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Health Care Reform November 7, 2014. Background of US Health Care Delivery 2 U.S. Health System – employment based since World War II Entire voluntary.

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Presentation on theme: "Health Care Reform November 7, 2014. Background of US Health Care Delivery 2 U.S. Health System – employment based since World War II Entire voluntary."— Presentation transcript:

1 Health Care Reform November 7, 2014

2 Background of US Health Care Delivery 2 U.S. Health System – employment based since World War II Entire voluntary Competitiveness/Recruitment and Retention Largely funded by employers and employees Medicare/Medicaid Group Health Plan

3 Health Care Reform – Why it Matters 3 Health Care Reform - ACA, PPACA, Obamacare  ACA is an acronym for the "Affordable Care Act", a set of laws passed in 2010. ACA is the shortened name for the PPACA, the Patient Protection and Affordable Care Act.  The ACA is a very extensive set of laws which sets out to reform the U.S. healthcare system. The goal of the ACA is to expand coverage to all Americans and to help control healthcare costs overall. Uncertainties now largely gone  Survived the 2012 Presidential election.  Survived court challenges. The US Supreme Court ruled that the law’s individual mandate is a constitutional exercise of Congress’s power to impose tax; however new court challenges continue to arise.

4 Affordability and the ACA 4 Has insurance under the law been affordable? Though many people have found policies with affordable premiums, high deductibles and other out-of-pocket costs have discouraged some people from using their insurance. Of the 7.3 million people who signed up for private insurance through online exchanges during the first enrollment period, 85 percent qualified for federal subsidies that decreased the cost of their premiums.

5 Coverage Requirements & Expansion 5 Individual Mandate: mandates that all Americans, with some very limited exceptions, maintain a minimum level of health insurance or face a tax Insurance Exchanges: creates state-based health insurance exchanges and provides premium tax credits to assist eligible individuals with the purchase of coverage Medicaid Expansion: allows states to expand Medicaid up to 133% of federal poverty level – not expanded in NC Employer Mandate: requires all employers, with 50 or more full-time equivalents, to offer health benefits that meet a defined standard, and pay a set portion of the cost of those benefits on behalf of their employees (Effective January 1, 2015)

6 Market Place Exchanges 6 ACA creates state-based exchanges though which individuals and small employers can purchase coverage. Presumption under ACA that each State will run the exchange in its State - not so in North Carolina and South Carolina States can choose NOT to run the exchange Federal Government has also proposed a “Federal Partnership” model where the federal government runs the exchange, but with State involvement in certain areas.

7 State Insurance Market Place 7

8 Congress and the ACA 8 How many times has the House of Representatives voted to repeal, revamp or tweak the ACA? While Democrats are struggling with whether to embrace the law or push for changes, Republicans are reminding voters that since they took control of the House in 2011, they've voted 54 times to undo, revamp or tweak the law. To date – no legislation to change the Affordable Care Act has been approved by either the House of senate

9 Example of Individual Penalties 9 $40,000 Income$200,000 Income 2014201620142016 Dad$95.00$695.00$95.00$695.00 Mom$95.00$695.00$95.00$695.00 Child age 14$47.50$347.50$47.50$347.50 Child age 16$47.50$347.50$47.50$347.50 Child age 19$95.00$695.00$95.00$695.00 Total$380.00$2,780.00$380.00$2,780.00 Individual Cap$285.00$2,085.00$285.00$2,085.00 Income Cap$103.50$207.50$1,683.00$4,207.50 Penalty$285.00$2,085.00$1,683.00$4,207.00

10 Employer Mandate 10 Coverage Requirements  Meet actuarial threshold of 60% of health care expenses paid by the employer plan  Must cover 95% of eligible employees  Full-time employees who work 30 or more hours per week for 3 Affordability Requirements  Premiums for individual coverage can’t exceed 9.5% of household income

11 Control Group Rules 11 Employer – all entities in the controlled group Aggregate employees of controlled group entities to count employees (50+) Governmental entities should use reasonable good faith method Penalties assessed by unit with controlled group

12 Transition Relief for Employers 12 Employers with 100 or more employees - 2015  Cover 70% of workforce in 2015 and 95% in 2016 Employers with 50-99 employees - 2016 Must meet three conditions: Limited workforce size Maintenance of workforce and aggregate hours of service Maintenance of previously offered health coverage

13 Employer Mandate – Pay or Play” 13 Penalty assessment of up to $2,000 annually per full-time employee for employers that do not provide coverage if at least one full-time employee receives a premium tax credit or cost sharing reduction. Penalty assessment of up to $3,000 for employers that provide coverage but employee opts out of the plan and receives a premium tax credit or cost share reduction because employer coverage for EMPLOYEE only coverage is unaffordable. Exchange subsidies are premium tax credits or cost share reductions that are available to employees whose coverage is unaffordable.

14 Sample ACA “Metallic” Design Levels 14 ProvisionPlatinumGoldSilverBronze Individual Deductible$200$600$2,000$4,500 Coinsurance after Deductible 80% Out-of-pocket Limit$1,500$5,000 $6,400 PCP Office Visit$10$2580% Specialist$10$5080% Generic Rx$10$1580% Formulary Brand$20$3080% Non-form. Brand$20$5080% Actuarial Value90.0%80.0%70.0%60.0%

15 30 is the New 40: The New Full-time Employee

16 Identifying Full-time Employees 16 Full-time Employee – is a common law employee who is employed on average: at least 30 hours of service per week; or 130 hours of service in a month Variable Hour Employee – an employee, who at the start of employment, the employer cannot in good faith determine whether the individual is expected to work on average 30 hours of service per week Seasonal Employee – an employee hired into a position for which the customary annual employment is six months or less. Employment should begin each year in approximately the same part of the year, such as summer or winter Student Workers – does NOT include any hour of service performed by a student as part of the Federal (or equivalent State) Work-Study Program

17 Health Care Reform 101 17

18 Hours of Service 18 Hour of service - each hour for which an employee is paid or entitled to payment for the performance of duties for the employer; and each hour for which an employee is paid, or entitled to be payment, for the period of time where no duties are performed due to vacation, holidays, illness, layoff, jury duty, incapacity (disability), military duty or leave of absence. If an employee is paid on an hourly basis, then the employer must use actual hours from records of hours worked to determine the employee’s status.

19 Exclusion – Hours of Service Rules 19 Bona-fide volunteers Student Employees – can exclude hours for student workers for any hour of service performed by a student as part of the Federal Work Study Program (or equivalent State Program) Members of religious orders – vow of poverty Service outside the United States

20 Non-Hourly Employees 20 The proposed regulations require an employer to count actual hours of service for employees paid on an hourly basis. For employees not paid hourly, an employer may use one of the following three methods to determine hours: i.Actual hours of work ii.A days worked equivalency, with eight hours of service credited for each day worked iii.A weeks-worked equivalency, with 40 hours or service credited for each week worked. An employer can use different methods for different classification of non-hourly employees, as long as the classifications are reasonable and consistently applied.

21 To Measure or Not to Measure that is the Question

22 Determining Full-time Employees 22 Two measurements methods Look-back measurement method o Largely unchanged from prior guidance o Similar break in service/unpaid leave treatment  Break in service reduced to 13 weeks for non- education organizations  26 weeks for education organizations Monthly measurement method Approach used can vary by: Certain employee categories Employer member

23 Measuring and Covering Employees 23 Measurement Period – (a.k.a – look back period) - time frame used to identify full-time employees on a month-by-month basis Coverage Period (a.k.a. – Stability Period) - period during which health coverage may have to be provided, depending on full-time status during a measurement period. Administrative Period – period that allows time for enrollment and disenrollment of employees between the “measurement” and “coverage” periods. Enrollment Period – period of time that allows time for the employee to enroll.

24 UNC Measuring and Coverage Periods 24 Measurement Period - 12 month period Coverage Period - 12 month period Administrative Period - 90 days Enrollment Period - 30 days

25 Measurement Period – How it Works Standard Measurement Period October 3, 2013 to October 2, 2014 Coverage (Stability) Period January 1, 2015 to December 31, 2015 Administrative Period October 3, 2014 to December 31, 2014 12 month measurement and stability period for 2015 plan year

26 Measurement Period – How it Works October 2014 Action Initial Measurement Period,” you will measure employees hired prior to October 1, 2013 Measurement Period: Measure hours worked from October 3, 2013 through October 2, 2014 (12 month measurement period) Coverage Period (Stability Period): January 1, 2015 – December 31, 2015 Enrollment Period: November 1 - November 30, 2014

27 Measurement Period – How it Works November 2014 Action Measurement Period - you will roll forward your hire dates and now measure employees hired from October 1 through October 31, 2013 (these are your newly eligible employees) Measure hours worked from November 1, 2013 through October 31, 2014 (12 month measurement period) Coverage Period (Stability Period): January 1, 2015 – December 31, 2015 Enrollment Period: November 1 - November 30, 2014

28 Measurement Period – How it Works December 2014 Action Measurement Period – Continue to roll forward your hire dates and now measure employees hired from November 1 through November 30, 2013 (these are your newly eligible employees) Measure hours worked from December 1, 2013 through November 30, 2014 (12 month measurement period) Coverage Period (Stability Period): January 1, 2015 – December 31, 2015 Enrollment Period: December 1 – December 30, 2014

29 Breaks in Service 29 If an employee has a break for 13 or more weeks (26 for educational institutions), can use “rehired date” for measuring the employee as “new.” Employers can also use the “rule of parity” that says an employee may be treated as a new employee if the period of non-employment is shorter than 13 weeks (26 for educational institutions) but is at least four weeks long ---and is longer than the employee’s period of employment immediately preceding the period of non-employment.

30 Breaks in Service 30 Break in Service Example - Rule of Parity If an employee works six weeks, terminates employment, and is rehired ten weeks later, that rehired employee is treated as a new employee because the ten-week period of non- employment is longer than the immediately preceding six-week period of employment.

31 Notice and Disclosure Requirements 31 ProvisionSummary of RequirementImplicationsAction Steps Form W-2 ReportingEmployers are required to report the value of employer-provided health care coverage starting with the 2012 plan year. Each employer will need to calculate this amount. Verify that each employer has a system in place to report information in the W-2s. Exchange NoticeNotice to employees explaining the Exchanges. Was required for current employees by October 1, 2013, and all new hires after that date. This requirement amended the FLSA, and, as such, it most likely is the responsibility at the University level; GA could draft and distribute or distribute at the campus level. This notice must continue to be provided to new employees within 14 days of start date. The DOL recently published an updated notice for use through 2017. IRS/Participant ReportingReporting of medical coverage to the IRS and participants and beneficiaries is required for coverage starting in 2015. The reporting for 2015 is required in early 2016. Proposed regulations have been issued. Employers and insurers (for insured plans) have significant new reporting obligations. Verify with your insurer what role they may plan in complying with this reporting requirement and monitor future guidance.

32 Reporting Requirement 32 Calendar year reporting for 2014 W-2s – must include the “cost of coverage” on the W-2—this includes reporting for non- permanent employees. New Reporting Requirement s- large employer reporting – IRC Section 6055 and 6056 reporting. Mandatory reporting for 2015 calendar year reported in 2016. Will report on new Form 1095-C to employees by January 31 and on new Form 1094-C to IRS by February 28 Will need to report SSNs for dependents covered under any of the State Health Plan programs.

33 Taxes and Fees 33 New Medicare Tax  Imposes an additional “employee” Medicare Tax. There is no “employer match” on this additional Medicare Tax.  Adds a 0.9% additional Medicare Tax on wages over the following thresholds:  $250,000 for joint return  $125,000 married filing separately  $200,00 in all other cases (i.e. head of household)  Requires employers to withhold the additional tax on wages or compensation it pays to employees in excess of $200,000 in a calendar year.  Employer only required to start withholding the additional Medicare Tax once an employees wages or compensation exceed $200,000

34 Taxes and Fees 34 Patient Centered Outcomes Research Inst. (PCORI) Fees  Establishes a private non-profit whose mission is to “research” the outcomes and clinical effectiveness, risk and benefits of medical treatments to help with informed health decisions. In the first year (2012) the fee is $1 times the number of plan participants (employees and dependents). For the plan year starting July 1, 2013 the fee will increase to $2 and will be indexed in future years. This fee is charged directly to insured and self-insured health plans. Temporary Reinsurance Program  This three-year transitional reinsurance program was established to help stabilize premiums in the individual health insurance market from 2014 to 2016. This program is funded by contributions from insurers in the individual, small group and large group markets, and self-insured group health plans. Fee expected to be $63 per participant (employee and dependents). Health Insurance Industry Tax  In 2014 the tax will add an estimated 2.0-3.0% in cost to insured plans.

35 Health Care Reform – Things to Consider 35 Move more employees to regular, fulltime status (cost of healthcare + other benefits) Limit number of ‘temporary’ employees including contingent faculty Strictly limit ‘hours worked’ Create separate health care plan for these types of employees? Turnover / Unemployment costs if layoff or reduce hours

36 Health Care Reform – Things to Consider 36 Auto enrollment into health care plans has been delayed Anti-retaliation provisions of the Fair Labor Standard Act

37 Possible Consequences 37 Competitive market for talent Loss of efficiency and effectiveness Long standing practice of offering benefits Possible claims of discrimination in health benefits

38 What Now 38 Communicate with employees about what the ACA provides Determine which employees should be offered coverage because they are “full-time” Offer coverage as required by the ACA

39 Questions 39

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