Cool presentation on aligning values and culture to the people

1. Health Care Reform
What Are the Changes
for Employers
Nancy Taylor
Greenberg Traurig
July 20, 2012
GREENBERG TRAURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM 0
Information on Presentation
• Background on “ACA”
• Employer Requirements
• Implementation Issues
• Legislative, Regulatory, and Legal
Challenges
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2. ACA Breakdown by Pages
Coverage
465 pages
19% of total pages
2,409 total pages
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How did we get here?
• Decision to expand coverage resulted in
a $1 trillion package over 10 years.
• Options:
– Keep coverage that you have (already
expensive from a tax code)
– Expand public programs (expensive)
– Provide tax credits to those without
coverage (more expensive than public
programs)
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3. Overview
● Analysis of financing of health care reform by sector
● Overview of business segment impact of health care
reform
Insurance
Market
Exchanges Medicaid
Fully insured
Self Insured
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Health Care Coverage Timeline
Most changes occur in 2014 to expand
coverage:
● Reform insurance marketplace (“Exchange”);
● Create tax credits; or
● Medicaid eligibility for low-income who do not
have access to employer-sponsored coverage.
Some interim changes in 2011.
First stage of reforms allows time for
implementation of major changes in 2014.
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4. General Structure of Reform
● Most Americans stay in their employer-sponsored
plans.
● Individuals and small groups may purchase coverage
through the state-based exchanges in 2014. (An
exchange is a group of insurance plans with new
rules.)
● Tax credits for low-income individuals available only
when coverage is purchased through the exchange.
● Between now and 2014, some changes to health
insurance and employer-sponsored plans.
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Changes Starting in Plan Year After
September 23, 2010
Insurance & Employer-Sponsored Plans Must:
● Cover dependents up to age 26 (if plan offers dependent
coverage);
● No lifetime dollar limits (e.g. no limit on the spending
under the plan);
● No restrictive annual dollar limits on essential benefits
(may get a waiver under certain conditions);**
● No rescissions (unless there is fraud);
● Appeals and grievance process*;
● No cost sharing on certain prevention and wellness
benefits*; and
● No pre-existing condition limitations on children 19 and
younger.
* may be grandfathered.
** mini-med waivers have been granted.
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5. Additional Changes
Additional Changes:
● W-2 reporting (mandatory for 2012
W-2s);
● HSA penalty;
● Changes to FSAs/HSAs/benefits on OTC
(prescription only) (applies after
December 31, 2010); and
● CLASS Act has ended
● Uniform Summary Benefits must be
provided to all employees plan year after
September 23, 2012.
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You must report the cost of
employer-sponsored health
coverage in box 12 using
code DD. The amount
reported should include
both the portion paid by the
employer and the portion
paid by the employee.
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6. IRS Chart of Reporting Requirements
More available at www.irs.gov
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Uniform Summary Benefit Notices
● ACA Section 1001 (PHS Act Section
2715)
● Final Rule released on February 9,
2012
• Requires use of template, content, coverage
examples.
• Subject to changes through future guidances.
• May be done electronically.
• Changes to content and coverage examples.
• Effective date: first open enrollment period
after September 23, 2012 or plan year after
September 23, 2012.
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7. 12
Changes in 2013
• Notice to employees about benefits and
eligibility for exchange (March 1, 2013).
• Medicare payroll and unearned tax
increased for certain individuals (no
change to employer contribution).
• Limit on FSAs ($2,500).
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8. Changes Starting January 1, 2014
Individual obligation to have coverage or pay a
penalty.
●Employer obligations go into effect:
● auto-enroll employees into plans if over 200
employees (RFI to be released on how employers offer
default enrollment today);
● offer affordable coverage or may pay a penalty.
●Employer plans must:
● pay for 60% of benefit costs;
● guarantee issue without limits on pre-existing
conditions;
● have no more than 90-day waiting period;
● no annual limits, appeals and grievances, dependant
coverage up to age 26, and other requirements.
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Individual Obligation - 2014
Individual must obtain coverage through:
● Medicare;
● Medicaid;
● Eligibility expanded to all individuals
with incomes up to 133% FPL
(under age 65)
● Exchanges;
● Individual
● Small Groups (up to 100)
● Employer-Sponsored Coverage; or
● Pay a penalty (exceptions for income below
tax filing threshold, no affordable plan
available, non-citizens, and religion).
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9. Supreme Court
• Individual mandate is constitutional under
Congress’s authority to “lay and collect”
taxes
• Not constitutional under Commerce Clause
or Necessary and Proper Clause
• Medicaid expansion is constitutional under
Spending Clause
• But Congress cannot give the Secretary
authority to tie all of a State’s federal
Medicaid funding to compliance
• Can only tie expansion funding to
compliance with expansion program
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Low-Income Americans without
Employer Coverage (in 2014)
If an individual/family does:
• not receive “affordable” employer sponsored
coverage and
• earns between 133-400%* of the federal
poverty level, then
• the individual/family will get a tax subsidy
to pay for all or part of their health
insurance coverage.
The tax subsidy can only be used in the
exchange.
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10. Supreme Court Made Some Changes
Supreme Court held that the Medicaid expansion is not
enforceable under the law. Therefore, States may not
expand eligibility up to 133% of FPL.
Law permits individuals who earn between 100-400% of the
federal poverty level to get a tax subsidy. If an employee
gets a tax subsidy who otherwise would be eligible for
coverage, an employer would be penalized.
Law did permit all who earned less than 133% of the federal
poverty level to get Medicaid coverage. If an employee
becomes eligible for Medicaid, an employer would not be
penalized.
Now it is unclear what will happen in each State. Stay tuned and
watch for more updates.
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Employer Obligation
Effective 2014
Employers may either offer coverage or risk paying a
penalty.
● Coverage is only required for full-time employees
(working more than 130 hours/month but rules will
permit a three month-one year lookback stability
period).
● Coverage must be a plan that pays out 60% of the costs
of the plan or meet a “minimum value test”
● Coverage must be “affordable” for full-time
employees, or full-time employees may get coverage
in the exchange and may qualify for a tax subsidy.
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11. Definition of Employer and Employee
Definition of Employer
- Uses the common-law test
- Employer includes a predecessor employer
- An employer not in existence during an entire preceding
calendar year will be an applicable large employer for the
current calendar year if reasonably expected to employ an
average of at least 50 full-time employees (taking into account
FTEs) on business days during the current calendar year
- Common Control: Entities treated as a single employer under
IRC § 414(b), (c), (m), or (o) are treated as a single employer,
so all employees of a controlled group or an affiliated service
group, as defined by the IRS, are taken into account in
determining whether any member of the controlled group or
affiliated service group is an applicable large employer.
Definition of Employee
- A worker who is an employee under the common-law test
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If Employer Offers Coverage
That is Not Affordable
•If the full-time employee must pay more than 9.5% of
income for individual premium costs, the plan may be
deemed “unaffordable” and the employee may opt out
and receive a tax credit for coverage in the exchange.
•For each full-time employee that qualifies and
receives a tax credit, employer will pay $3,000 (or
$2,000 (-30) for all full-time employees, whichever is
less).
•For each full-time employee who is not offered
coverage, employer will pay $2,000 for all full-time
employees (-30).
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12. Affordability Test
Request for comments from IRS (IRS Notice 2011-73)
• 9.5% test applies to self-only coverage.
• Safe harbor for employers who base the 9.5%
premium on the employer wages.
• No penalty if employee can demonstrate that family
wages higher and eligible for tax subsidy.
• Affordability test does not apply to dependent
coverage.
• If employee offered dependent coverage (that is or
is not affordable), then dependents may not eligible
for tax credits (issue still pending).
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Employer Shared Responsibility
IRS Notice for Comment – Notice 2011-36
• How to define “full-time” employees who must be
eligible for coverage beginning in 2014.
• Employee – defined under the common-law test
(“leased” employees would not be counted).
• “Hours of service” is an employee who works 130
hours of service in a calendar month.
• Employer permitted a “look-back” of 3-12 months
to determine eligibility.
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13. Full-Time / Part-Time
• ACA Section 1513
• FAQs released on February 9, 2012
• Clarifies that safe-harbor and stability period will be
included in proposed rules
• Permits employers to define in plan eligibility
requirements
• 90-day waiting period will apply after eligibility
period is met
• Greater clarity in seasonal and part-time
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Employer Shared Responsibility
“Look-back/stability period” for existing
employees
• Employer would determine each employee’s full-time
status by looking back at a defined period of not less
than three, but not more than twelve consecutive
months, as chosen by the employer, to determine
whether the employee averaged least 130 hours of
service per calendar month.
• If yes, then during the “stability period”, the employee
would be required to have coverage or the employer
would pay a penalty.
For new employees, IRS requested comments
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14. Employer Shared Responsibility
Proposed Facts and Circumstances Test for New Hires
• Employer must determine, in light of the facts and circumstances:
• (a) whether employee is reasonably expected at time of hire to work an
average of 30 or more hours per week on an annual basis; and
• (b) whether employee’s first 3 months of employment are reasonably
viewed, as of the end of that period, as representative of the average hours
the employee is expected to work on an annual basis.
• If employee reasonably expected to work full-time and does work full-
time for first 3 months, employee must then be offered coverage
• If the employee’s status cannot reasonably be determined:
• If hours representative of expected work: deemed full-time if he
or she works full-time during first 3 months
• If these hours not representative: plan permitted additional 3
months to determine employee’s status
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Examples
Employer has a group of employees who work on an
hourly basis.
•The employer establishes a “look-back period” of 12
months. Certain employees work 1560 hours and then are
considered “full-time” employees. These full-time
employees would then be eligible for affordable coverage
for the “stability” period of 12 months or the employer
could face a penalty
Employer has a group of salaried workers.
•Employer determines that they are to be treated as full-
time workers. These workers would then be eligible for
affordable coverage for one year or the employer could
face a penalty.
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15. Example
● Employer offers coverage to all 230 full-
time employees (and dependents).
● Coverage is unaffordable for 40 full-time
employees.
● These 40 full-time employees get tax credits to
buy coverage in the exchange.
● Employer must pay $120,000, the smaller penalty.
■ $3,000 x 40 FT employees receiving tax credit =
$120,000; versus
■ $2,000 x (230-30) 200 FT employees = $400,000.
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If Employers Do Not Offer Coverage
For employers not offering coverage to full-
time employees (based on the “look-
back/stability” test):
● If one full-time employee gets a tax
subsidy to buy insurance in exchange:
● Employer must pay a fee –
● $2,000 x # of all full-time employees
(minus 30 full-time employees).
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16. Example
● Employer with 230 full-time employees
does not offer coverage.
● 40 full-time employees get government tax
credit to buy coverage in the exchange.
● Employer must pay:
$2,000 x (230-30) = $400,000.
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Practical Effect of These Provisions
• Can declare an individual “full-time” and offer benefits
without the “test” and cover after a waiting period (no
longer than 90-days)
• Can declare an individual “part-time” and offer a
probationary period with a look-back, stability period
and then offer coverage (and include a 90-day waiting
period)
• Exchange coverage not available for groups over 100 (or
over 50 depending on State discretion)
• Coverage must be “affordable” (individual coverage
premium charged may not exceed 9.5% of total premium
cost)
• Coverage must meet “minimum credible coverage”
(employer plan must pay out 60 percent of the costs of
the plan’s covered benefits)
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17. Treasury Notice 2012 (2/9/2012)
Employee is
hired
Assumes that the
Offer coverage
Is employee employee is
Yes* to employee
expected to “otherwise eligible”
within 90 days at hire date.
be full-time?
of hire
FT/PT status is unknown
Employee
Assumes that
Measure actual Employee considered
Yes* effective date of
hours worked on averages 30+ eligible for coverage is at 3-12
set period (3-12 hrs/week full-time months for same
months) coverage period
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Essential Health Benefits
● ACA Section 1302
● Essential Health Benefits Bulletin released
December 16, 2011
• Lifetime and annual limits on EHBs
prohibited after 2014
• EHBs apply to exchanges, small group
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18. Essential Health Benefits
Coverage through the Exchange:
Must meet “Essential Health Benefits” requirements
IOM report – base it on categories of coverage and focus
on the cost of the coverage
Coverage from Employer-Sponsored Plan:
Fully insured coverage – either State benefit
requirements or Essential Health Benefits
Self insured coverage – 60% actuarial value of the
underlying benefit plan
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Essential Health Benefit Guidance
Transition Period for States
• Benchmark plan selection from four options
• Largest plan by enrollment in any of three
largest small group insurance products in
State;
• Any of three largest State employee benefit
plans;
• Any of the 3 largest national FEHBP plans; or
• Largest HMO in the State.
• Default is largest plan in small group market
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19. Health Insurance Exchanges
The Exchange will begin – this means there will be a
selection of insurance plans for individuals and small
groups under 100 to select from in each State.
(enrollment will begin in 2013).
● Exchange plans will
● offer “essential benefit packages” ;
● guarantee issue without limitations on pre-
existing conditions;
● limit premium rates;
● no more than 90-day waiting period; and
● no annual limits, appeals and grievances, and
other requirements.
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Structure in 2014
Structure in 2014
Outside the Individuals: Small Business
Exchange Exchange Market SHOP Enrollment
Nongroup & 24 million 5 million
Other Coverage 9% of total (<100 employees)
22 million (19 million subsidized)
8% of total
(“Other” is about
half and includes
Employers
Medicare) Small and
Large
Qualified Qualified
Health Health 162 million
Plans Plans
Medicaid Subsidies
Enrollment Exchange “SHOP” 58% of total
51 million Exchange
(non-elderly)
18% of total
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Note: Enrollment figures are CBO projections for 2019 (CBO, March 2011 Baseline).
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20. Questions & Answers
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