Health Care Reform: 2014 Overview The session will begin shortly • • • Sound should come through your speakers when the session begins Verify that the volume is turned up on your computer You can listen through your computer or over the phone If there is no sound on your computer or you would like to call in directly, use the following information: • Session phone number: (877) 668-4493 • Access code: 927 694 939 Health Care Reform 2014 Overview November 2013 Presented by: Erica Storm, Esq. Becca Kopps, Esq. Robert D. Reynolds, CIC,CPIA, AAM, AIS, AU About the presenters Erica Storm, Esq. Becca Koops, Esq. Robert D. Reynolds, CIC, CPIA, AAM, AIS, AU • Employment and benefits attorney • Employment and benefits attorney • President & CEO Morris & Reynolds Insurance • Expertise in health care reform and health plan issues • Primary focus: health care reform • Insurance & Employee Benefit’s Broker For 30 Years • Educates companies on compliance obligations • Creates educational materials and compliance resources • Certified Healthcare Reform Expert Webinar Logistics Call in to connect to audio We welcome your questions at any time! Questions will be addressed at the end of the session. •Phone number: 1-877-668-4493 •Access code: 927 694 939 Select Q&A and choose “Send to All Panelists” to submit your questions. Introduction Health Care Reform Affordable Care Act • Enacted in March 2010 • Makes significant changes to health care system • Implemented over several years Provisions that impact: • Health care providers • Government programs • Health insurance issuers • Employers/plan sponsors • Individuals Most employers that offer health plans will be impacted in some way How Health Care Reform Works The Rule Definitions Exception Special Rule Special Rule Partial delay More Special Rules Sub-special Rule Additional Special Rule Confusing Political Action Confusing Media Coverage Recent Developments Recent Guidance • Health FSA rollovers permitted − Oct. 31, 2013: IRS relaxed “use-or-lose” rule for health FSAs − Participants can carry over up to $500 in unused funds to the next year − Plan cannot include both carryover and grace period − Does not impact $2,500 salary reduction limit − Written plan amendment required • Cafeteria plan election change rules expanded for health care reform changes* • New hardship exemption from individual mandate penalties for Exchange enrollees* 2013 Compliance Reminders SBC and 60-Day Notice Rule Summary of Benefits & Coverage (SBC) Simple, concise explanation of plan benefits & costs • Model chart available Applies to issuers and plan sponsors • • No duplication required Issuer can distribute on behalf of employer Provide to participants & beneficiaries effective Sept. 23, 2012 • • • 1st day of 1st open enrollment period 1st day of 1st plan year Other specific situations 60-Day Notice Rule Must notify in advance of any material modifications not in connection with renewal • • Describe in a summary of material modifications (SMM) or updated SBC At least 60 days BEFORE modification becomes effective Material modification: • • • Enhancement of covered benefits/services Material reduction in covered benefits/ services More stringent requirements for receipt of benefits Notice of Exchange Employers subject to the FLSA must notify all employees of Exchange/Marketplace information Must provide in writing May provide by mail or electronically (DOL requirements apply) Model notices available Compliance deadline: New employees: within 2 weeks of hire date Must include information about: Existence of Exchange and services provided Potential eligibility for subsidy under Exchange Risk of losing employer contribution Notice of Exchange - Penalties DOL has said there are no fines or penalties for failing to provide notice • Still unclear whether non-compliance can trigger: − Non-ACA penalties − DOL audit − Employee lawsuits • Providing notice is still required by law, and can benefit employers − Can help answer employee questions Health Plan Fees Patient-Centered Outcomes Research Institute (PCORI) Fees • Paid by issuers and self-funded plan sponsors − Special rules multiple self-funded plans (including HRAs) • Paid annually on Form 720 by July 31 each year − Apply for plan years ending on or after Oct. 1, 2012 − End with the 2018 plan year – do not apply for plan years ending on or after Oct.1, 2019 • Amount of the fees: 2012 plan year $1 x average number of covered lives 2013 plan year $2 x average number of covered lives 2014 and beyond Increase based on National Health Expenditures Reinsurance Fees • Transitional reinsurance program to operate 2014-2016 − Fees imposed on health insurance issuers and self-funded plan sponsors of major medical plans (with some exceptions) − Exemption expected for some self-funded plans for 2015-2016 • Fees based on annual national contribution rate − 2014: $5.25/month ($63/year) x average number of covered lives Nov. 15 Submit enrollment count to HHS Dec. 15 (or 30 days) HHS notifies issuer/sponsor of amount due 30 days Payment due Health Insurance Providers Fee • Annual fee on health insurance providers − Effective in 2014 − Due Sept. 30 each year − Allocated according to market share: $8B in 2014 - $14.3B in 2018 (based on premium growth in later years) Applies to: Does not apply to: Covered Entities Companies with $25M or less in net premiums Including health insurance issuers and HMOs Self-insured employers Government and non-profit entities VEBAs 2014 Health Plan Changes Waiting Period Limits • Waiting periods limited to 90 days for all plans − Beginning with 2014 plan year Strict 90 day limit • 1st of the month following not permitted Other eligibility conditions permitted Variable hour employees • Can’t use to avoid 90-day limit • Limits on cumulative hours of service requirement (1200 hours/one time only) • Measure hours for up to 12 months to determine FT status • Offer coverage by end of 13th month Cost-Sharing Limits for Health Plans • Limits for non-GF group health plans beginning with 2014 plan year Out-ofPocket Limits Deductible Limits • All non-GF group health plans • May not exceed HDHP limits for 2014 ($6,350 single/$12,700 family) • Indexed for inflation • Special rule for 2014 delays full compliance • Only insured small group non-GF plans • May not exceed $2,000 (single coverage) or $4,000 (family coverage) • Carriers may have flexibility • Indexed for inflation Plan Changes Annual limits eliminated • Prohibited on essential health benefits in 2014 plan year • Essential health benefits determined according to state benchmark plan Preexisting condition exclusions prohibited • Currently prohibited for children under age 19 • Prohibited for everyone beginning with 2014 plan year Small group policies (non-GF plans) • Must provide essential health benefits package • Premium rating restrictions apply – limited to age, geographic location, family size and tobacco use Wellness Programs Changes • Health-contingent wellness program reward limits increase in 2014 − Current limit: 20% of cost of coverage − General limit: 30% of cost of coverage − Tobacco program limit: 50% of cost of coverage • Health contingent wellness programs divided into: − Activity-only programs − Outcome-based programs • Nondiscrimination rules apply to health contingent programs (with slight differences) − Opportunity to qualify once/year − Must offer alternative means of qualifying − Outcome-based programs must offer reasonable alternative standard Individual Mandate and Exchanges Individual Mandate • Rule for individuals: have health insurance coverage by 1/1/14 or else (pay a penalty) • Penalty applies to taxpayers and their children who don’t have “minimum essential coverage” − Greater of dollar amount or % of income − Kids = half of adult penalty − Family penalty capped • Annual penalty amounts − 2014 = $95 or 1% − 2015 = $325 or 2% − 2016 = $695 or 2.5% What is Minimum Essential Coverage? Employer sponsored coverage Including COBRA and retiree coverage Individual coverage Government programs Medicare Medicaid Children’s Health Insurance Program (CHIP) coverage Some veterans’ health coverage TRICARE Exemptions to the Mandate • Available Exemptions o Low income or hardship* o Coverage is unaffordable o o o o o (more than 8% of income) Religious exemption Incarcerated Member of Indian tribe or health care sharing ministry Not lawfully present Short gap in coverage • Exemptions claimed through Exchange or tax filing • Individuals who lose exemption get special enrollment rights Special Rule for Employees Eligible for Non-Calendar Year Plans Employers can amend Section 125 plan to allow mid-year election changes • Let employee elect employer coverage for Jan. 1 or leave employer plan to go to Exchange • Optional, but plan must be amended (retroactive amendment ok) • Extended to any employer with a non-calendar year cafeteria plan (not just large employers) Relief for employees • Employee will not be subject to penalties if they are not enrolled for 2013-2014 plan year • Relief available until the end of the 2013 plan year American Health Benefits Exchange Public health insurance Exchange required by ACA Primarily online marketplace for purchasing health insurance (Qualified Health Plans) Run by state or federal government with consumer assistance from other entities For individuals and small employers (generally up to 50 employees) SHOP Exchange • Small Business Health Option Program (SHOP) – Exchange for small employers 2014-15 • States can limit size to up to 50 employees • 2016 • States must increase size to up to 100 employees 2017 • States can let any size employer participate Small employers can offer employees enrollment in a QHP through a SHOP − Can offer benefits through a cafeteria (Section 125) plan − Exchange sets contribution methods Employee-Choice Feature Delay Employee-choice model: • Employers have the option to offer employees all QHPs at a certain level of coverage • Employer chooses level of coverage and a contribution amount • Employees choose the plan they want Employee choice model delayed until 2015 for FFE SHOPs • 2014 implementation optional for state Exchanges • Most state Exchanges will offer employee choice in 2014 Exchanges still planned to be operational • Employers will have to choose a plan • Employees won’t be able to choose from all plans right away Qualified Health Plans Offered by an approved insurer Certified to meet Exchange requirements Offers essential health benefits Meets cost-sharing limitations Priced like plans outside the Exchange Provides Apples to apples... bronze, silver, gold or platinum coverage (or catastrophic plan for young individuals) QHP Metal Levels 90% of benefit costs covered 80% of benefit costs covered 70% of benefit costs covered 60% of benefit costs covered Exchange Eligibility Individuals • Citizen or legal resident • Not incarcerated • Reside in state covered by Exchange • (Not be enrolled in Medicare) • Separate from subsidy eligibility rules Small Employers (SHOP Exchanges) • Qualify as a small employer based on size • Offer QHP coverage to at least all FT employees • Use SHOP in primary office location or employee’s primary worksite location Most individuals can shop for Exchange coverage (even if eligible for employer coverage) Exchange Enrollment Restrictions apply to timing of enrollment to prevent adverse selection Individuals Small Employers • Initial enrollment: Oct. 1, 2013-March 31, 2014 • Must enroll by Dec. 15 for Jan. 1 coverage but: no penalties for anyone who enrolls during initial open enrollment period • Annual open enrollment: Oct. 15-Dec. 7 • Special enrollment for qualifying events • Can buy coverage for employees any time after Oct. 1, 2013 • 12 month plan year required • Annual election periods apply • Special enrollment for employees with qualifying events Exchange Subsidies Provide assistance to low income individuals: • 100%-400% of federal poverty level • Not eligible for government programs that cover health care To help pay premiums or reduce cost-sharing Not available to individuals who are: • Eligible for affordable, minimum value employer coverage or • Enrolled in an employer plan Employer Mandate (Delayed Until 2015) Employer Shared Responsibility Rules (Pay or Play) Small Employers (fewer than 50 FT/FTE employees) • No requirement to offer coverage • Can get tax credits for providing coverage Large Employers (50+ FT/FTE employees) • Must offer coverage to FT employees and dependents to avoid penalties • Coverage must be affordable and provide minimum value • Penalties delayed until 2015 Employer penalties triggered if any full-time employee receives subsidized coverage in an Exchange Determining Large Employer Status for Pay or Play Penalties Who is a Large Employer? Average 50+ fulltime employees In the prior calendar year Including full-time equivalent employees Common ownership rules apply Special rule for 2014: can count 6 consecutive months in 2013 Will this apply for new 2015 effective date? Full-Time Employee With respect to a calendar month An employee who is employed on average at least 30 hours of service per week 130 hours of service in a calendar month = the monthly equivalent of 30 hours of service/week Full-Time Equivalent Employees Add hours of service in a month for PT employees (up to 120 hours/person) Divide total hours by 120 Result: Number of FTEs for the month Counting Employees Add full-time employees (including seasonal) for each calendar month in prior calendar year Add FTEs (including seasonal) for each calendar month in prior calendar year Add full-time employees and FTES together for each month of prior calendar year Add 12 monthly totals and divide by 12 * Special rule for 2014: can use 6 consecutive months in 2013 Special Rules Seasonal Employees An employer is not a large employer if: (1) the employer's workforce exceeds 50 fulltime employees for 120 days (4 months) or fewer during the calendar year and (2) the employees in excess of 50 employed during that period were seasonal workers New Employers Use average number of full-time employees the employer is “reasonably expected to employ” on business days in the current calendar year Providing Coverage to FullTime Employees Employer Shared Responsibility Penalties Penalties may apply if the employer: • Fails to offer minimum essential coverage to FT employees (and dependents) • Offers coverage that is not affordable or does not provide minimum value Penalties triggered if any FT employee gets subsidized coverage through Exchange • Not offered employer coverage or offered coverage that is unaffordable not of minimum value (and doesn’t enroll) • Not eligible for government programs (Medicare, Medicaid) • Income below 400% of federal poverty level Enrolling in Exchange coverage without subsidy will not trigger penalties Affordability and Minimum Value Affordable Coverage • Employee’s cost for self-only coverage does not exceed 9.5% of household income • Employer can generally compare cost of coverage to W-2 income, rate of pay or federal poverty level Minimum Value Coverage • Plan covers at least 60% of costs of covered benefits and services for average person • HRA/HSA amounts may be included • HHS-approved methods for calculation • Some HRA amounts may be included • Most wellness incentives cannot be taken into account Potential Penalties Penalty A • Employer did not offer coverage to substantially all FT employees and dependents (children) • $2,000 x (all FT employees – 30) Penalty B • Employer offered coverage to substantially all FT employees/dependents • But not all OR coverage is not affordable or does not provide minimum value • $3,000 x each employee who gets subsidized coverage (capped at Penalty A amount) Penalty Potential Not a large employer: Less than 50 full-time equivalent employees Large employer: 50 or more full-time equivalent employees Does not offer coverage to substantially all FT employees (and dependents) Scenario A No full-time employees receive credits for exchange coverage No penalty No penalty Offers coverage to substantially all FT employees (and dependents) Scenario B 1or more full-time employees receive credits for exchange coverage Scenario C No full-time employees receive credits for exchange coverage Number of fulltime employees minus 30 multiplied by $2,000 No penalty Scenario D 1or more full-time employees receive credits for exchange coverage Lesser of: Number of full-time employees minus 30, multiplied by $2,000. Number of full-time employees who receive credits for exchange coverage, multiplied by $3,000. (Penalty is $0 if employer has 30 or fewer full-time employeesbecause penalty is based on the lesser of the two calculations) 49 Offering Coverage • Must be offered to substantially all FT employees and dependents • Substantially all • Children up to age 26 must be offered coverage − 95% general rule − May fail to offer to up to 5% (or 5, if greater) − Does not have to be inadvertent − Not spouses − Dependent coverage does not have to be affordable • Opportunity to elect must be offered once per year − Employee must be able to opt out of coverage that is unaffordable/not MV Measuring Full-Time Status Statutory Requirement • Employers would have to determine full-time status on a monthly basis − Would have to know status to offer coverage • Administrative issues − Not an issue for employers/employees with standard schedules − Problematic for variable hour employees Employees Expected to Work Full-Time • Employer must offer coverage by the end of the first 3 full calendar months of employment • Applies to an employee who is “reasonably expected at his or her start date to be a fulltime employee (and is not a seasonal employee)” • If coverage is not offered by the deadline, penalties can apply for: − The first 3 calendar months − Any subsequent months where coverage is not offered Safe Harbor for Variable Hour/Seasonal Employees Measurement Period Counting hours of service (3-12 months) Administrative Period Time for enrollment/disenrollment (Up to 90 days) Stability Period Coverage provided (or not) – length depends on type of employee and whether FT or not Look Back Measurement Method 2013 Nov. 1 Dec 31 Measurement Period 2014 Jan 1 Nov. 1 Measurement Period cont. Dec 31 Admin Period 2015 Dec 31 Jan 1 Stability Period Questions? For more information about Health Care Reform visit: www.morrisandreynolds.com/health-reform/ Morris & Reynolds Insurance 14821 South Dixie Highway, Miami, FL 33176 Telephone 305.238.1000 | Fax 305.255.9643 Thank you! This presentation is current as of the date presented and is for informational purposes only. It is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Please contact legal counsel for legal advice on specific situations. This presentation may not be duplicated or redistributed without permission. © 2012-2013 Zywave, Inc. All rights reserved.