no coverage

MAY 3, 2013
Presented by: Terry K. Headley
Past President – National
Association of Insurance &
Financial Advisors
Affordable Care Act
March 23, 2010
President Barack Obama signed
the Patient Protection &
Affordable Care Act into law
March 30, 2010
Amendments were signed into
Recap of SCOTUS decision
• Constitutionality & individual mandate upheld
• Mandate unconstitutional under Commerce
Clause, but permissible under Congress’
power to a tax
• Medicaid expansion no longer mandatory for
states to retain their current Medicaid
Affordable Care Act
“Members of this Court are vested with the
authority to interpret the law; we possess
neither the expertise nor the prerogative to
make policy judgments. Those decisions are
entrusted to our Nation’s elected leaders, who
can be thrown out of office if the people
disagree with them. It is not our job to protect
the people from the consequences of their
political choices.”
- Chief Justice John Roberts
NFIB v. SEBELIUS, June 28, 2012
ACA Early Years (2010-2012)
Part D rebate Rx - $600 Rebate in the Doughnut Hole
Adult children coverage to age 26
No pre-ex exclusions for children under age 19
No lifetime dollar limits on essential benefits
Restricted annual dollar limits on essential benefits
No reimbursement for OTC drugs on HSAs
Increased penalty (20%) for non-qualified HSA withdrawals
Medical loss ratio reporting
Medical loss ratios rebate
CLASS (suspended)
Affordable Care Act Taxes
(21 New Taxes)
Affordable Care Act Taxes
ACA Challenges
• Remove Agent Compensation from MLR
• Reverse the 3.8 Percent Tax on Unearned
Income (Including Annuities)
• Raise or Remove FSA Contribution Cap
• Repeal the CLASS Act
• Enhance HSA and FSA Use
• Create Purchase Incentives
• Build on the Employer-based System
• Reduce Consumer Costs
Post-ACA Legislative Efforts
Class Act Repeal (H.R.1173) – Passed House 2/1/12
Sponsor: Rep. Charles Boustany (R-LA-7)
NE Cosponsors: Reps. Lee Terry (R-2) and Adrian Smith (R-3)
Class Act Repeal (S.720)
Sponsor: Sen. John Thune (R-SD)
NE Cosponsors: Sen. Mike Johanns (R-NE)
MLR Fix (H.R.1206) – Passed Energy & Commerce Committee 9/20/12
Sponsor: Rep. Mike Rogers (R-MI-8)
NE Cosponsors: Reps. Jeff Fortenberry (R-1) and Lee Terry (R-2)
MLR Fix (S.2288)
Sponsor: Sen. Mary Landrieu (D-LA)
NE Cosponsors: Sen. Ben Nelson (D-NE)
New Concerns
• New Medicare taxes on unearned income and
higher income employees and self-employed
• FSA contributions capped at $2,500
• Exchange notification requirement for
ACA’s Big Year - 2014
Individual Mandate
Health Insurance Exchanges
Employer Mandate
Individual market guaranteed issue
Elimination of preexisting condition look-back and
exclusionary periods
• Subsides available for qualified individuals purchasing
individual coverage through the exchanges
2014 Continued
• Medicaid expansion
• New premium taxes on fully-insured plans
• Essential benefit and actuarial value requirements for
individual and small group plans
• Non-discrimination rules and wellness plans
Individual Mandate
• PPACA requires all U.S. citizens and legal residents to
have minimum essential coverage in 2014.
• Annual tax for not having minimum essential
coverage will be the greater of a flat dollar amount
per individual or a percentage of the individual’s
taxable income
• The tax paid as a federal tax liability (16,500 IRS
Agents to Enforce Tax)
New Premium Tax Credit
• Tax credit available to individuals and families
with incomes between 100% and 400% of the
federal poverty level
• CBO estimates average credit $5,000 per year
• Credit is generally the difference between the
“benchmark plan” (silver level) premium and
the taxpayer's “expected contribution”
Employer Reforms
• Employer (50+ employees) assessments for not providing
coverage or providing unaffordable coverage
• W-2 reporting of health insurance (not taxable income
to employees)
• 40% tax on Cadillac plans ($27,500 Aggregate Value) 2018
• FSA contributions capped at $2,500
• Auto-enrollment for employers with 200+ employees
Insurance Not Offered
• $2,000 assessment per full-time worker
• First 30 full-time workers excluded
• Part-time workers don’t count for assessment
• Part-time do count for figuring out if the rules
apply to employers (50+ employees)
Not Affordable Coverage
• Employers (50+ employees) who fail to offer
"affordable" coverage pay a $3,000 penalty for
every employee that receives a subsidy
• Affordability based on household income
• Employers can use employee’s W-2 for
calculating assessments
Federal Subsidies
• Federal subsidies for low-income individuals
buying coverage through state exchanges
• Employer obligation to pay an assessment is
contingent on a worker qualifying for a federal
• Will subsidies exist in federal facilitated
• Effective 2014, ACA requires most individuals to have
“minimum essential coverage”.
• Penalties
– 2014: $95 per uninsured person or 1 percent of household
– 2015: $325 per uninsured person or 2 percent of household
income, and
– 2016 and beyond: $695 per uninsured person or 2.5 percent of
household income
• Overall penalty is capped at the national average
premium of a bronze level plan purchased through an
General Rules
• Today: Employer can refuse to offer coverage without
any federal penalty
• January 1, 2014: Large employers are not required to
provide health insurance, but tax applies if full-time
employee receives federally-subsidized exchange
– No explicit exclusion for government, church or non-profit
• Tax depends on whether “minimum essential
coverage’ was offered to full-time employees (&
their dependents – Kids – Adopted & Foster)
Employer “Pay or Play”
• Step 1: Understand the rules
• If employer has 50-full-time employees or more (30+
hours/week or 130 hours/month) and offers no
coverage, the penalty is $2,000 per employee per year
($166.67 per month) if any employee receives a
subsidy in the exchange, minus the first 30 employees.
– Part-time employees calculated by taking the hours
worked by a part-time employees in a month
divided by 120.
– Seasonal employees not counted if working less
than 120 days a calendar year.
Determining Number of Employees
• Step 2: Are you an applicable large
• A large employer is one who employed an
average of 50 full-time Equivalent Employees
on business days during the preceding
calendar year.
• Again, takes into account part-time Employees
as “full-time Equivalents”.
Calculating Part-Time Employees
• Only for purposes of determining if “Pay or Play’
applies – do not have to offer coverage to part-time
• Hours worked in month divided by120 + FTEs
• Example
– A restaurant has 20 part-time employees who all
work 24 hours per week or 96 hours per moth.
– These 20 part-time employees would be counted as
16 full-time employees.
– 20 part-time employees “x” 96 hours worked in a
month = 1920 divided by 120 hours = 16 full time
Calculating the Penalty
• Step 3: Do you owe a penalty?
• (FTEs – 30) X $166.67 month + penalty.
• Penalties calculated on a month-by-month
• Employers are only subject to this penalty if not
offering coverage and at least one employee
receives a subsidy in the exchange.
• Total number of full-time employees is used
when calculating this penalty.
Penalties Summary
• Only penalized if not offering coverage, have
50 or more full-time employees, including parttimers, and one or more employees receive a
subsidy through the exchange
• Could be penalized for offering unaffordable
coverage if employee portion is greater than
9.5% (Single Coverage Cost) of wages and
employee receives subsidy.
Essential Health Benefits
• HHS has not issued formal regulations on the
essential health benefits
• States tasked with identifying their own
benchmarks plans on which to base essential
health benefits
State EHB Benchmark Plans
Nebraska has proposed a benchmark plan
State Exchanges
• On January 1, 2014, states are required to
establish health care exchanges.
• If the state fails to establish the exchange, the
federal government will step in and run the
state exchange.
• Nebraska has opted for Federally-Run
Medicaid Expansion
• Medicaid Expansion creates a new Medicaid
group - Newly Eligible Individuals age 19-64 who:
– Have income below 133% FPL (138% with a standard
5% of income disregard)
Annual Fee on Health Insurance
• PPACA will impose a fee on all health insurers
based on their market share of net premiums
written, which will be effective beginning in
– The fee will not apply to self-insured plans and
federal, state, or other government entities.
• This fee is projected to raise about $60 billion
over a 10-year period
Access – The Insured
Eligible but Not
Enrolled in
Employment Based
Individually Purchased
30% Medicaid
21% CHIP
Other Public
(GAO Means Tested
Insurance Coverage Today
(2010 Census)
Why does it cost so much?
Government Cost Shifting
New Technology
Access to Care (No waiting)
Legal-Defensive Medicine
Lifestyle – Health & Habits
(Smoking-Obesity-Diabetes-Lack of
Health insurance
the cost of medical
Present Cost Shifting to You
Medicare Pays
Doctors 20% less &
Hospital 30% less
than what private insurers pay
As a result:
Private Insurers & You Pay
$150 a Month More for a Family of 4
Source: Milliman 2008
Let’s Get This Right
Modifications to the new health law are
necessary to improve affordability and
sustainability of private insurance choices, and
to ensure that consumers have access to
professional services provided by fairlycompensated, licensed and regulated
insurance agents and advisors.
Small Employer Responsibilities
• Allocating Medical Loss Ratio Rebate
• Withholding Medicare (FICA) Tax
• Administering FSA Contribution Cap
• High-value Health Insurance Tax
• Calculating & Reporting to IRS “high value” health

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