healthcare reform salgba presentation

Healthcare Reform

Patient Protection & Affordable Care Act

Healthcare & Education Affordability Reconciliation Act

April 21, 2010

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About Secova Presenter

Secova Introduction Our History and Approach

Healthcare Reform Overview, Major Provisions and Administration

Details by Effective Year 2010 - 2014

The Next Steps 2015-2018, Questions and Contact Information

WorkshopAgenda

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Founded in 1989 Global Service Provider, headquartered in Newport

Beach, CA Dedicated Benefits Administration team with 20+ years

experienceOur Mission:

To help employers control and drive down the cost of delivering Human Resources & Employee Benefit

Services.

Secova is an HR and Benefits Management Services

company supporting our clients with customized,

“value–sourced” solutions that enhance services and

reduce operating costs.


WorkshopAgenda

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Bruce BorgosMr. Borgos is the Director of Healthcare audit services at Secova. With over 20 years of experience in risk management and benefits management for public sector employers, Mr. Borgos has developed and managed innovative solutions designed to reduce health care costs and improve employee health and productivity. Before joining Secova, Mr. Borgos served as Director of Sales and Marketing for a division of Sierra Health Services, Product Manager for GatesMcDonald, and Vice President of Operations for W.R. Gibbens. Karen KernsKaren Kerns is the Internal Compliance Director at Secova. Miss Kerns has advised the public and private sector on all aspects of benefit administration including optimal operational and administrative design, as well as advising companies of the due diligence necessary for employee benefit issues. Karen has presented at the National Retail Federation’s Human Resources Executives Summit helping employers understand how to implement new administrative procedures to meet the new requirements from recently passed legislative measures for COBRA. With a focus on process improvements, her experience provides insight to enhancing current processes to accommodate future business needs while ensuring client needs and requirements are represented.

WorkshopAgenda


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Overview

Impact Timeline

Healthcare Reform

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Overview2010

Impact2011

Impact

Senate Passed Patient Protection & Affordable Care

Act (PPACA)December 24,

2009

House Passed the Health Care and Education Reconciliation

Act (HCERA)

March 21, 2010

PPACA Signed Into Law By President

ObamaMarch 23, 2010

HCERA Signed Into Lay by President Obama March 30, 2010

Passage of Healthcare Reform

Senate Enacted Changes & Passed

the HCERAMarch 25, 2010

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Overview 2010 Impact

2011 Impact

Expands coverage to 31 million currently uninsured Americans

through a combination of cost controls, subsidies and mandates.

Congressional Budget Office estimates that the legislation will cost $950 billion over a ten-year period.

Healthcare reform measures will go into effect six months from the enactment date through 2018. Significant changes occur in 2010-11 with the majority of the

provisions taking place in 2014.

Comprehensive nature of this recently passed reform includes benefit re-design, increased administrative and compliance costs, eligibility rules restructuring, increased taxes and health insurance exchanges. All provisions should be carefully reviewed with legal council,

actuaries and plan design consultants.

Healthcare Reform Overview

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2011 Impact

Enforcement regulations will delay “immediate” provisions until:

Next plan year after enactment, waiting period or effective date

First renewal date after enactment or effective date

The regulations are written to ensure:

More individuals are covered with fewer restrictions on coverage or

eligibility.

Future regulations will provide guidance by:

Internal Revenue Service (IRS)

Department of Labor (DOL)

Health and Human Services (HHS)

Health Resources and Services Administration (HRSA)

State Departments/Division of Insurance

State Departments/Division of Revenue

Healthcare Reform Overview

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2011 Impact

2010 - Expansion of Eligibility: (Grandfathered Plans)

Dependents are eligible to receive health insurance until their 26th birthday

2010 - Elimination of lifetime and most annual dollar limits on coverage. (Grandfathered

Plans)

2010 - Internal and External Appeals Process: Must be established

2010 - Prohibition of Pre-existing Conditions and Recissions. (Grandfathered Plans)

Eliminating exclusions of pre-existing conditions excluded for all others in 2014

2010 - Health Plan Disclosure and Transparency Requirements: Administrative simplification

and

uniform explanation of coverage standards are implemented.

2011 - Reporting Health Coverage Costs on W-2 Forms – This is issued for W-2’s issued in

2012 covering

the 2011 tax year.

2011 - Insurer Regulations: Regulated medical loss ratios for large and small groups

2011 - Automatic Enrollment: 1st national long-term care insurance program for

U.S. workers. Few employers will enroll their employees when it officially launches.

Major Provisions to Healthcare Reform

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2011 Impact

2013 - Loss of tax advantage benefits: Medical FSA cap of $2,500 and limitation on

reimbursement of prescribed medicines

2013 - Additional Tax for High Wage Workers

2014 - Automatic Enrollment: Employers with more than 200 employees are required to

automatically enroll new-full time employees in their healthcare plans

2014 - Expansion of eligibility for Medicaid and subsidized care

2014 - Insurance Exchanges: Created to assist individuals and small businesses with fewer

than 100 employees to purchase medical insurance

2014 - Individual Coverage Mandate: Requires all individuals to qualify to receive

affordable health insurance or pay a penalty

2014 - Employer Pay or Play Mandate: Employers must offer affordable coverage to

full time employees (30 hours a week), or pay a penalty

Employers with 50 or fewer employees are exempt from penalties

2018 – High Cost Insurance Excise Tax: Is established

2014 to 2018 - Insurer Regulations: Health insurance provider fee imposed

Major Provisions to Healthcare Reform

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Model Notices

Michelle’s LawTimeline

What Happens now?

Compliance Strategy

This calls for a lot of paper work.

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2011 Impact

Increased administrative workload:

Notices will be required after enactment to educate your employees

and their dependents. Increased costs are attributed to:

1. Spike of enrolled dependents and participants in your

medical plans

2. Penalties to the employer for not offering coverage to your

expanded “dependent” population

3. Automatic medical enrollment provision taking effect in 2014

• Employees may opt out

Claims activity levels will increase.

Potential increased premium costs through:

• Removal of lifetime and annual limits

• Insurer tax increases

• Mandatory preventative service provisions with no cost sharing

Increase In Administrative Workload and Costs

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2011 Impact

Annual distribution and collection of waivers and other forms

Employers that provide FSAs will need to amend their plan

documentation and enrollment materials. Restrictions must be placed

on automatic reimbursement procedures, such as the use of debit

cards. Increased costs will be attributed to:

1. Fewer employees enrolled/lower contributions (increased taxes)

2. Limited $2,500 cap in 2013

3. Restriction on reimbursement for prescribed medicines and

insulin in 2011

Monitoring (FCV, Medicaid):

1. Inflation adjustments

2. Federal poverty levels

3. Employee incomes vs. cost sharing

4. State exchanges (What is offered in each state, costs and

coverage.)

Increase In Administrative Workload and Costs

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2010 Impact

2011 Impact

Grandfathered Plans As for existing plans, the law includes a grandfathering rule that

allows employers to avoid many (but not all) of the reform law's benefit

requirements as long as the plan was in use when the bill was passed.

Plans in existence on March 23, 2010 are grandfathered plans.

Grandfathered plans will be subject to the following insurance reforms.

1. Expansion of child coverage for children until age 26.

2. Prohibition of waiting periods for over 90 days.

3. Prohibition of lifetime limits.

4. Restrictions on annual limits from 2010 through 2013 and prohibit annual

limits 2014 onward.

5. Standard uniform explanation of coverage.

6. Prohibition of pre-existing conditions on dependents under age 19 (2011

through 2013) and prohibition of pre-existing condition limitations entirely

by 2014.

Overview

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2010 Impact

2011 Impact

New Law Redefines Eligible Dependents Allows adult children to remain on their parents’ health insurance plan up until their

26th birthday.

Applies to married children. Excluded from this provision are married children’s

spouse and their children.

Applies to young adults away at college or

young adults living away from home not

attending college.

Employer may exclude children up to the age 26, who

are eligible for coverage under another employer

sponsored plan, for the next three years.

Note: Plan year 2014 this requirement is no longer

imposed.

Young adults under the age of 26 will be able to

take advantage of this provision as of September 2010, six months after the

enactment of the legislation (March 23, 2010).

Overview

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2010 Impact

2011 Impact

Medicare and Medicaid Provisions Rebates for Medicare Part D “Donut Hole” - Seniors will get a $250 rebate to

help fill the “donut hole” gap in Medicare prescription drug coverage.

The coverage gap falls between the $2,830 and $6,440 in total drug

spending.

Makes Participation in Medicare Part D more attractive to retirees.

Program to Reduce the Cost of Covering Early Retirees - A program will be

implemented to temporarily support employer retiree plans until the

exchange is fully running.

Plan sponsors will be reimbursed for 80% of claims between $15,000 and

$90,000 for pre-Medicare retirees age 55-64.

Program does not apply to retirees on Medicare and retirees that are not

actively working for an employer.

Program will end when the health insurance exchanges roll out in 2014.

Overview

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2010 Impact

2011Impact

Benefit Restrictions and Prohibitions

Prohibiting Rescission of Coverage – Coverage can not be

cancelled unless the individual has committed fraud or made an

intentional misrepresentation of material fact.

No lifetime dollar amount maximums on benefits are allowed.

Annual limits are allowed until the year 2014 on services

determined by the Department of Health and Human Services.

Overview

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2010 Impact

2011 Impact

Essential Health Benefits The new law requires that the Secretary of Health and Human Services

issue regulations specifically defining essential health benefits. The statute

states that these categories should be considered “essential”:

Ambulatory patient services

Emergency services

Hospitalization

Maternity and newborn care

Mental health and substance use disorder services

Prescription drugs

Rehabilitative services and devices

Prevention and wellness services and chronic disease management,

and Pediatric services, including oral and vision care.

Overview

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2010 Impact

2011Impact

Health Plan Administration Nondiscrimination Requirements for Fully Insured Plans - Nondiscrimination

rules formerly applicable to self-funded group health plans are now

applicable to all group health plans.

Access to Insurance for Uninsured Individuals with Pre-Existing Conditions -

Through a new program of high-risk insurance pools, people who have been

denied coverage on the basis of pre-existing conditions and have been

uninsured for at least six months will be extended subsidized coverage.

The program will end when the health insurance exchanges roll out in

2014.

Administrative Simplification - Health plans must adopt and implement

uniform standards and business rules for the electronic exchange of health

information to reduce paperwork, administrative burdens and costs.

Overview

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2010 Impact

2011Impact

Tax Provisions

Adoption Tax Credit and Assistance Exclusion - The adoption tax credit

has increased from $12,170 to $13,170 for adoption beginning

January 1, 2010.

Adoption credit is refundable and is extended through 2011.

Tax on Indoor Tanning Services -The act imposes a 10% tax on

amounts paid for indoor tanning services (new IRC § 5000B).

Like a sales tax, the tax will be collected from the person tanning

when payment for the tanning services is made. The provision

applies to services performed on or after July 1, 2010.

This excise tax will not impact employer plans.

Overview

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2010 Impact

2011Impact

Medicare and Medicaid Provisions Preventative Care Services - Provides a free, annual wellness visit

and personalized prevention plan service for Medicare beneficiaries

and requires new plans to cover preventive services with little to no

cost sharing.

Medicare Part D Discounts - Seniors who have fallen into the "donut

hole" of Medicare Part D prescription coverage in 2010 will receive a

50% discount on name brand drugs. Pharmaceutical manufacturers

that don’t comply with the discount program will be subject to fines.

The legislation aims to close the donut hole by 2020 by offering a

75% discount on generic drugs.

The bill includes $500 billion in Medicare cuts over the next decade.

Overview

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2010 Impact

2011Impact

Tax Provisions Increased Tax on Withdrawals from

HSAs, FSAs and Health Reimbursement

Arrangements (HRAs)- Additional tax for

health savings account withdrawals before

age 65 for nonqualified medical expenses

will increase from 10 percent to 20 percent.

Plan sponsors should communicate this

to their employees.

Overview

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2010 Impact

2011Impact

Health Plan

Administration Reporting Health Coverage Costs

on

W-2 Forms - Employers are

required to disclose the value of

the health coverage provided by

the employer on the employee’s

annual W-2 form.

This is for W-2’s issued in

2012 covering the 2011 tax

year.

Overview

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2013 Impact

2014Impact

Medicare and Medicaid Provisions Eliminating Deduction for Medicare Part D Subsidy - Employers that

maintain prescription drug coverage for their Medicare Part D eligible

retirees previous to the year 2013 are entitled to a tax deduction.

This deduction will be eliminated.

Under 2003 law, employers are eligible for tax-free

government reimbursement of 28% of prescription drug

expenses. With the elimination of this deduction some

companies are reporting a $150 million dollar loss in earnings.

2012Impact

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2013 Impact

2014Impact

Health Plan Administration Limiting Flexible Spending Account Contributions: A $2,500 cap on

contributions to flexible spending accounts will go into effect. In succeeding

years, the cap would be increased to match the rise in the Consumer Price

Index.

There is no annual limit under current law. Currently employers impose

limits between $4,000 and $5,000 a year.

• Administrative Note: Employers that provide FSAs will need to

amend their plan documentation and enrollment materials.

Restrictions must be placed on automatic reimbursement

procedures, such as the use of debit cards.

Required Employee Redesign of FSA’s - Employers will have to narrow allowed

spending from flexible spending accounts to bar reimbursement for non-

prescription and over-the-counter drugs. This is an FSA feature that the Internal

Revenue Service sanctioned in 2003.

2012Impact

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2013 Impact

2014Impact

Tax Provisions Increased Threshold for Claiming Itemized Deduction for Medical

Expenses - Increases the income threshold for claiming the itemized

deduction for medical expenses from 7.5 to 10 percent.

Beginning 2013, individuals over 65 will be able to claim the

itemized deduction for medical expenses at 7.5 percent of

adjusted gross income through 2016.

Excise Tax on Medical Device - Medical device manufacturers will

face a 2.9 percent national sales tax. Excepted are eyeglasses,

contact lenses, hearing aids or other items for individuals.

2012Impact

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2013 Impact

2014Impact

State Exchanges are Created Health Insurance Exchanges - Insurance exchanges will open in each

state for small employers that fall under 100 employees. Insurance

exchanges build a competitive marketplace for the self-employed,

unemployed, small businesses and others not covered through their

employer.

Individuals and small businesses can utilize

Analysts and insurers are uncertain how state insurance

exchanges will operate until after final regulations are issued.

In 2017 states may opt to allow businesses with more than 100

employees to participate in these exchanges.

2012Impact

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2013 Impact

2014Impact

Employer Penalties, Fees and Fines Employer Pay or Play Mandate for Lack of Coverage - Employers with over 50 full time

employees will be assessed a pay or play penalty of $2,000 per employee.

The first 30 employees are not counted in calculation of the penalty. Example:

an employer with 75 employees would pay the penalty for 45 workers, or

$90,000 (45* $2,000).

Applies to full-time employees (defined as at least 30 hours per week).

Employer Pay or Play Mandate for Employees Receiving Coverage through the Exchange

- Employers who offer coverage, and has at least one employee that receives a tax

credit, will be assessed a pay or play fine of $3,000 for each worker receiving the tax

credit, up to an aggregate cap of $2,000 per full-time employee.

Employers are required to report to the federal government on health coverage

they provide.

Employers can provide a voucher to eliminate penalty.

Available for employees under 400% FPL and employee plan cost between 8%-

9.8% of income.

2012Impact

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2013 Impact

2014Impact

Provisions Under Health Insurance Exchanges Free Choice Vouchers - Employers that offer healthcare coverage and make a

contribution toward the cost of the health care coverage will be required to

provide “Free Choice Vouchers” to qualified employees for the purchase of

qualified health plans through the exchanges under the following conditions:

Employee household income is 400% of the Federal Poverty Level, and

The required contribution for employer-sponsored single coverage in

the least expensive plan is between 8% and 9.8% of AGI and

The employee is a full time employee and

The employee opts out of your employer sponsored coverage and

The employee purchases coverage through the exchange.

2012Impact

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2013 Impact

2014Impact

Individual Penalties, Fees and Fines Individual Coverage Mandates - Citizens will be required to have acceptable coverage

or pay a penalty of $95 in 2014, $325 in 2015, $695 (or up to 2.5 percent of income)

in 2016. Families pay half of the amount for children, up to a cap of $2,250 per family.

After 2016 prices are indexed to the consumer price index.

Applies to retirees.

Employer plan participation will increase.

Healthcare Tax Credits

Premium tax credits will be available to individuals up to 400% of the Federal

Poverty Level (FPL) through the “exchanges” for those not eligible/offered

“affordable” employer coverage.

Employers are required to educate employees about their insurance options outside

of employment

The notifications must mention existence of the exchanges, premium subsidies

and credits.

2012Impact

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2013 Impact

2014Impact

Medicare and Medicaid Provisions Expands Medicaid Eligibility - The uninsured and self-employed will be able

to purchase insurance through state-based exchanges with subsidies

available to individuals and families with income above Medicaid eligibility

(133%) and below 400%of poverty level.

Generous subsidies are offered to the low income. For this reason

employers may not want to duplicate these offerings with salary-

based cost sharing.

Medicaid businesses will not be able to charge patients premiums to

pay for the enrollees. They will have to absorb the extra costs or pass

it to others with higher premiums.

2012Impact

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2013 Impact

2014Impact

Health Plan Administration Automatic Enrollment - Employers with more than 200 employees are

required to automatically enroll new full-time employees in their healthcare

plan (subject to any waiting period authorized by law).

Employers must provide notice of employee’s right to opt out of automatic

enrollment.

Notice Of Coverage Options: Employers must give employees notice about

the availability of an insurance exchange.

2012Impact

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2015-2018

Questions

Contact Information

The Next Steps

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2015 - 2018 QuestionsContact

Information

Comprehensive nature of this recently passed reform

includes benefit re-design, increased administrative and

compliance costs, eligibility rules restructuring, increased taxes and health insurance

exchanges.

Note: All provisions should be

carefully reviewed with legal

council, actuaries and plandesign consultants.

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2015 - 2018 QuestionsContact

Information

Implement processes to account for the “tricky” situations in addition to the standard guidelines.

Communicate to all HR ongoing processes which will be implemented to manage the healthcare reform provisions.

Educate HR about the healthcare reform legislation to reduce any mistakes that can lead to unwanted costs.

Provide ongoing review and training to all HR for benefits improvements and the healthcare reform legislative updates.

Whether you administer your benefits in house or utilize an outsourced vendor, here are suggestions regarding achieving success within your benefits

department and administration:

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QuestionsQuestions

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Thank You

Secova, Inc.5000 Birch Street

Suite 300, East TowerNewport Beach, CA 92660

1.800.257.0011

www.secova.com

2009 Secova, Inc. All Rights Reserved.

Sarah Soss714-384-0590

[email protected]

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