new jersey state policemen’s benevolent association march 6, 2013
DESCRIPTION
Health Reform: What Does it All Mean and What Changes Are Ahead? Jessica Waltman, National Association of Health Underwriters. New Jersey State Policemen’s Benevolent Association March 6, 2013. Recap Political Overview What’s Already Been Done What’s About to Change For Individuals - PowerPoint PPT PresentationTRANSCRIPT
The 2010 Election CycleMarch 6, 2013
What Does it All Mean and What Changes Are Ahead?
Jessica Waltman,
1
anu
Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Recap on Health Reform
President Obama signed Patient Protection and Affordable Care Act (PPACA) on March 23, 2010
Makes significant statutory changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms
Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant
For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage
Focuses on insurance market reforms and subsidies – does not really address the true cost of health care
Bulk of the reforms take effect in 2014, but there are still many aspects of the law employers need to be cognizant of between now and then
Supreme Court Outcome
The Supreme Court upheld the constitutionality of PPACA and the individual mandate
Although the mandate was deemed not constitutional under the Commerce Clause, it was deemed to be an appropriate use of the Congressional power of taxation
Bottom line: Congress can’t force Americans to obtain broccoli, but they can tax or penalize Americans who don’t
The court also ruled 7-2 to allow PPACA’s expansion of the Medicaid program, but it struck down the portion of the law that would have penalized states that chose not to expand their Medicaid programs by taking their existing federal Medicaid funds away. This part of the ruling gives states significant leverage, as it will create a coverage hole in states that choose not to expand their programs for financial reasons.
4
Individual mandate
Exchange notification requirements for all employers
Employer responsibility/ minimum value requirements for 50+ groups
Automatic expansion of state small group markets to 100 employees
Sept. 23rd reforms- all plans Dependent coverage to 26 No pre-ex for children Restrictions on rescissions and annual/lifetime limits
Employee FSA contributions capped at $2,500
Health insurance exchanges, private coverage subsidies and Medicaid expansion in willing states
States can let large group join exchanges, triggering market reforms for all fully-insured large groups
Sept. 23rd reforms for non-grandfathered plans Preventive care 105h nondiscrimination rules (enforcement delayed) New coverage appeals process
Comparative effectiveness research funding tax impacts all plans
Insurance market reforms and new coverage standards for individual/small group market plans
The “Cadillac” 40% excise tax goes into effect for all high-value group plans, including self-insured plans
Medical loss ratio requirements
5
Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
6
7
Compromise is extraordinarily difficult--moderates are unable to move
House actions are tempered by conservative pressure and tight Democratic majority in the Senate and President Obama
Policy Innovative State
Preparing for the Big Year Ahead!
2014 is going to bring great changes to the world of employee benefits
The kinds of coverage available will change, as will the requirements and options for employers and employees
?
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
11
Grandfathered Plans
To keep a grandfathered plan, insurers and employers have to meet strict standards.
Plan design essentially needs to stay static. Exceptions for collective bargaining agreements and improved benefits.
Cost-sharing and employer contributions changes are capped.
Grandfathered plans are only exempt from certain requirements.
It’s very hard to maintain a grandfathered plan for any length of time.
In 2012, 48 percent of those who get coverage through their jobs were enrolled in a grandfathered health plan, down from 56 percent in 2011. Employers can offer grandfathered and non-grandfathered plans.
If you are in a grandfathered plan your employer is required to provide a notice.
Grandfathered plans may not have all of the same benefits but non-grandfathered may have higher cost
“If you like your health care plan, you can keep your health care plan.”
President Obama, August 2009
Non-Grandfathered Plans
Preventive Care
Rescission Restrictions
105h Nondiscrimination (enforcement delayed)
Small Business Tax Credits
Federal Premium Rate Oversight
HSA distribution tax increase
Medical Loss Ratio requirements/rebates
Summary of Benefits and Coverage
W2 Reporting begins (requirement is optional for employers who issue less than 250 W2s until further notice)
What’s Already Done
Federal High Risk Pool
Federal Retirement Reinsurance Program
Small Business Wellness Grants
Co-OP (no additional money—Co-OPs already with grants continue to exist)
Annual limit waivers
State MLR waivers
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Incarcerated
Medicaid, Medicare, CHIP
Pay more than 8% of take-home pay for employer coverage
Someone who fall sinto a Medicaid expansion coverage hole
So low-income you don’t pay federal income taxes
Grandfathered plan
2014—Greater of 1% family income or $95 adult/$285 family maximum
2015—Greater of 2% family income or $325 adult/$975 family maximum
2016—Greater of 2.4% family income or $695 adult/$2085 family maximum
Some other hardship exemption
As envisioned, “streamlined, easy to use, consumer friendly, neutral online marketplace for health insurance”
One-stop shopping for Medicaid, CHIP, subsidized coverage and other individual coverage
Subsidized coverage will only available for individuals purchasing through an exchange, not those in an employer group
People with adequate and affordable group coverage cannot leave group plan for subsidized individual exchange coverage
Obama Administration is attempting to rebrand Exchanges as “Marketplaces”
Three Governance Options:
State-Owned and Operated
State-Federal Partnership Model
Federal Fallback Exchange
First Open Enrollment 10/1/2013-3/31/2014
NJ Will Expand Medicaid
NJ already has one of the most generous Medicaid programs in the country .
Approximately 7% state residents have Medicaid coverage now.
Expansion expected to extend coverage to 300,000 NJ uninsured.
Most of the beneficiaries will be low income adults.
Pre-health reform NJ adults without children were not eligible unless they applied for welfare and earned no more than $140 a month.
Individual Coverage Subsidies
Premium tax credit (subsidies) only are available to qualified individuals purchasing individual coverage through health insurance exchanges after January 1, 2014.
Individuals with family incomes between 100-400% of the federal poverty level are eligible for a premium tax credit. Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost-sharing.
Individuals and their dependents who have been offered coverage through an employer that meets an affordability and minimum value test are not eligible to purchase coverage through an exchange and get a subsidy.
The premium subsidy will come in the form of a refundable and advanceable tax credit paid directly to the individual’s insurer.
The amount of the refundable premium tax credit received is based on the premium for the second lowest cost qualified health plan in the exchange (the silver plan) and in the rating area where the individual is eligible to purchase coverage.
If you get a subsidy inappropriately, there will be tax consequences.
The Congressional Budget Office’s Take on the Subsidies
This nonpartisan analysis makes it very clear that many people will not be eligible for the subsidies, and that individual coverage will overall be much more expensive than group moving forward. This may be an incentive for employers considering dropping coverage. Since management carve outs are essentially prohibited by the law, if an employer drops coverage, everyone needs to go the exchange.
21
The CBO says “[new health care law market reforms will] have a much greater effect on premiums in the nongroup [individual] market than in the small group market, and they would have no measurable effect on premiums in the large group market.”
The Congressional Budget Office estimates that individual market premiums are going to be between 27-30% higher in 2014.
On average, Exchange subsidies will only cover approximately 2/3 of premiums
Fifty-six percent of Individual Exchange Consumers Will Get A Subsidy
Percentage of Individual Exchange Consumers Who Will Get A Subsidy Subsidized Consumers Unsubsidized Consumers 0.56999999999999995 0.43000000000000038
Premium Tax Credit’s Varying Impact Source: Kaiser Family Foundation’s Subsidy Calculator
Individual
Percentage of income that may be spent on health insurance
Estimated value of the employee’s annual tax credit in 2014
30 year old with qualified employer coverage
Married, two children
9.5% of household income
No one in the family qualified to buy subsidized exchange coverage
30 year old with no employer coverage
Single
$35,000
9.5% of household income
$155 (based on Kaiser Family Foundation’s projection of a $3440 annual single premium in 2014) Individual’s annual premium costs would be $3325
30 year old with no employer coverage
Married, two children
3.97% of household income
$8,720 (based on Kaiser Family Foundation’s projection of a $10,108 annual family premium in 2014) Family’s annual premium costs would be $1,388
45 Year old with qualified employer coverage
Married, three children
9.5% of household income
$0 --No one in the family qualified to buy subsidized exchange coverage
45 year old with no employer coverage
Single
$55,000
N/A
$0 – Individual may buy coverage in the exchange but would not qualify for subsidy Individual’s annual premium payments would be $5,609 based on Kaiser Family Foundation’s projection of 2014 single premium
45 year old with no employer coverage
Married, two children
7.52% of household income
$10, 100 (based on Kaiser Family Foundation’s projection of a $14, 250 annual family premium in 2014) Family’s annual premium costs would be $4,135
22
Price and Design of Small Group and Individual Market Plans
Pricing Changes
Community rating that limits rate variability to age, family status, smoker status and geographic area with an overall variation of 3 to 1 meaning that the highest rate offered for a product may be no more than three times the lowest rate.
Plan Design Changes
Essential health benefit requirements
New Jersey already has similar rules in place, so this change will not impact prices as much as in other states
Qualified individual and small group plans will have to meet:
Actuarial value requirements
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Basic Coverage Rules for Large Employers
Large employers may be subject to an excise tax if at least one full-time employee whose household income is between 100-400% of FPL level receives a premium tax credit for Exchange coverage and the employer either:
Offers coverage to full-time employees that does not meet the law’s affordability or minimum value standards
Fails to offer coverage to full-time employees and their dependents
Summary of Potential Employer Penalties under PPACA, Congressional Research Service, May 14, 2010
Large Employer Coverage Tests
Minimum Value
Employee’s share of the premium cannot exceed 9.5% of household income.
Affordability test is based on the cheapest minimum value plan the employer offers.
Test is also based on the employee-only rate, regardless of whether or not the employee selects family or dependent coverage
Lowest tier plan must be at least a 60% actuarial value
Actuarial value is based on cost-sharing and out-of pocket expenses, not premiums
Employer contributions to account-based plans will factor into actuarial value
Administration has a calculator and there are other safe harbors employer can use
Administration estimates that more than 90% of large employer plans meet this standard now.
Who has to be offered coverage?
Full Time Employees (30 hours or more a week)
Dependents who are defined as employee’s children under age 26 (IRC §152(f)(1))
Employers will not face tax penalties for electing not to offer coverage to spouses.
If a spouse has no other source of affordable employer-sponsored coverage, he/she could get an exchange subsidy.
Other Key Points About Coverage Offers
A large employer will be considered as offering coverage to full-time employees if they offer coverage to 95% of their full-time employees and dependents(or, if greater, to 5 employees). Note: if any of the 5% of full-time employees who are not offered coverage receive premium tax credits from an Exchange, the employer will be required to pay an annual penalty of $3,000 for each of those employees.
Many Employers May Try To Be 49ers and 29ers
Employers are only subject to the employer mandate requirements if they have 50 or more Full-Time Equivalent employees.
Employers only have to offer coverage to employees who work an average of 30 hours or more per week
Determining Full-Time Employee Status
Generally, an employee who was employed on average at least 30 hours of service per week or 130 hours of service per month is considered full-time.
When calculating hours of service, the following rules apply:
The common law definition of employee is used.
All hours of service an employee performs for members of the controlled group are counted.
Each hour for which an employee is paid, or entitled to payment, for performance of duties for the employer is counted including vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence
For union/multi-employer plans, an employer won’t be penalized if:
The employer is required to make a contribution to a multiemployer plan with respect to a full-time employee pursuant to a collective bargaining agreement or appropriate related participation agreement
Coverage under the multiemployer plan is offered to the full-time employee (and the employee’s dependents)
The coverage offered to the full-time employee meets the law’s affordability and minimum value standards
SHOP Exchanges
SHOP Exchanges will be a new purchasing environment for small employers
Only place an employer can receive the small business tax credit post-2014
States can allow large groups entry in 2017 if they choose
All small groups, including those who purchase SHOP coverage for employees will be subject to new market rules and plan design changes in 2014
Is SHOP Coverage Subsidized?
Subsidized coverage will only be available for individuals purchasing individual coverage through an exchange
Low-income individuals who are part of an employer group that buys coverage through a SHOP exchange are not eligible for a personal premium tax credit
Only subsidies that will be distributed through the SHOP exchanges are the small business tax credits
People with “adequate” and “affordable” group coverage cannot leave group plan and buy subsidized coverage through the individual exchange, even if they are low-income
Other Employer Requirements
Waiting periods
W2 Reporting
Employers will have to report the complete value of you health benefit plan on your W2 statement for tax years 2012 on forward
Requirement currently optional for employers that issue less than 250 W2s
Requirement is currently for “informational” purposes, not the taxation of benefits
Auto Enrollment
Employers with more than 200 employees will have to begin auto-enrolling new employees in benefit plans
Still need regulations on how opting out will work, coverage waivers, waiting periods, etc.
Effective date is unclear—not until 2015 at least
Coverage Verification
Employers will have to report income and plan data to IRS and HHS for the employer mandate and individual mandate and subsidy verification
Limited to 90 days
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
34
Originally projected to cost the federal government approximately $1 trillion over 10 years.
Now projected to cost $1.3 trillion over 10 years.
Vast majority of the cost of the law to the federal government is paying for the Medicaid expansion and the coverage subsidies for Americans without affordable employer coverage who earn between 100-400% of the federal poverty level.
While the law does provide for some savings through increased efficiencies, it also contains a significant amount of revenue enhancements too.
New Direct Tax Changes for Individuals and Employers
New Medicare taxes on unearned income and higher income employees and self-employed
Individual mandate tax penalty
FSA cap of $2500
HSA Penalty Distribution Increase
Individual medical cost deduction threshold increased from 7.5% AGI to 10% AGI
Employer mandate tax penalty
Only on fully-insured plans.
The fee would equal $8 billion for 2014, $11.3 billion for 2015 and 2016, $13.9 billion for 2017, and $14.3 billion for 2018. For years after 2018, the fee is adjusted for inflation.
Average cost per family in 2014 will be $500
National Comparative Effectiveness Tax (PCORI)
$2 per covered individual
New National Reinsurance Fee
Phases out in three years but may be reauthorized
New Taxes That Will Increase Costs of Goods/Services
Pharmaceutical Industry
New taxes $4.8 billion over 10 years will be passed on to consumers
Medical Device Tax
2.3% of the price for which the medical device is sold. The tax will not apply to eyeglasses, contact lenses, hearing aids, and any other device deemed by the Secretary to be of the type available for regular retail purposes
Tanning Tax
10% excise tax paid by the provider but leveied on the consumer
Cadillac Tax
40% Excise Tax on high-cast health plans that begins in 2018
High-cost health plan is defined as costing more than $10,200 for an individual or $27,500 for a family, including worker and employer contributions to flexible spending or health savings accounts.
Vision and dental values are not included.
The tax would be paid by the insurer, but would be passed on directly to the employer.
The threshold may be adjusted based on the age and gender of workers covered by the plan. Plans covering workers in high risk professions and retirees will also have their thresholds increased by: $1,650 for single plans and $3,450 for family plans
For the first three years of the tax, the cost threshold in the 17 states with the highest health care costs would be higher than in the rest of the country
Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
40
National Association of Health Underwriters
What Does it All Mean and What Changes Are Ahead?
Jessica Waltman,
1
anu
Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Recap on Health Reform
President Obama signed Patient Protection and Affordable Care Act (PPACA) on March 23, 2010
Makes significant statutory changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms
Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant
For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage
Focuses on insurance market reforms and subsidies – does not really address the true cost of health care
Bulk of the reforms take effect in 2014, but there are still many aspects of the law employers need to be cognizant of between now and then
Supreme Court Outcome
The Supreme Court upheld the constitutionality of PPACA and the individual mandate
Although the mandate was deemed not constitutional under the Commerce Clause, it was deemed to be an appropriate use of the Congressional power of taxation
Bottom line: Congress can’t force Americans to obtain broccoli, but they can tax or penalize Americans who don’t
The court also ruled 7-2 to allow PPACA’s expansion of the Medicaid program, but it struck down the portion of the law that would have penalized states that chose not to expand their Medicaid programs by taking their existing federal Medicaid funds away. This part of the ruling gives states significant leverage, as it will create a coverage hole in states that choose not to expand their programs for financial reasons.
4
Individual mandate
Exchange notification requirements for all employers
Employer responsibility/ minimum value requirements for 50+ groups
Automatic expansion of state small group markets to 100 employees
Sept. 23rd reforms- all plans Dependent coverage to 26 No pre-ex for children Restrictions on rescissions and annual/lifetime limits
Employee FSA contributions capped at $2,500
Health insurance exchanges, private coverage subsidies and Medicaid expansion in willing states
States can let large group join exchanges, triggering market reforms for all fully-insured large groups
Sept. 23rd reforms for non-grandfathered plans Preventive care 105h nondiscrimination rules (enforcement delayed) New coverage appeals process
Comparative effectiveness research funding tax impacts all plans
Insurance market reforms and new coverage standards for individual/small group market plans
The “Cadillac” 40% excise tax goes into effect for all high-value group plans, including self-insured plans
Medical loss ratio requirements
5
Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
6
7
Compromise is extraordinarily difficult--moderates are unable to move
House actions are tempered by conservative pressure and tight Democratic majority in the Senate and President Obama
Policy Innovative State
Preparing for the Big Year Ahead!
2014 is going to bring great changes to the world of employee benefits
The kinds of coverage available will change, as will the requirements and options for employers and employees
?
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
11
Grandfathered Plans
To keep a grandfathered plan, insurers and employers have to meet strict standards.
Plan design essentially needs to stay static. Exceptions for collective bargaining agreements and improved benefits.
Cost-sharing and employer contributions changes are capped.
Grandfathered plans are only exempt from certain requirements.
It’s very hard to maintain a grandfathered plan for any length of time.
In 2012, 48 percent of those who get coverage through their jobs were enrolled in a grandfathered health plan, down from 56 percent in 2011. Employers can offer grandfathered and non-grandfathered plans.
If you are in a grandfathered plan your employer is required to provide a notice.
Grandfathered plans may not have all of the same benefits but non-grandfathered may have higher cost
“If you like your health care plan, you can keep your health care plan.”
President Obama, August 2009
Non-Grandfathered Plans
Preventive Care
Rescission Restrictions
105h Nondiscrimination (enforcement delayed)
Small Business Tax Credits
Federal Premium Rate Oversight
HSA distribution tax increase
Medical Loss Ratio requirements/rebates
Summary of Benefits and Coverage
W2 Reporting begins (requirement is optional for employers who issue less than 250 W2s until further notice)
What’s Already Done
Federal High Risk Pool
Federal Retirement Reinsurance Program
Small Business Wellness Grants
Co-OP (no additional money—Co-OPs already with grants continue to exist)
Annual limit waivers
State MLR waivers
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Incarcerated
Medicaid, Medicare, CHIP
Pay more than 8% of take-home pay for employer coverage
Someone who fall sinto a Medicaid expansion coverage hole
So low-income you don’t pay federal income taxes
Grandfathered plan
2014—Greater of 1% family income or $95 adult/$285 family maximum
2015—Greater of 2% family income or $325 adult/$975 family maximum
2016—Greater of 2.4% family income or $695 adult/$2085 family maximum
Some other hardship exemption
As envisioned, “streamlined, easy to use, consumer friendly, neutral online marketplace for health insurance”
One-stop shopping for Medicaid, CHIP, subsidized coverage and other individual coverage
Subsidized coverage will only available for individuals purchasing through an exchange, not those in an employer group
People with adequate and affordable group coverage cannot leave group plan for subsidized individual exchange coverage
Obama Administration is attempting to rebrand Exchanges as “Marketplaces”
Three Governance Options:
State-Owned and Operated
State-Federal Partnership Model
Federal Fallback Exchange
First Open Enrollment 10/1/2013-3/31/2014
NJ Will Expand Medicaid
NJ already has one of the most generous Medicaid programs in the country .
Approximately 7% state residents have Medicaid coverage now.
Expansion expected to extend coverage to 300,000 NJ uninsured.
Most of the beneficiaries will be low income adults.
Pre-health reform NJ adults without children were not eligible unless they applied for welfare and earned no more than $140 a month.
Individual Coverage Subsidies
Premium tax credit (subsidies) only are available to qualified individuals purchasing individual coverage through health insurance exchanges after January 1, 2014.
Individuals with family incomes between 100-400% of the federal poverty level are eligible for a premium tax credit. Individuals with family incomes at or below 250% of the FPL also qualify for reduced cost-sharing.
Individuals and their dependents who have been offered coverage through an employer that meets an affordability and minimum value test are not eligible to purchase coverage through an exchange and get a subsidy.
The premium subsidy will come in the form of a refundable and advanceable tax credit paid directly to the individual’s insurer.
The amount of the refundable premium tax credit received is based on the premium for the second lowest cost qualified health plan in the exchange (the silver plan) and in the rating area where the individual is eligible to purchase coverage.
If you get a subsidy inappropriately, there will be tax consequences.
The Congressional Budget Office’s Take on the Subsidies
This nonpartisan analysis makes it very clear that many people will not be eligible for the subsidies, and that individual coverage will overall be much more expensive than group moving forward. This may be an incentive for employers considering dropping coverage. Since management carve outs are essentially prohibited by the law, if an employer drops coverage, everyone needs to go the exchange.
21
The CBO says “[new health care law market reforms will] have a much greater effect on premiums in the nongroup [individual] market than in the small group market, and they would have no measurable effect on premiums in the large group market.”
The Congressional Budget Office estimates that individual market premiums are going to be between 27-30% higher in 2014.
On average, Exchange subsidies will only cover approximately 2/3 of premiums
Fifty-six percent of Individual Exchange Consumers Will Get A Subsidy
Percentage of Individual Exchange Consumers Who Will Get A Subsidy Subsidized Consumers Unsubsidized Consumers 0.56999999999999995 0.43000000000000038
Premium Tax Credit’s Varying Impact Source: Kaiser Family Foundation’s Subsidy Calculator
Individual
Percentage of income that may be spent on health insurance
Estimated value of the employee’s annual tax credit in 2014
30 year old with qualified employer coverage
Married, two children
9.5% of household income
No one in the family qualified to buy subsidized exchange coverage
30 year old with no employer coverage
Single
$35,000
9.5% of household income
$155 (based on Kaiser Family Foundation’s projection of a $3440 annual single premium in 2014) Individual’s annual premium costs would be $3325
30 year old with no employer coverage
Married, two children
3.97% of household income
$8,720 (based on Kaiser Family Foundation’s projection of a $10,108 annual family premium in 2014) Family’s annual premium costs would be $1,388
45 Year old with qualified employer coverage
Married, three children
9.5% of household income
$0 --No one in the family qualified to buy subsidized exchange coverage
45 year old with no employer coverage
Single
$55,000
N/A
$0 – Individual may buy coverage in the exchange but would not qualify for subsidy Individual’s annual premium payments would be $5,609 based on Kaiser Family Foundation’s projection of 2014 single premium
45 year old with no employer coverage
Married, two children
7.52% of household income
$10, 100 (based on Kaiser Family Foundation’s projection of a $14, 250 annual family premium in 2014) Family’s annual premium costs would be $4,135
22
Price and Design of Small Group and Individual Market Plans
Pricing Changes
Community rating that limits rate variability to age, family status, smoker status and geographic area with an overall variation of 3 to 1 meaning that the highest rate offered for a product may be no more than three times the lowest rate.
Plan Design Changes
Essential health benefit requirements
New Jersey already has similar rules in place, so this change will not impact prices as much as in other states
Qualified individual and small group plans will have to meet:
Actuarial value requirements
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Basic Coverage Rules for Large Employers
Large employers may be subject to an excise tax if at least one full-time employee whose household income is between 100-400% of FPL level receives a premium tax credit for Exchange coverage and the employer either:
Offers coverage to full-time employees that does not meet the law’s affordability or minimum value standards
Fails to offer coverage to full-time employees and their dependents
Summary of Potential Employer Penalties under PPACA, Congressional Research Service, May 14, 2010
Large Employer Coverage Tests
Minimum Value
Employee’s share of the premium cannot exceed 9.5% of household income.
Affordability test is based on the cheapest minimum value plan the employer offers.
Test is also based on the employee-only rate, regardless of whether or not the employee selects family or dependent coverage
Lowest tier plan must be at least a 60% actuarial value
Actuarial value is based on cost-sharing and out-of pocket expenses, not premiums
Employer contributions to account-based plans will factor into actuarial value
Administration has a calculator and there are other safe harbors employer can use
Administration estimates that more than 90% of large employer plans meet this standard now.
Who has to be offered coverage?
Full Time Employees (30 hours or more a week)
Dependents who are defined as employee’s children under age 26 (IRC §152(f)(1))
Employers will not face tax penalties for electing not to offer coverage to spouses.
If a spouse has no other source of affordable employer-sponsored coverage, he/she could get an exchange subsidy.
Other Key Points About Coverage Offers
A large employer will be considered as offering coverage to full-time employees if they offer coverage to 95% of their full-time employees and dependents(or, if greater, to 5 employees). Note: if any of the 5% of full-time employees who are not offered coverage receive premium tax credits from an Exchange, the employer will be required to pay an annual penalty of $3,000 for each of those employees.
Many Employers May Try To Be 49ers and 29ers
Employers are only subject to the employer mandate requirements if they have 50 or more Full-Time Equivalent employees.
Employers only have to offer coverage to employees who work an average of 30 hours or more per week
Determining Full-Time Employee Status
Generally, an employee who was employed on average at least 30 hours of service per week or 130 hours of service per month is considered full-time.
When calculating hours of service, the following rules apply:
The common law definition of employee is used.
All hours of service an employee performs for members of the controlled group are counted.
Each hour for which an employee is paid, or entitled to payment, for performance of duties for the employer is counted including vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence
For union/multi-employer plans, an employer won’t be penalized if:
The employer is required to make a contribution to a multiemployer plan with respect to a full-time employee pursuant to a collective bargaining agreement or appropriate related participation agreement
Coverage under the multiemployer plan is offered to the full-time employee (and the employee’s dependents)
The coverage offered to the full-time employee meets the law’s affordability and minimum value standards
SHOP Exchanges
SHOP Exchanges will be a new purchasing environment for small employers
Only place an employer can receive the small business tax credit post-2014
States can allow large groups entry in 2017 if they choose
All small groups, including those who purchase SHOP coverage for employees will be subject to new market rules and plan design changes in 2014
Is SHOP Coverage Subsidized?
Subsidized coverage will only be available for individuals purchasing individual coverage through an exchange
Low-income individuals who are part of an employer group that buys coverage through a SHOP exchange are not eligible for a personal premium tax credit
Only subsidies that will be distributed through the SHOP exchanges are the small business tax credits
People with “adequate” and “affordable” group coverage cannot leave group plan and buy subsidized coverage through the individual exchange, even if they are low-income
Other Employer Requirements
Waiting periods
W2 Reporting
Employers will have to report the complete value of you health benefit plan on your W2 statement for tax years 2012 on forward
Requirement currently optional for employers that issue less than 250 W2s
Requirement is currently for “informational” purposes, not the taxation of benefits
Auto Enrollment
Employers with more than 200 employees will have to begin auto-enrolling new employees in benefit plans
Still need regulations on how opting out will work, coverage waivers, waiting periods, etc.
Effective date is unclear—not until 2015 at least
Coverage Verification
Employers will have to report income and plan data to IRS and HHS for the employer mandate and individual mandate and subsidy verification
Limited to 90 days
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
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Originally projected to cost the federal government approximately $1 trillion over 10 years.
Now projected to cost $1.3 trillion over 10 years.
Vast majority of the cost of the law to the federal government is paying for the Medicaid expansion and the coverage subsidies for Americans without affordable employer coverage who earn between 100-400% of the federal poverty level.
While the law does provide for some savings through increased efficiencies, it also contains a significant amount of revenue enhancements too.
New Direct Tax Changes for Individuals and Employers
New Medicare taxes on unearned income and higher income employees and self-employed
Individual mandate tax penalty
FSA cap of $2500
HSA Penalty Distribution Increase
Individual medical cost deduction threshold increased from 7.5% AGI to 10% AGI
Employer mandate tax penalty
Only on fully-insured plans.
The fee would equal $8 billion for 2014, $11.3 billion for 2015 and 2016, $13.9 billion for 2017, and $14.3 billion for 2018. For years after 2018, the fee is adjusted for inflation.
Average cost per family in 2014 will be $500
National Comparative Effectiveness Tax (PCORI)
$2 per covered individual
New National Reinsurance Fee
Phases out in three years but may be reauthorized
New Taxes That Will Increase Costs of Goods/Services
Pharmaceutical Industry
New taxes $4.8 billion over 10 years will be passed on to consumers
Medical Device Tax
2.3% of the price for which the medical device is sold. The tax will not apply to eyeglasses, contact lenses, hearing aids, and any other device deemed by the Secretary to be of the type available for regular retail purposes
Tanning Tax
10% excise tax paid by the provider but leveied on the consumer
Cadillac Tax
40% Excise Tax on high-cast health plans that begins in 2018
High-cost health plan is defined as costing more than $10,200 for an individual or $27,500 for a family, including worker and employer contributions to flexible spending or health savings accounts.
Vision and dental values are not included.
The tax would be paid by the insurer, but would be passed on directly to the employer.
The threshold may be adjusted based on the age and gender of workers covered by the plan. Plans covering workers in high risk professions and retirees will also have their thresholds increased by: $1,650 for single plans and $3,450 for family plans
For the first three years of the tax, the cost threshold in the 17 states with the highest health care costs would be higher than in the rest of the country
Recap
What’s About to Change For Individuals
What’s About to Change for Coverage at Work
Cost and Taxes
Questions
Moving ahead, here’s a quick summary of what happened over New Years for the world’s worst group of procrastinators.
40
National Association of Health Underwriters