August 1, 2013 to comply • New accommodation “Insurance Carriers must provide, not Employer” • Grandfathered plans will need not comply unless they adopted initial set preventive rules
Summary of Benefits Requirements • All insurers and self-funded employers will have to give people who apply for or enroll in individual or employer-sponsored coverage a standardized summary of benefits and coverage that includes: • Four page coverage summary with coverage terms glossary • Coverage examples of two set medical scenarios • Deductibles, co-pays etc. • Customer service and website information • Intent to give consumers standardized comparison information • Effective date delayed to on or after the plan year that begins on or after September 23, 2012 • Applies to all plans, including grandfathered and self-funded plans. • HIPAA excepted benefit plans (e.g., stand-alone dental, specific diseases, etc.) do not have to comply
The Big Year - PPACA in 2014 • Individual Mandate • Health Insurance Exchanges • Employer Mandate: Pay or Play • Other significant changes: • Modified community rating • Individual market guaranteed issue • Subsides available for qualified individuals purchasing through the exchanges • New premium taxes on fully-insured plans • Essential benefit requirements • Minimum value standard
Individual Mandate • Supposed to take effect on January 1, 2014 • Applies to most Americans but there are specified exceptions • Violators subject to a phased-in excise tax penalty of either a flat-dollar amount per person or a percentage of the individual’s income, whichever is higher • Widely viewed as weak and unenforceable • Constitutionality was determined by Supreme Court
Employer Responsibility Requirements effective January 1, 2014 • Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees • Certain seasonal workers are not counted in determining if employer has 50 workers • Full-time = 30 or more hours per week, determined on a monthly basis • Penalties assessed for “no coverage” or coverage that is “not affordable” • Minimum value standard to be developed to determine adequacy of coverage • Premium used to calculate affordability versus household premium is the single employee rate, regardless of how many dependents employee has covered on the employer plan
90-day Wait-Period PPACA limited wait-periods to no more than 90 days. The Notice proposes: • The wait-period rules apply to both full- and part-time employees (if coverage is offered to part-time employees). • No penalties for employers during the 90 day wait period. • Other conditions for eligibility under the terms of a group health plan would generally be permissible under PHS Act section 2708, unless the condition is designed to avoid compliance with the 90-day wait period limitation. For example, eligibility conditions such as full-time status, a bona fide job category, or receipt of a license would be permissible.
Newly-Hired Employees • Treasury proposes that for newly-hired employees, employers be granted a three-month period to determine whether an employee has worked sufficient hours to reach full-time status and become eligible for the employer’s health plan. • In cases where an employer reasonably views, at the end of the three-month period, that the hours worked by an employee during the period are not representative of the average hours the employee is expected to work on an annual basis, the Department proposes granting employers a second three-month period to determine the employee’s status. • Once it is determined that an employee has worked sufficient hours to reach full-time status (representative of the average hours the employee is expected to work on an annual basis) and become eligible for the employer’s health plan, the 90-day wait period would then be applied
Other 2014 Items • An employer must report to HHS certifying that its group health plan provides “minimum essential coverage” • Cancer clinical trials for non-grandfathered plans (new benefit) • No annual dollar limits (lifetime caps gone Sept. 2010) • Wellness incentives
Affordability Safe Harbor • Treasury will allow employers to use a safe-harbor for the affordability test based on 9.5% of employee W-2 reportable wages rather than 9.5% of household income. • This attempts to meet workability issue since employer may not know household income.
PPACA Exchanges • State-based Health Insurance Exchanges • Law requires creation of an American Health Benefit Exchange for individuals and Small Business Health Options Program (SHOP) Exchange for small employers up to 100 lives • States can combine their individual and small employer exchanges • Regional sub-exchanges optional • States can choose to expand their Exchanges to serve employer groups of 100+ in 2017 • If a state doesn’t create one, federal government will if they are not convinced that state is making significant progress by November 16, 2012 • Small Business Health Insurance Premium tax credits ONLY available for individuals purchasing through an Exchange, not those in an employer group 2013 • People with adequate and affordable group coverage cannot leave group plan for the individual Exchange
Employer Responsibilities Regarding Exchanges Responsibilities apply even if an employer does not want to purchase Exchange-based coverage or isn’t eligible to purchase Exchange coverage • All group health plans must provide notice to current employees and new hires about Exchange and subsidies March 2013 re: • Existence of Exchange, services and how to obtain assistance • Availability of subsidies if employer coverage is unaffordable or below minimum benefit level.
Exchange Questions for Employers • Are you eligible to purchase Exchange-based coverage • Is there an advantage to purchasing coverage through the SHOP Exchange? • What about competing private Exchanges? • How can you budget for potential cost increases? • What will your new compliance costs and responsibilities? • What would the advantages/disadvantages be to dropping coverage and thereby allowing employees to purchase coverage through the individual Exchange? • What will your communications strategy be?
State Discretion • PA must choose whether it wants to have an Exchange. There are many decisions to be made by the General Assembly such as: • Will it be run by Insurance Department? • What size (50 EE for small group)? • Separate individual and small group Exchanges? • Consumer protections re marketing (licensed insurance brokers vs. unlicensed Navigator community/advocacy groups)?
State Discretion • PA General Assembly decisions (cont.): • Minimum essential benefits: which HHS option? • How to pay for it after start-up? • Safeguarding financial privacy since Navigators may help decide what subsidy levels are available • Exchange plans equality (coverage and price) with private sector plans? • NOTE:HHS provided Exchange guidance (Federal Register March 27, 2012 )
2014 Changes the Way Employer Plan Premiums Are Calculated • Market reforms for fully insured small groups up to 100 employees (and any larger fully insured groups if a state allows groups of 100+ in their exchange): • Strict modified community rating standards with premium variations only allowed for age (3:1), tobacco use (1.5:1), family composition and geographic regions • Experience rating would be prohibited • Wellness discounts will be allowed for group plans under specific circumstances • Could have a SIGNIFICANT price impact
2014 Changes Employer Plan Benefit Structures • Essential health benefits (EHB) for qualified coverage • Standard to apply to all fully insured small groups (1-100; possibly just 1-50 until 2016 based on state decision) and individual products to be sold both inside and outside the Exchanges • Obama Administration released a bulletin in December 2011 which will help shape what services must be covered for non-grandfathered individual and small group plans • States will need to determine by August 2012 which of four benchmark plans will be their baseline for determining EHB standards of coverage PA LEGISLATURE NOT IN SESSION • If a state allows fully insured large groups in its Exchange after 2017, then EHB will apply to all fully insured large groups too
2014 Changes Employer Plan Benefit Structures • Actuarial value requirements for all individual and small group plans begins. • Minimum actuarial value of a plan will be 60% and there will be four medal-levels of plans—Bronze, Silver, Gold and Platinum • Actuarial value Bulletin issued by HHS will determine value and regulate cost-sharing. Provides for state flexibility but creates uncertainty for consumer-directed plans • Out of pocket and cost-sharing limits for individual and small group markets • All qualified health plans will be subject to new certification standards • Large groups and self-funded plans will be subject to a different, to-be-determined minimum value standard, to be developed by IRS/DOL/HHS for employer mandate compliance purposes
Other 2014 Employer Plan Changes • All fully insured group plans will be guaranteed-issue with no preexisting condition limitations • Annual and lifetime limits will be fully prohibited, including for grandfathered plans • Size of a small-employer group will be redefined to one to 100 employees (although states may elect to keep the size of a small groups at 50 employees until 2016) • Employee waiting periods of more than 90 days are prohibited for all plans, including grandfathered plans. • Employer-sponsored wellness program rules for all employer group plans under HIPAA improve and employers can increase the value of workplace wellness incentives up to 30% of premiums, with HHS discretion to increase the incentives to 50% • Small businesses prohibited from buying coverage with deductibles in excess of $2000 individual/$4000 family
PPACA in 2018 • Cadillac tax goes into effect for all group plans, including self-insured plans. The tax would be paid by the insurer in the case of a fully insured group or the TPA in a self-insured arrangement, but would be passed on directly to the employer. • 40% excise tax on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for singles and from $27,500 for families takes effect in 2018 • Arbitrary numbers and lack of adequate indexing may be problematic
Thank You!For More Information Kevin Sweeney 412-288-2365 Vince Phillips, Lobbyist 717-232-0020 Resources: www.pahu.org (contains link to Supreme Court ruling); www.nahu.org; www.kff.org; www.hhs.gov; www.dol.gov; www.irs.gov; www.ahip.org
