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A DISTRICT’S NEW OBLIGATIONS

This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.

From Health Care Reform

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• Provide a road map for Health Care Reform• Gain an understanding of the key obligations

affecting employers in a state sponsored plan• Introduce an employer’s long-term options

OBJECTIVES

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SETTING THE STAGE

• 1,000 pages of legislation drafted and enacted very quickly

• Rules are still being developed– Federal agency guidance– Role of states

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• Plan design mandates• Health FSA/HRA/HSA provisions• Administrative requirements• Plan sponsorship provisions

HCR ROADMAP

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2010 & 2014 PLAN DESIGN MANDATES

• Some provisions apply to all plans, some only to non-grandfathered plans

• Implications of grandfathering• Apply to major medical

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KEY MANDATES INFLUENCING PLAN DESIGN

• Annual and lifetime limits prohibited• Waiting periods limited to 90 days• Deductibles limited to $2,000/$4,000 for

individual/family coverage• Required out-of-pocket maximums

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• Employee Health FSA contributions will be capped at $2,500 effective 1/1/2013

• Employee contributions are subject to the new limit

LIMITS ON HEALTH FSA CONTRIBUTIONS

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KEY ADMINISTRATIVE REQUIREMENTS

• W-2 reporting of value of health coverage• Summary of Benefits & Coverage (SBC)• Automatic enrollment• Coverage and workforce reporting to IRS and

employees• Nondiscrimination testing

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• Cornerstone year of Health Care Reform– State Exchanges– Individual mandate– Federal premium tax credit to purchase

Exchange coverage– “Employer responsibility”

2014

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• Penalty may apply if:– No coverage offered to full-time employees

and dependents– Coverage is “unaffordable” or “inadequate”– Employee receives federal premium tax credit

for Exchange coverage

FREE RIDER PENALTY

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FREE RIDER PENALTY (cont’d)

• Definitions:– Large employer – Full-time employee– Inadequate– Unaffordable

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FREE RIDER PENALTY (cont’d)

• Monthly penalty for no coverage: – 1/12th x $2,000 per month/per employee (after

1st 30 employees)

• Penalty for unaffordable/inadequate coverage: – 1/12th x $3,000 per month/per employee with

federal premium tax credit

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• Effective 2018: 40% non-deductible excise tax • Imposed on aggregate value of health

coverage that exceeds threshold amounts

CADILLAC TAX

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• General thresholds: – $10,200 individual coverage– $27,500 family coverage

• Indexed for inflation• Applies for specified health coverage

CADILLAC TAX (cont’d)

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2. ASSESS HEALTH COSTS

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HCR ROADMAP

• Plan design mandates• Health FSA/HRA/HSA provisions• Administrative requirements• Plan sponsorship issues

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WHAT DO YOU DO NOW?

1. Understand your responsibilities

2. Assess whether costs are sustainable

3. Understand your choices

4. Design an implementation strategy

5. Implement your plan

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CHOICE SPECTRUM

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• No one-size-fits-all solution• Can offer more than one• Two-part strategy• Transition period

BEFORE YOU DECIDE

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ACTION PLAN - RECAP

1. Understand your responsibilities

2. Assess whether costs are sustainable

3. Understand your choices

4. Design an implementation strategy

5. Implement your plan

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Thank you!This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance.

Copyright 2012 American Fidelity Assurance Company