health care reform 2012: after the supreme court’s decision california grocers association october...

HEALTH CARE REFORM 2012: AFTER THE SUPREME COURT’S DECISION

CALIFORNIA GROCERS ASSOCIATION • OCTOBER 24 , 2012

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Hosted by:

CGA Educational Foundation

Presenters:

Howard Bye-Torre, Attorney

Anthony DeCristoforo, Attorney

Stoel Rives LLP

Health Care Reform 2012:After the Supreme Court’s Decision



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CGA Educational Foundation

The California Grocers Association Educational Foundation was created in the early 1990s to "provide measurable benefits to

employees, potential employees, customers and businesses in the Retail Food Industry." This goal takes shape in three focus areas of the Foundation: College Scholarships, Career Development, and Industry

Education.

To learn more about the Foundation’s programs, and how they can

benefit your company, visit www.cgaef.org.

http://www.cgaef.org/



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CGAEF DisclaimerBy hosting this Webinar, California Grocers Association (CGA) and the CGA Educational Foundation (CGAEF) is providing an opportunity for its members and attendees to learn general information that may be of interest as your company develops a program for complying with the new health care act. The Webinar is designed to provide practical and useful information on the subject matter covered. However, CGA is not engaged in rendering legal, accounting or other professional advice or services.

CGA does not review or approve the content of the webinar presented by guest speakers and others, and makes no representations or warranties about the accuracy or legality of any legal or other recommendations provided during the webinar. If legal advice or other expert assistance is required, the services of a competent professional should be sought.



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Webinar Instructions

• Can’t hear the program? Click the phone request button on the Participants tab to request a dial-in phone number.

• The session is being recorded. Both the recording and the PowerPoint slides will be made available following the webinar.



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Today’s Agenda

• Supreme Court decision• Impacts of HCR already felt by employers• Regulatory developments for 2013• New federal fees on health plans • Nutrition disclosure rules• 2014 and beyond

– Benefit mandates and employer penalties



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Supreme Court Decision

• Three constitutional arguments– Violates federal authority to regulate interstate

commerce (Commerce Clause activity/inactivity)?• Yes, individual mandate not proper under Commerce Clause

– Penalty within federal power to levy tax?• Yes, tax within meaning of U.S. Constitution

– Anti-Injunction Act: is this a tax that cannot be challenged until actually imposed?

• No, it is a penalty, not a tax, for purposes of this Act



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HCR: Impacts Already Felt

• No aggregate lifetime dollar limits• Children must be covered until age 26• Changes in taxation of health care

coverage for dependent children– Tax-free through end of year in which child

turns 26

• No pre-existing condition exclusions for children under age 19



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HCR: Impacts Already Felt (cont.)

• Non-grandfathered plans– Must provide preventive services without

cost-sharing– Must meet new internal and external review

process standard– Rules on designation of primary care

physicians– Emergency room payment requirements



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2012: W-2 Reporting

• Cost of health coverage must be reported in Box 12, Code DD on Form W-2– Aggregate cost of all plans in which the

employee participates– No reporting for retirees or COBRA participants who

do not otherwise get a Form W-2

• Not included in taxable income• Effective for 2012 W-2 end-of-year forms

(issued in early 2013)



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W-2 Reporting (cont.)

• Current exemptions– Retiree health coverage– Multi-employer plans – Employee assistance programs and wellness

programs if no COBRA premium is charged– Incidental medical benefits provided by

non-medical benefit (e.g., disability plan)



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• Current exemptions (cont.)– Employer who files 250 or fewer W-2’s– No aggregation rules

• When determining whether the employer files 250 or fewer W-2’s, do not count W-2’s filed by a parent, subsidiary or other affiliated entity under a different EIN



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• Calculation of cost includes– Both employee and employer contributions– Pre-tax and after-tax amounts– Dependent coverage– Vision/dental if bundled– Employer contributions to health FSA

• Based on facts known as of Dec. 31



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• Not included in calculation of cost– Employee contributions to health FSA– HSA contributions– HRA contributions– Specific disease policies (e.g., cancer)– Unbundled vision/dental benefits

• Separate election for coverage • Separate premium for coverage



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2012: Summary of Benefits and Coverage (“SBC”)

Group Health Plan Facts

Deductibles

$500/Individual • $1,000/Family

Out-of-Pocket Maximums

$2,000/Individual • $4,000/Family

PPO Network? Yes

Services Not Covered

Cosmetic, Bariatric Surgery

Dental, Infertility

Co-Payments, In-Network $35

Co-Insurance, In-Network 20%

Co-Insurance, Out-of-Network 40%

Preventive Care Costs $0

Your Coverage Costs*

Having a baby $1,500

Managing diabetes $3,500

*Numbers based on average costs. Your costs may be different and are likely to exceed these numbers.



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Content of the SBC

• Basic idea: give individuals easy way to compare health insurance plans and options

• Long list in the statute• Sample coverage/cost scenarios

– Diabetes and childbirth

• Internet addresses for list of network providers, prescription drug formulary, uniform glossary

• No premium amounts required



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Responsible Entities

• Insurance company provides to health plan

• Insured plan: insurance company or plan administrator (but not both) provides to participants

• Self-insured group health plan: plan administrator provides to participants

• Penalty = up to $1,000 per participant



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Timing of Providing the SBC

• New hires: first day of initial enrollment period

• Within 90 days of HIPAA special enrollment

• First day of each open enrollment period– First open enrollment after Sept. 22, 2012

• Within seven days of a request for the SBC



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Methods of Providing the SBC

• Must provide separate SBC for each benefit option– Can combine various family options into one SBC

• Employee only, employee and spouse, employee and family

• Must be provided to participants and beneficiaries, including COBRA beneficiaries– Only one mailing required for participant and

dependents living at same address• Separate mailing to dependent known to be living at different

address



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Appearance of the SBC

• Be no more than four pages (which means

eight pages)• Use 12 point or larger type• Use understandable terminology• Use uniform format



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Nutrition Disclosure Rules

• Section 4205 of PPACA– Applies to chain of 20 or more “restaurants or

similar retail food establishments” doing business under the same name that sell substantially same menu items

– FDA proposed rules in Apr. 2011 under which some grocery stores would be subject to the requirements



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Nutrition Disclosure Rules

• Require calorie display on all menus, menu boards, and at self-service foods

• Statement of availability of additional nutritional information

• Bill introduced to exclude grocery stores– Common Sense Nutrition Disclosure Act of

2012 (HR 6174)



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2012: PCO Fee

• Annually assessed to fund a Patient-Centered Outcomes Research Institute/Trust Fund

• Assessed based on number of average lives covered– $1/covered life for 2012– $2/covered life (indexed) for 2013-2018– Covered life means both participants and dependents

• Responsible parties– Insurance company for insured plan– Plan sponsor of self-funded plan



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Planning for 2013

• Health FSA limited to $2,500 (indexed) per plan year (calendar or non-calendar)

• Employer must provide notice to employees about exchanges– Mar. 2013 (assuming there are no regulatory

delays)



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Planning for 2013 (cont.)

• Non-grandfathered plans must cover expanded preventive care for women at 100% (no cost-sharing, copayments, or deductibles)– Contraceptive coverage, STD screening and

counseling, breastfeeding supplies– Prescription drug coverage: NO COPAYS



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Planning for 2014: Benefit Mandates• Cost-sharing limits (non-grandfathered)

• For example, deductibles may not exceed $2,000/single coverage or $4,000/family

• No pre-existing condition exclusions for anyone (not just children)

• No annual limits on essential health benefits

• Maximum 90-day waiting period



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Maximum 90-Day Waiting Period• New guidance issued Aug. 31• Only applies to eligibility rule requiring

lapse of time before coverage begins– No requirement to cover part-time employees– Other eligibility rules okay unless designed as

subterfuge to avoid the rule• Example: Requiring more than 1,200 cumulative

hours before eligible for coverage



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Maximum 90-Day Waiting Period (cont.)

• Rule not violated when employee slow to enroll

• Rule not violated by rules for variable hour and seasonal employees (later slides)– As long as variable hour or seasonal

employee who is determined to be full-time is eligible 13 months after date of hire



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Planning for 2014: Transitional Reinsurance Fee• Purpose: funding of a three-year program

– To assist insurers who provide individual insurance to high-cost enrollees

– To repay federal government for ERRP

• HHS will collect $25B from 2014-2016 from health insurance companies and self-funded plans– Fee will be per capita (per participant)



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Transitional Reinsurance Fee (cont.)

• Amount of the fee not yet set by HHS– Estimates are $60-$100 per plan participant

for 2014– Amounts will be lower in 2015 and 2016 – States have the right to charge additional fees

to insurers (but not to self-funded ERISA plans)



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Transitional Reinsurance Fee (cont.)

• Responsible parties– Insurance company for insured plans– Third-party administrators “on behalf of”

self-funded plans



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Planning for 2014: Individual Mandate• Individuals must pay tax if they, their

spouses, or their tax dependents do not have “minimum essential coverage”

• Minimum essential coverage includes– Any employer-sponsored plan– Any government-sponsored plan– Plans in the individual market



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Planning for 2014: Employer Pay-or-Play Penalties

• Penalties apply to employers with >50 full-time equivalents

• Penalties kick in when a full-time employee receives a premium tax credit or cost-sharing reduction under PPACA– New guidance issued on Aug. 31 on definition

of full-time employee



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Planning for 2014: Employer Pay-or-Play Penalties (cont.)

• Employers who do not offer coverage and have an employee who receives a premium tax credit– Must pay $2,000 per full-time employee (after

subtracting the first 30 full-time employees)

• Employers who offer coverage and have an employee who receives a premium tax credit– $3,000 per full-time employee receiving the tax

credit



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Planning for 2014: Premium Tax Credit • Proposed regulations on premium tax credit

– Employee not eligible for premium tax credit if employee has access to minimum essential coverage

– Employer-provided coverage is minimum essential if• Coverage provides minimum value: plan pays at least 60%

of total allowed costs of plan benefits– Transition relief under consideration by federal agencies

• Coverage is affordable: employee-only coverage of lowest plan option does not exceed 9.5% of household income

– Safe harbor adopted by IRS: no penalty for employer if cost does not exceed 9.5% of employee’s wages in Box 1 of W-2



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Full-Time Employees (“FTE”)

• Employee working 30 hours per week or 130 hours per month is considered full-time

• Safe harbors announced by IRS on Aug. 31– IRS may allow other ways to define “full-time”



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New Full-Time Employees

• New employees hired into full-time positions must be offered minimum essential coverage (“MEC”) within 90 days in order for employer to avoid pay-or-play penalty– No penalty imposed during 90 days



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Variable Hour and Seasonal Employees

• Safe harbor rules allow employer to have initial measurement period (“IMP”) to measure how many hours employee is working– 3- to 12-month IMP allowed – At end of IMP, employer determines whether

employee worked on average 30 hours or more per week during IMP



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Variable Hour and Seasonal Employees (cont.)

• If employee qualifies as FTE during IMP, employer must offer MEC within 90 days (but not to exceed 13 months from hire)

• Coverage must last for “stability period” – If IMP was six months or less, stability period

must be at least six months– If IMP was longer than six months, stability

period must be at least as long as IMP



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Variable Hour and Seasonal Employees: Example

• Hire date Jan. 1• IMP from Jan. 1 to Mar. 31, and employee

determined to be FTE • Employee must have access to MEC by

July 1 • Employee eligibility must last until Dec. 31

(six-month stability period), even if work hours are reduced



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Ongoing FTE Determinations

• Safe harbor allows employer to select static measurement period (“SMP”) of 3-12 months in duration

• Within 90 days of end of SMP, employee determined to be FTE must be eligible for MEC

• Eligibility must continue during stability period



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Planning for 2014: State Exchanges• Exchanges initially only open to individuals

and small businesses• States may choose to expand to larger

employers later• Exchanges will vary by State• Exchanges must be approved by Jan. 1,

2013 for Jan. 1, 2014 operation (first open enrollment is Oct. 1, 2013)



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Issues on Delayed List

• Automatic enrollment for large employers– Delayed until after 2014– Enforcement moved to EBSA

• Non-discrimination rules for insured plans– Enforcement delayed until regulations are issued

• Free choice voucher program: repealed• Long-term care/CLASS Act

– HHS has refused to implement



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Questions?

Please contact:

Howard Bye-Torre [email protected] (206) 386-7631

Anthony DeCristoforo [email protected] (916) 319-4670

mailto:[email protected]

mailto:[email protected]

health care reform 2012: after the supreme court’s decision california grocers association october...

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