health care reform impact on employer group health plans maureen m. maly partner, employee benefits...
TRANSCRIPT
Health Care ReformImpact on Employer Group Health Plans
Maureen M. MalyPartner, Employee Benefits and Executive Compensation
August 24, 2010 Presentation to Minnesota Bankers Association
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Overview
• Timeline• Grandfathered plans• New federal benefit mandates and administrative mandates on
employer-sponsored group health plans• Tax increases — high cost plans / loss of retiree drug subsidy /
Medicare taxes• Impact on account-based plans (HSAs, FSAs, etc.)• Consumer information requirements• Insurance exchanges• Employer and individual coverage mandates
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2010
Health Care Reform Timeline – 2010
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3/23/10 •Breaks required for nursing mothers•Consumer AssistanceGrandfather plans (plans in existence on March 23, 2010)
3/23/10 •Breaks required for nursing mothers•Consumer AssistanceGrandfather plans (plans in existence on March 23, 2010)
3/30/10Nontaxable health coverage for adult children
3/30/10Nontaxable health coverage for adult children
Not applicable to grandfathered plans
6/21/10 Early Retiree Reinsurance Program
6/21/10 Early Retiree Reinsurance Program
7/1/10 Internet portal
7/1/10 Internet portal
2011 2012 2013 2014 2015 2016 2017 2018
Health Care Reform Timeline – 2011 - 2018
1/1/11 •New form W-2 reporting requirement•Voluntary public
long-term care•No OTC medications reimbursed under account-based plans•HSA excise tax increase
1/1/11 •New form W-2 reporting requirement•Voluntary public
long-term care•No OTC medications reimbursed under account-based plans•HSA excise tax increase
3/23/12New summaries of coverage
3/23/12New summaries of coverage
1/1/14 • Limited waiting periods• New annual reporting• Employer mandates• Individual mandates
1/1/14 • Limited waiting periods• New annual reporting• Employer mandates• Individual mandates
2014 Creation of Health Insurance Exchanges
2014 Creation of Health Insurance Exchanges 2018
Taxation of High Cost Plans
2018Taxation of High Cost Plans
1/1/14 Additional
insurance reforms
Cost sharing limits
1/1/14 Additional
insurance reforms
Cost sharing limits
Uncertain start date: increased wellness incentive, auto-enrollmentUncertain start date: increased wellness incentive, auto-enrollment
9/30/12 (plan years ending after)Fee (per participant) for patient-centered outcomes
research
9/30/12 (plan years ending after)Fee (per participant) for patient-centered outcomes
research
4Not applicable to grandfathered plans
1/1/13 •Medicare tax increases•Limit FSA contributions
1/1/13 •Medicare tax increases•Limit FSA contributions
2013 Loss of Retiree Drug Subsidy Deduction
2013 Loss of Retiree Drug Subsidy Deduction
2010 2011 2012 2013 2014 2015 2016 2017 2018
Grandfathered Plans
• Grandfathered Status– Plan in existence on March 23, 2010
• Analyze each benefit option separately– To keep grandfathered status:
• CANNOT eliminate benefits• CANNOT increase coinsurance at all• CANNOT increase participant cost sharing (co-pay, deductible, out-of-
pocket) outside of permitted range (15% or, for copays, the greater of $5 or 15%) all plus inflation
• CANNOT add or decrease annual limits on dollar value of benefits• CANNOT merge plans or transfer employees to other plans to avoid
loss of grandfather status• CANNOT decrease employer contribution outside permitted range (5%
with no indexing)
• To grandfather or not grandfather?– Balance compliance advantages with cost / benefit restrictions
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Breaks Required for Nursing Mothers (3/23/10)
• FLSA amendment – requires employers to provide reasonable break time / place for nursing mothers– Not a bathroom– Free from intrusion / shielded from view– More protective state laws not preempted– Exemption for employers with less than
50 employees if undue hardship
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Nontaxable Health Coverage for Adult Children (3/30/10)
• No more imputed income for adult children up to age 26 – even if not dependent– Still need to impute income for non-dependent domestic partners and
domestic partner children
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Early Retiree Reinsurance Program (6/21/10)
• Temporary $5 billion insurance program• 55+ retirees, not Medicare eligible• Reimburses 80% of claims from $15,000 - $90,000• Plan sponsor can use reimbursements to reduce premiums,
copays, deductibles, coinsurance, etc. for plan participants or to reduce health benefit or premium costs for sponsor
• Maintenance of effort requirement – – Plan sponsor’s plan contributions cannot decrease
• Applications became available June 2010– Claims not yet accepted
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Consumer Information Requirements (3/23/10 and 7/1/10)
• Consumer assistance– Federal grants to states to establish health insurance consumer
assistance offices to assist consumer with complaints, appeals, enrollment and premium tax credits
– Effective 3/23/10• Internet portal
– HHS developed Internet consumer tool to help individuals and small employers shop for affordable coverage
– Effective 7/1/10– www.healthcare.gov
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Coverage of Adult Children to Age 26 (plan years beginning on or after 9/23/10)
• For plans covering children• Up to age 26, regardless of residency, marital or dependent status• Special enrollment notice required• Cannot impose greater costs for adult children• Special grandfathered rule – if other
employer coverage is available
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Restrictions on Lifetime and Annual Dollar Limits (plan years beginning on or after 9/23/10)
• Lifetime Limits: Lifetime limits on essential health benefits are prohibited for plan years beginning on or after 9/23/2010
• Annual Limits: Restricted annual limits on essential health benefits are allowed until 1/1/2014, and then prohibited
• Non-Essential Health Benefits: Annual and lifetime limits are permissible
2010 2011 2012 2013 2014 2015 2016 2017 2018
No Lifetime Limits on “Essential Health Benefits” (plan years beginning on or after 9/23/10)
• “Essential Health Benefits” – statutory list:− Ambulatory patient services− Emergency services− Hospitalization− Maternity and newborn care− Mental health and substance abuse disorder treatment− Prescription drugs− Rehabilitative and habilitative service
and devices− Laboratory services− Preventive and wellness services and
chronic disease management− Pediatric services
• Waiting for further guidance
2010 2011 2012 2013 2014 2015 2016 2017 2018
Restricted Annual Limits on Essential Benefits (plan years beginning on or after 9/23/10)
• Before 2014: Annual limits on essential health benefits are permitted, but not below these levels:– Plan years beginning 9/23/2010 – 9/22/2011: $750,000 – Plan years beginning 9/23/2011 – 9/22/2012: $1.25 million – Plan years beginning 9/23/2012 – 12/31/2013: $2 million
• Effective 2014: Annual limits on essential health benefits are prohibited for plan years beginning January 1, 2014
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Limited Rescission of Coverage (plan years beginning on or after 9/23/10)
• No retroactive terminations except for: – fraud – intentional misrepresentation of material fact or – non-payment
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Pre-Existing Condition Exclusions (plan years beginning on or after 9/23/10)
• Plan Years Beginning On or After September 23, 2014: Group health plans may no longer have pre-existing condition exclusions for children under age 19
• Plan Years Beginning January 1, 2014: No pre-existing condition exclusions for anyone
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Insured Medical Loss Ratio (plan years beginning on or after 9/23/10)
• Insured plans must report the medical loss ratio (incurred losses and lost adjustment expenses compared to earned premiums)
• If medical loss ratio is less than minimum, must provide participants with a pro rata rebate
• Minimum for large group market is 85%• Minimum for small group market is 80%
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Insured Plans Must Meet Nondiscrimination Rules (plan years beginning on or after 9/23/10)
• No discrimination in favor of highly compensated employees in eligibility or benefits– Long-time self-funded plan rule– Now applies to insured plans– Not applicable to grandfathered plans
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Emergency Service Provisions (plan years beginning on or after 9/23/10)
• Must cover emergency services without prior authorization and out‐of‐network as if in‐network – Not applicable to grandfathered plans
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Primary Care Provider Designations (plan years beginning on or after 9/23/10)
• Must allow OB/GYN/Pediatrician to be designated as primary care provider – Not applicable to grandfathered plans
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2010 2011 2012 2013 2014 2015 2016 2017 2018
First Dollar Preventive Care (plan years beginning on or after 9/23/10)
• Must cover specified services and items without deductible, copayment or coinsurance
• Network providers only• Covered services include certain U.S. Preventive
Services Task Force recommendations, vaccines recommended by Advisory Committee on Immunization Practices and Bright Futures, guidelines developed by the Health Resources and Services Administration with the American Academy of Pediatrics
• List of specified services and items will be updated• Not applicable to grandfathered plans
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2010 2011 2012 2013 2014 2015 2016 2017 2018
New External Appeals Process (plan years beginning on or after 9/23/10)
• No major changes for most insured plans• New process for self-funded plans – need additional guidance
– Claims for benefits only (not eligibility)• Internal ERISA claims process still applies
– New denial notice requirements (DOL to issue models)– New non-English language requirements– Strict compliance required
• 4980D $100 / day penalty for non-compliance
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2010 2011 2012 2013 2014 2015 2016 2017 2018
New Form W-2 Reporting Requirement (1/1/11)
• Report cost of employer-sponsored health coverage– Excludes contributions to HSAs, FSAs, Archer MSAs– Excludes truly stand-alone vision and dental– Informational only, not taxable– Systems ready by 1/30/11, but for most Forms W-2, 1/31/12
requirement
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Voluntary Public Long-Term Care (1/1/11)
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• CLASS Act• Optional for employers to auto enroll employees• Premiums will be determined annually by
Secretary of HHS• Benefits will be paid from new public trust
fund
2010 2011 2012 2013 2014 2015 2016 2017 2018
New Summaries of Coverage (3/23/12)
• Four-page maximum summary– Additional to SPD– HHS models by 3/23/11
• Notice of material modifications– 60 days before effective date of change
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Loss of Retiree Drug Subsidy Deduction (2013)
• Loss of deduction for 28% Medicare Part D drug subsidy– Effective in 2013, but accounting rules
require employer to take immediate charge for quarter of date of enactment
– Will cause employers to rethink retiree drug offerings — may switch to PDPs / other options
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Medicare Tax Increases (1/1/13)
• Additional Medicare tax on wages — 0.9% on wages over $250,000 (jt.) / $200,000 (others)
• Unearned income Medicare contribution tax — new 3.8% tax on “net investment income” for taxpayers with modified AGI over $250,000 (jt.) / $200,000 (others)– Net investment income — interest, dividends, capital gains, annuities,
royalties and rents and certain trade or business income– Excludes qualified retirement plan distributions– Unclear whether includes nonqualified plan distributions
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Impact on Account-Based Plans (1/1/11 and 1/1/13)
• No OTC medications reimbursed under HSAs, FSAs, HRAs, except by prescription or insulin (effective for expenses incurred on or after 1/1/11)
• HSA excise tax increase– 20% excise tax on withdrawals for non-medical expenses
(effective 1/1/11)• Limit FSA contributions to $2,500, indexed in future years
(effective 1/1/13)
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Fee (per participant) for Patient-Centered Outcomes Research (plan years ending after 9/30/12)
• Fee on each health insurance policy or self-funded plan• First year fee is $1 per participant to fund federal patient-centered
outcomes research• Increases to $2 in second year and indexed for future years• January 1, 2013 for calendar-year plans• Imposes as a tax
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Additional Insurance Reforms (plan years beginning on or after 1/1/14)
None of these apply to grandfathered plans• Non-discrimination against health care provider
– Plan cannot limit provider if within provider’s license• Guaranteed Issue / Renewal
– Health insurance issuers offering coverage in the individual and group markets must accept every employer and individual who applies for coverage
– Not applicable to self-funded plans• Clinical trials and routine expenses for clinical trials must
be covered for cancer and life-threatening diseases.• Rating Discrimination
– Not applicable to self-funded plans
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Cost Sharing Limits (plan years beginning on or after 1/1/14)
• Cost-sharing on essential health benefits cannot exceed the out-of-pocket HDHP limit in 2014 indexed for future years ($5,950 / $11,900 in 2010)
• Cost-sharing includes deductible, coinsurance and copayments, but not premiums
• Not applicable to grandfathered plans
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Limited Waiting Periods (plan years beginning on or after 1/1/14)
• Effective for plan years beginning on or after January 1, 2014
• Waiting period to enroll in group health plan cannot exceed 90 days
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2010 2011 2012 2013 2014 2015 2016 2017 2018
New Annual Reporting Requirements (1/1/14)
• Report coverage, cost of coverage, employees covered, etc.• Additional reporting for large employers regarding waiting periods,
premium costs, etc.
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Increased Wellness Incentive (unclear effective date)
• From 20% to 30% of employee premiums lost• Agency discretion to increase to 50%• Guidance needed regarding
grandfathered plans
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Auto-Enrollment (unclear effective date)
• Auto-enrollment for full-time employees (employers with more than 200 employees)
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Creation of Health Insurance Exchanges (2014)
• By 2014• State insurance market — run by government or non-profit entities• For individuals and businesses < 100 employees; larger businesses
may be allowed to buy in beginning 2017• Will offer four comprehensive plans (varying co-pays / deductibles)
and one catastrophic plan• Employer requirement to provide written notice to employees about
exchange and potential premium credits — effective 2013
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Employer Mandates (1/1/14)
• Employer Mandates– Applies to “large” employers (50+ employees)
• Full time and part time employees (on full time equivalent basis) count to determine 50
• Full time = 30+ hours / week, average (period for determination unclear)– Penalties apply for no coverage / unaffordable coverage
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Employer Mandates – No Coverage (1/1/14)
• No Coverage Penalty– If employer fails to provide full time employees and dependents
opportunity to enroll in minimum essential coverage, and– One or more full time employees enroll in an exchange and receive a
premium tax credit or cost-sharing reduction,– Employer penalty = $2,000 per full time employee– Minimum essential coverage means any employer-sponsored major
medical coverage– If you have no employees with income < 400% of federal poverty
level, this penalty will not apply:• For 2009, $43,230 individual, $88,200 family
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Employer Mandates – Unaffordable Coverage (1/1/14)
• Unaffordable Coverage Penalty– If employer offers full time employees and dependents opportunity to
enroll in minimum essential coverage and– One or more full time employees enrolls in exchange and receives
premium tax credit or cost-sharing reduction because either:• Employee’s share of premiums > 9.5% of income, or• Actuarial value of coverage employer provides < 60% of full value, then
Employer penalty = $3,000 per full time employee who receives a tax credit or cost-sharing reduction
• May not exceed penalty for no coverage– If you have no employees with income < 400% of federal poverty
level, this penalty will not apply
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Employer Mandates – Vouchers (1/1/14)
• Free Choice Vouchers:– Effective 1/1/14– Applies to employers that offer coverage and pay part of the cost
• To qualify, employees must:– Meet lower income requirements (< 400% of federal poverty) and– Contribute 8-9.8% of income and– Not participate in employer plan
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Employer Mandates – Vouchers (1/1/14)
• Voucher = cost which employer would have paid if employee were covered under plan for which employer pays the largest portion of plan cost (self or family depending on employee’s election)
• Employer pays amount of exchange credits for cost of coverage employee elects
• Excess amounts paid to employee, tax-free• Employee who gets voucher does not qualify for premium tax credit
in exchange• Need further guidance on how to calculate employee cost for
employer’s plan, amount employer must contribute, how this program interacts with unaffordable coverage penalty, etc.
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Individual Mandates (1/1/14)
• Individual Mandate– Requires individuals to obtain minimum essential coverage or pay tax
penalty• Starts at $95 / individual — 2014• Up to $695 / individual, $2,085 / family — 2016• Exemption if uninsured less than three months
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Taxation of High Cost Plans (2018)
• “Cadillac plan” tax – High cost plan excise tax– Effective 2018
• 40% excise tax on value of employer-provided coverage over $10,200 (self) / $27,500 (other)
– Increased levels for high risk jobs, multi-employer plans, plans with higher cost due to age / gender
• Tax on all employer-sponsored health coverage– Includes FSA, HSA, on-site medical clinics, Medicare supplemental
policies, but excludes stand-alone dental and vision, long-term care, accident and disability insurance, liability insurance, auto medical insurance, employee pay-all hospital indemnity and specified disease or illness policies
• Self-funded plans — employer pays tax• Insured plans — insurance company pays tax
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