At Heartland Bank's July 10th Power Breakfast, Chris Pulos of Brower Insurance provided the audience with an update on the legal status of health care reform as well as a summary of benefits and coverage, FSA, HSA and HRA changes, individual mandate, employer issues, W-2 reporting, non-discrimination rules and significant mandates for 2013 and beyond.

1. Chris G. Pulos
Senior Vice President
Brower Insurance,
a Marsh & McLennan Agency LLC
Company
Health Care
Reform

2. Agenda
• What is the legal status of the law?
• Which plans must comply?
• Reforms currently in place
• 2012-2013 compliance deadlines
• Future compliance deadlines
• PPACA Taxes
• Handouts
• Questions
2

3. Legal Status of Health Care
Reform Law
3

4. Supreme Court Decision
• Supreme Court issued its decision on June 28, 2012
− 5:4 ruling
− Chief Justice Roberts wrote the court’s opinion
• Upheld individual mandate (purchase health
coverage or pay a penalty – 2014)
• The individual mandate is constitutional, so the rest
of the law is too
4

5. What Will Be Next?
• Implementation of health care reform law continues
as scheduled
• Changes to law may come from Congress
− Some changes already made
− Democrats will oppose any major changes, and President
Obama has promised to veto
• Courts will address other aspects of the law
− For example, courts have ruled on the law’s contraceptive
coverage mandate, with mixed results on whether employers
must comply
5

6. Which Plans Must Comply?
6

7. Plans Subject to Health
Care Reform
• Health care reform’s health plan rules generally
apply to group health plan coverage
• Exceptions
− Excepted benefits
− Retiree-only plans
− Group health plans covering fewer than 2 employees
• Excepted Benefits
− Accident or disability income coverage
− Separate dental and vision plans
− Liability insurance
− Some FSAs
7

8. Reforms Currently in Place
8

9. Provisions Already Effective
• Small employer tax credit
• Dependent coverage up to age 26
• No lifetime limits/restrictions on annual limits
• No rescissions
• No pre-existing condition exclusions for children (age 19 or
under)
• No cost-sharing for preventive care services
• Appeals process changes
• No reimbursement for Over-the-Counter medicine or drugs
(without a prescription)
• Medical loss ratio rules
9

10. 2012-2013 Compliance
Deadlines
10

11. W-2 Reporting
• Employers must report aggregate cost of group health plan
coverage on each employee’s W-2 Form
• Does not change the tax rules for health coverage –
coverage is still not taxable
• Mandatory for 2012 tax year (W-2 Forms provided in January
2013)
• For employers that filed fewer than 250 W-2 Forms last
year, reporting requirement is delayed until further guidance
issued.
• Please refer to Handout for additional information
11

12. Summary of Benefits and Coverage
• Health plans to enrollees:
− Open enrollment: 1st day of the 1st open enrollment period that begins on or after
Sept. 23, 2012, or
− Other enrollment: 1st day of the 1st plan year that begins on or after Sept. 23, 2012
• Issuers must provide SBC to health plans:
− Upon application
− Before the first day of coverage (if there have been changes to the SBC)
− When a policy is renewed or reissued
− Upon request
• Plans must provide SBC to enrollees:
− For each benefit package offered or which they are eligible
− Annually at renewal (or 30 days before new plan year if automatic renewal)
− With enrollment application materials (if no written enrollment materials, when the
participant is first eligible to enroll)
− Before the first day of coverage (if there have been changes to the SBC)
− To special enrollees within SPD timeframe
− Upon request
12 12

13. Increased Medicare Tax
• Medicare tax rate to increase for high-earners
− 0.9 percent increase (from 1.45 percent to 2.35 percent)
• High-earner threshold
− Single: $200,000
− Married : $250,000
• Employer responsibilities
− Withhold additional amounts from wages in excess of
$200,000
− No requirement to match additional tax
− No requirement to notify employees
13

14. Health FSA Limits
• Beginning in 2013, limit is
$2500/year
− Limit is indexed for CPI for later years
• Applies to plan years beginning on
or after 1/1/13
− This is a change from initial effective date
• Does not apply to dependent care FSAs
14

15. Comparative Effectiveness
Research Fees
• Patient-Centered Outcomes Research Institute
− Created to improve informed health decisions
− Research funded by a fee paid by insurers and plan sponsors of self-
funded plans
• Effective date
− Plan years ending after Sept. 30, 2012
− Do not apply for plan years ending after Sept. 30, 2019
− For calendar year plans – apply for 2012-2018 plan years
• Amount of fee:
− $1 per covered life (enrolled)
− Increases to $2
− Indexed for Consumer Price Index (CPI)
15

16. Notice of Exchange
• Employers must notify new and current employees of
exchange information
− Effective October 1, 2013
• Notice must include information about 2014 changes:
− Existence of health benefit exchange and services provided
− Potential eligibility for subsidy under exchange if employer’s share of
benefit cost is less than 60 percent
− Risk of losing employer contribution if employee buys coverage
through an exchange
• More guidance and model notice expected
16

17. 2014 Compliance Deadlines
17

18. Individual Mandate
• Jan. 1, 2014: Individuals must enroll in coverage or pay a
penalty
• Penalty amount: Greater of $ amount or a % of income – Single
annual fee
− 2014 = $95 or 1%
− 2015 = $325 or 2%
− 2016 = $695 or 2.5%
• Family penalty capped at 300% of the adult flat dollar penalty
or “bronze” level premium
• Penalty proposed to be deducted when filing income tax
18

19. Health Insurance Exchanges
• Health insurance exchanges will be established in each
state (by the state or the federal government)
− Premiums in Public Exchange are NOT pre-tax
• Individuals and small employers can purchase coverage
through an exchange (Qualified Health Plans)
− In 2017, states can allow employers of any size to purchase
coverage through an exchange
• Individuals can be eligible for tax credits
− Limits on income and government program eligibility
− Employer plan is unaffordable or not of minimum value
• Private Exchanges
19

20. Employer Responsibility
Delayed until 2015!
• Large employers subject to “Pay or Play” rule
− Offer coverage of a certain quality or possibly pay a penalty
− Please refer to Handout
• Applies to employers with 50 or more full-time
equivalent employees in prior calendar year
− Full-time employee: employed for an average of at least 30
hours of service per week
• Penalties apply if:
− Employer does not provide coverage to all full-time
employees and any full-time employee gets subsidized
coverage through exchange OR
− Employer does provide coverage and any full-time employee
still gets subsidized coverage through exchange
20

21. Exchange Premium Assistance
• Employee eligibility will trigger employer penalties
• Employees who are not offered coverage
− Not eligible for government programs (like Medicaid)
− Meet income requirements (less than 400% of Federal Poverty
Level (FPL))
• Employees who are offered coverage
− Not enrolled in employer’s plan
− Not eligible for government programs (like Medicaid)
− Meet income requirements (less than 400% of FPL)
− Employer’s coverage is unaffordable (greater than 9.5% of
employee’s single income) or not of minimum value (an
actuarial determination that plan covers less than 60% of
total health care cost incurred by participants)
21

22. Employer Penalty Amounts
Delayed until 2015!
Employers that do not offer coverage to all full-time
employees:
− $2,000 per full-time employee per year
− Excludes first 30 employees
• Employers that offer coverage:
− $3,000 for each employee per year that receives subsidized
coverage through an exchange
− Capped at $2,000 per full-time employee per year(excluding
first 30 employees, if ALL full-time employees receives
subsidized coverage through an exchange
• Pay or Pay Calculators
22

23. Essential Health Benefits
• PPACA generally prohibits both group health plans
and issuers from imposing lifetime or annual limits on
the dollar value of health benefits for plan years
beginning on or after September 23, 2012.
− May impose lifetime and annual limits on “Non-Essential
Health Benefits” to the extent that such limits are permitted
under Federal/State Laws
− No Interim Final Rule that specifically defines Essential Health
Benefits
23

24. Essential Health Benefits
• Essential Health Benefits have been described to include:
− Ambulatory patient services
− Emergency services
− Hospitalization
− Laboratory services
− Maternity and newborn care
− Mental health and substance use disorder services, including
behavioral health services
− Pediatric services, including oral and vision care
− Prescription drugs
− Preventive and wellness services and chronic disease management
− Rehabilitative and habilitative services and
devices
24

25. Safe Harbors
• Employer penalties: Who is a full-time employee?
− Ongoing employees
− New full-time employees
− New seasonal and variable hour employees
• Affordability Safe Harbor
− Use W-2 income
• Waiting periods
− Cannot exceed 90 days
− No penalty for employees in waiting period
• Employers can rely on Safe Harbors through 2014
− Please refer to Handouts
25

26. Employer Reporting
• Employers will have to report certain information
about health coverage to the government and
individuals
• Applies to:
− “Applicable large employers” (50 +)
− “Offering employers” – employers that provide coverage if
employee cost exceeds 8% of income
• Applies to coverage offered after Jan. 1, 2014
• First returns to be filed in 2015
26

27. Information Required
• Employer identifying information
• Whether employer offers health coverage to full-time
employees and dependents
• Number of full-time employees for each month
• Length of any waiting period
• Monthly premium for lowest-cost option in each enrollment
category
• Employer’s share of cost of benefits
• Names and contact info of employees and months covered by
employer’s health plan
27

28. More 2014 Changes
• No pre-existing condition exclusions or limitations
• Wellness program changes - maximum reward increases
to 30%
• Limits on out-of-pocket expenses and cost-sharing
• No waiting periods over 90 days
• Coverage of clinical trial participation
• Guaranteed issue and renewal
• No annual limits on essential health benefits
• Insurance premium rating restrictions28

29. Future Compliance
Deadlines
29

30. 2018 – Cadillac Plan Tax
• 40 percent excise tax on high-cost health plans
• Based on value of employer-provided health
coverage over certain limits (includes HSA & HRA)
− $10,200 for single coverage
− $27,500 for family coverage
• To be paid by coverage providers
− Fully insured plans = Health Insurer
− HSA/Archer MSA = Employer
− Self-insured plans/FSAs = Plan Administrator
• More guidance expected
30

31. Nondiscrimination Rules Coming
for Fully-Insured Plans
• Will apply to non-grandfathered plans
• Discriminating in favor of Highly-Compensated
Employees (HCEs) will be prohibited
− Eligibility test
− Benefits test
• Highly-Compensated Employees (HCEs)
− 5 highest paid officers
− More than 10% shareholder
− Highest paid 25% of all employees
• Effective date delayed for regulations
31

32. Automatic Enrollment Rules
• Will apply to large employers that offer health
benefits
− Applies to GF and non-GF plans
− Large employer = more than 200 employees
• Must automatically enroll new employees and re-
enroll current participants
• Adequate notice and opt-out option required
• DOL:
− Regulations will not be ready to take effect by 2014
− Employers not required to comply until regulations issued and
applicable
32

33. PPACA Taxes and Fees
33

34. Overview of PPACA Taxes and Fees
Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount
Pharmaceutical industry
fee- an annual fee on
branded prescription
drug manufacturers and
importers
Impact: Individual
Applies to any branded
prescription drug sales
after December 31, 2008
Manufacturers or
importers with gross
receipts from branded
prescription drug sales
Amount is determined by
the branded prescription
drug sales during the
calendar year and
percentage of gross
receipts taken into account.
Medical device
manufacturer fee- an
annual fee on medical
device manufacturers
and importers
Impact: Individual
Applies to any medical
device sales after
December 21, 2008
Manufacturers or
importers with gross
receipts from medical
device sales
Amount is determined by
the medical device sales
during the calendar year
and percentage of gross
receipts taken into account
34

35. Overview of PPACA Taxes and Fees
Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount
Indoor tanning services
tax- a tax on any service
that uses an electronic
product with 1 or more
ultraviolet lamps for skin
tanning
Impact: Individual
Applies to services
performed on or after
July 1, 2010
Individuals that use the
service
Tax equal to 10% of the
amount paid for a service.
Tax on high earners and
unearned income- an
annual tax on wages or
unearned income of
more than $200,000 for
singles and $250,000 for
married couples
Impact: Individual
Tax years beginning
1/1/3013 and later
Individual tax payers 0.9% Medicare surtax on
wages in excess of $200,000
single/ $250,000 married
couples.
3.8% tax on unearned
income for taxpayers with
modified adjusted gross
income in excess of
$200,000 single/$250,000
married couples.
35

36. Overview of PPACA Taxes and Fees
Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount
*Comparative
effectiveness research
fee- this fee funds
research on the
effectiveness, risks, and
benefits of medical
treatments through the
Patient-Centered
Outcomes Research
Institute
Impact: Employer
*Refer to Handouts
Plan/policy years that
end after 9/30/2012 and
beginning before
10/1/2019
Issuers of fully insured plans
Self-insured plan
customers
For plan years that end
during October 1, 2012
through September 30,
2013, this fee is $1 per
participant per year.
For plan years that end
during October 1, 2013
through September 20,
2014, the fee increases to $2
per participant per year.
After that, the rate increases
each year by the medical
inflation rate.
36

37. Overview of PPACA Taxes and Fees
Tax/Fee Effective Date Responsible Party Annual Tax/Fee Amount
Comprehensive Primary
Care Initiative Fee- this fee
is administered by CMS
and imposed upon plans
that have patients who
utilize a physician practice
that was selected through
a competitive application
process that focused on
technology, cost and
outcomes. Practices in 7
states/regions are currently
included in the pilot
(including SW Ohio). This is
a subset of the Patient-
Centered Medical Home
Initiative and may be
expanded to other states
and regions.
Impact: Employer
November 1, 2012
through 2016
Issuers of fully insured plans
Self-insured plan sponsors
Estimated at $7-$9 per
patient per month for 2013
rollout
Proposed shared-savings
implications in years 3 and 4
37

38. Overview of PPACA Taxes and Fees
Tax/Fee Effective
Date
Responsible Party Annual Tax/Fee Amount
ACA Insurer fee- an
annual excise tax on
health insurance to fund
premium subsidies and
Medicaid expansion
Tax years beginning
1/1/2014 and later
Issuers of full insured plans Based on the insurer's
market share of net
premiums written based on
the previous year. For
example, the 2014 fee will
be based on 2013
premiums.
Total fee amount to be
collected across all insurers
starts at $8 billion in 2014
and increasing to $14.3
billion in 2018. After 2018 the
fee increases annually
based on premium growth.
Starting in 2014 the
estimated fee is 2.46% of
premium.
38

39. Overview of PPACA Taxes and Fees
Tax/Fee Effective
Date
Responsible Party Annual Tax/Fee Amount
ACA Reinsurance fee-
this will support the
transitional reinsurance
program that aims to
stabilize premiums for
coverage in the
individual market and
lower the effects of
adverse selection
Plan/policy years
beginning in the 3-year
period starting 1/1/2014
Issuers of fully insured plans
Sponsors/administrators
will collect and send the
contributions on behalf of
self-insured plans
Funds will be used to make
reinsurance payments to
health insurance issuers that
cover high-cost individuals
in non-grandfathered
individual market plans.
The estimated fee is $5.25
per participant per month.
High-cost insurance tax-
an annual excise tax on
high-cost health plans
Tax years beginning
1/1/2018 and later
Issuers of fully insured plans
Sponsors/administrators of
self-insured plans
Tax of 40% on health plan
cost that exceed “Cadillac”
plan thresholds of $10,200
for single coverage or
$27,500 for family coverage.
39

40. Questions?
40

41. Thank you!
This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as
such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you
or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial,
tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as
actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling
analytics or projections are subject to inherent uncertainty and the analysis could be materially
affective if any underlying assumptions, conditions, information or factors are inaccurate or
incomplete or should change.