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N AVIGATING THE A FFORDABLE C ARE A CT : U NDERSTANDING THE INDIVIDUAL MANDATE, THE EMPLOYER MANDATE, INSURANCE EXCHANGES AND S TRATEGIC O PTIONS FOR C.

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Presentation on theme: "N AVIGATING THE A FFORDABLE C ARE A CT : U NDERSTANDING THE INDIVIDUAL MANDATE, THE EMPLOYER MANDATE, INSURANCE EXCHANGES AND S TRATEGIC O PTIONS FOR C."— Presentation transcript:

1 N AVIGATING THE A FFORDABLE C ARE A CT : U NDERSTANDING THE INDIVIDUAL MANDATE, THE EMPLOYER MANDATE, INSURANCE EXCHANGES AND S TRATEGIC O PTIONS FOR C OMPLIANCE WITH PPACA Katherine R. Basch Brennan, Manna & Diamond, LLC 1

2 US H EALTH C ARE L ANDSCAPE High costs that continue to rise Exclusive access to providers Scarce resources U.S. ranks behind other European countries on some measures (access to primary care physicians, quality measures, and information technology) 2

3 PPACA G OALS Provide affordable health insurance to Americans who cannot afford coverage or have pre-existing conditions. Phase out annual and lifetime insurance payout maximums to ensure continuous coverage for people with catastrophic illnesses. Boost patient health by expanding free and low- cost preventive care services. Crack down on Medicare fraud. Institute standardized billing and electronic medical record exchanges. Insurance company disclosure on premium payments – medical care vs. administration costs. 3

4 501( R ) R EQUIREMENTS FOR 501( C )(3) H OSPITALS Section 501(r) outlines requirements for certain hospitals to maintain 501(c)(3) status. This section requires hospitals to: Meet community health needs assessment requirements; Meet financial assistance policy requirements described in this section; Meet certain limitation requirements on charges; and Meet certain billing and collection requirements. 4

5 PPACA G OALS – S UPREME C OURT O PINION 1. PPACA requires most Americans to maintain “minimum essential” health insurance coverage. For those who are not exempt from this requirement or do not receive coverage through an employer or government program, you must purchase coverage from a private company or pay a “penalty” beginning in The individual mandate that everyone purchase health insurance is constitutional as the “penalty” is a “tax” within Congress’s taxing powers. 5

6 PPACA G OALS – S UPREME C OURT O PINION 2. PPACA expands the current Medicaid program, which is funded through the federal government to the states to provide assistance to pregnant women, children, needy families, the blind, the elderly, and the disabled. PPACA seeks to expand the scope of the Medicaid program to increase the number of individuals the states must cover. The expansion of the Medicaid program is constitutional as it is a new Medicaid program. 6

7 PPACA G OALS – S UPREME C OURT O PINION 2014, states must cover adults with incomes up to 133% of the poverty level, including those adults without children. ($30,000 for a family of 4). 2013, states must also cover preventive services at little to no cost to patients. 2013, primary care physicians treating Medicaid patients must be paid no less than 100% of Medicare rates. By October 1, 2013, states will receive 2 additional years of funding to continue coverage for children not eligible for Medicaid. 7

8 PPACA G OALS – S UPREME C OURT O PINION Medicaid expansion and border states Arkansas and Texas The Medicaid expansion was expected to provide coverage to 16 million Americans. 6 million have gained Medicaid coverage since October million with pending application. Medicaid exclusion and “credible allegation of fraud.” 8

9 PPACA G OALS – S UPREME C OURT O PINION 3. PPACA increases federal funding to the states for the expanded Medicaid program. However, if a state did not comply with the new Medicaid expansion program, the state would lose all of its Medicaid funding. The federal government can only withhold federal funds for the new Medicaid program if a state chooses not to participate. The federal government cannot withhold existing Medicaid program monies. This was the part of the law that was struck down by the Supreme Court. 9

10 E FFECT OF H EALTHCARE R EFORM CONT ’ D The cost of healthcare is expected to rise overall. 7.5% in Premiums are expected to rise for all plans. Employers and insurance companies are offering more incentives for good behaviors. 60% of jumbo employers (20,000 or more employees) provide incentives for employees who participate in a health management program. 10

11 I NDIVIDUAL M ANDATE 11

12 I NDIVIDUAL M ANDATE All individuals must show proof of insurance or else pay a penalty. Individuals can buy it from state-based insurance exchanges. Premium subsidies will be available to those with limited incomes. Those who can afford coverage must obtain it or pay a fee – this is used to offset the costs for caring for uninsured Americans. Tax credits are available for those between % ($92,000 for a family of 4) of the poverty level. Certain Americans may qualify for reduced copayments, coinsurance, and deductibles. 12

13 I NDIVIDUAL M ANDATE IRS will track compliance with the individual mandate through the individual’s 2014 tax return. Penalty is assessed monthly based on the number of months the individual goes without coverage and is the greater of the flat rate or the percentage (subject to annual cap). For 2014, $95 per uninsured person or 1 percent of household income over the filing threshold. For 2015, $325 per uninsured person or 2 percent of household income over the filing threshold. For 2016 and beyond, $695 per uninsured person or 2.5 percent of household income over the filing threshold. 13

14 “D ELAY ” OF I NDIVIDUAL M ANDATE Initially delayed through February 15, Delayed further through March 31, March 5, 2014 – Hardship exemption expanded and extended through October 1, December 2013 Hardship Exemption – Attest to the following: Previous insurance was cancelled due to noncompliance with PPACA. Insurance on the exchange is unaffordable. For 2014 only. March 2013 Hardship Exemption – Attest that you experienced another hardship obtaining insurance: Unaffordable. Preferred providers not in-network. Through October 1, Documentation “if possible.” 15 other exemptions also exist. 14

15 E MPLOYER M ANDATE 15

16 E MPLOYER R ESPONSIBILITY All applicable “large” employers (employ 50 or more “full-time” employees) must provide affordable minimal essential coverage to all full-time employees or face a penalty. Hot off the Press! – On March 14, 2014, the Department of Health and Human Services mandated that plans must cover same-sex spouses in the same manner as opposite-sex couples beginning in May 30, The Medicare program now considers sex reassignment surgery a covered service. 16

17 O VERVIEW OF P ENALTIES Employer Penalties (50+ full-time employees or full-time equivalents) 17 Do you offer coverage? Does the Plan provide minimum value? Is the coverage affordable? NO PENALTY! Yes No $2,000 per FTE* Lesser of: $3,000 per FTE receiving tax credit Or $2,000 per FTE* * Minus the first 30 employees Only applies to employees with household incomes of 400% FPL or less

18 D ELAY OF E MPLOYER M ANDATE July 1, 2013 – The Department of Treasury delayed the effective date of the employer mandate until January 1, February 10, 2014 – The Department of Treasury issued final regulations that: Delayed implementation of the employer mandate until January 1, 2016 for employers with FTEs. Provided transitional rules in 2015 for employers with 100 or more FTEs. Provided clarifications with respect to certain categories of employees. Delays allows employers to consider strategic options for compliance with the employer mandate. 18

19 D ELAY OF M ANDATE FOR E MPLOYERS WITH FTE S Small businesses with fewer than 50 FTEs (about 96% of all employers): remain unaffected by PPACA and the employer mandate and will not be required to provide healthcare coverage or fill out any forms in 2015, or in any year, under PPACA. Employers with 50 to 99 FTEs (about 2% of employers): must report on their workers and offer coverage beginning in 2015, but have until 2016 before any employer responsibility penalties may be assessed. Employers in this category are subject to certain maintenance of coverage requirements and must certify that they are not reducing the size of their workforce in order to fall into this category. Larger employers with 100 or more FTEs (about 2% of employers): must comply with PPACA beginning on January 1, 2015; however, these employers must only offer coverage to 70% of full-time employees in 2015 to avoid increased penalties. This is reduced from the 95% threshold previously set forth in proposed regulations. Beginning in 2016, the threshold will be raised to 95% requiring these employers to offer healthcare coverage to 95% of all full-time employers in order to avoid increased penalties under ACA. This delay does not affect other penalties under the mandate such as the requirement to provide minimum essential coverage and affordable coverage 19

20 V ARIOUS E MPLOYEE C ATEGORIES Volunteers: Hours contributed by bona fide volunteers for a government or tax- exempt entity, such as volunteer firefighters and emergency responders, will not cause them to be considered full-time employees. Educational employees: Teachers and other educational employees will not be treated as part-time for the year simply because their school is closed or operating on a limited schedule during the summer. Seasonal employees: Those in positions for which the customary annual employment is six (6) months or less generally will not be considered full-time employees. Student work-study programs: Hours worked by students under federal or state- sponsored work-study programs will not be counted in determining whether they are full-time employees. Adjunct faculty: The final regulations provide as a general rule that employers of adjunct faculty are to use a method of crediting hours of service for adjunct faculty employees that is reasonable under the circumstances and consistent with the employer responsibility provisions. To accommodate the need for predictability and ease of administration, the final regulations allow for a “bright line” test. Employers may credit an adjunct faculty employee with 2 ¼ hours of service per week for each hour of teaching or classroom time in order to calculate total hours of service for purposes of determining whether the employee is full-time or part-time. 20

21 E MPLOYER R EPORTING R EQUIREMENTS 21

22 H OT O FF T HE P RESS : F INAL R ULES I SSUED ON M ARCH 5, 2014 Section 6055 Insurer Reporting Requirements: Information about entity providing coverage and contact information. Individuals enrolled, identifying information, and months covered. Section 6056 Employer Reporting Requirements: Information about employer, contact information, and number of full-time employees. For each full-time employee, information about coverage offered, by month, and lowest employee cost of self-only coverage offered. Single combined form: Self-insured employers – must fill out both sections. All other employers – must fill out top section for Section 6056 information. Insurers fill out bottom section for Section Previous proposed rule: Employer annual return. Employee statements. 22

23 A LTERNATIVE F ILING R EQUIREMENTS Simpler form – for all full-time employees: Employer certifies that for each month, it provided minimum essential coverage at the minimum value of 9.5% of the federal poverty level to one or more employee; and The employer offered minimum, essential coverage to spouses and dependents. Alternative reporting for 2015 only: Employer certifies that it made a qualifying offer of coverage to at least 95% of all full-time employees and their spouses and dependents. Must provide the following for each employee: Name. SSN, address, months covered, and an employee statement to each employee. 23

24 R EPORTING D EADLINES The forms must be filed electronically, unless the employer is filing fewer than 250 returns. Each return for an employee is a separate return and all returns filed by the employer will be aggregated, including PPACA forms and Form W-2. Employers must file the return with the IRS by February 28 (March 31 if filed electronically). March 1, 2016 (nonelectronic) March 31, 2016 (electronic) Employers are encouraged to voluntarily report in 2015 for information pertaining to

25 T HE E XCHANGE 25

26 G OAL OF E XCHANGES “One-stop shopping” for health insurance Provide a venue where insurance companies can sell insurance and purchasers can compare and choose from multiple options available 26

27 F OUR L EVELS OF C OVERAGE Bronze: plan pays for 60% of covered services Silver: plan pays for 70% of covered services Gold: plan pays for 80% of covered services Platinum: plan pays for 90% of covered services

28 T HE S TATE OF THE E XCHANGE Exchange enrollment: 8.1 million enrolled before March 31 st open enrollment deadline. HHS goal was 8 million. 25% (2 million) have data discrepancies – income, citizenship, and immigration status. Exchange demographics: 59% are over age % are age “Invincibles” are not signing up at the projected rate necessary to spread risk. 28

29 T HE S TATE OF THE E XCHANGE Exchange Projections: 2.4% higher costs than premium revenues. On average, insurance companies have a profit margin of 4-6%. Insurers may have duplicate enrollment information. 1 in 4 enrollees will receive coverage termination notices for failure to pay premiums. Provider Payment Issues for Exchange Products: “All products” clauses 90-day grace period for premium nonpayment 29

30 S TATE P ARTICIPATION IN E XCHANGES 18 states and Washington D.C. will run their own exchange 7 states will operate exchanges as a federal-state partnership 25 states opted out of running their own exchange. Federal government will create these exchanges. 30

31 S TATE P ARTICIPATION IN E XCHANGES Source: Center on Budget Policies and Priorities (June 14, 2013).

32 S MALL B USINESS H EALTH O PTIONS P ROGRAM (SHOP) E XCHANGES SHOP exchange allows certain small employers to make qualified plans available to employees States can allow employers with up to 100 employees participate in SHOP exchange, or can limit to participation to businesses with no more than 50 employees SHOP exchange has same characteristics as individual exchange – only offers qualified health plans, determines eligibility, facilitates enrollment 32

33 S UBMITTING I NFORMATION TO AN E XCHANGE On May 16, 2014, a final ruling established civil penalties for all persons, including individuals, corporations, Exchanges, Medicaid and CHIP agencies, and other entities gaining access to personally identifiable information submitted to an Exchange: $250,000 maximum fine imposed if a reporting person knowingly and willfully provides false or fraudulent information to an Exchange. $25,000 maximum fine if a reporting person fails to report information to an Exchange due to negligence or disregard of any rules, or uses or discloses confidential information as defined by PPACA §1411(g). 33

34 O VERVIEW OF S TRATEGIC O PTIONS FOR C OMPLIANCE WITH H EALTHCARE R EFORM 34

35 I NTRODUCTION Healthcare reform has done NOTHING to reduce the cost of: Healthcare insurance; or Healthcare items and services. 35

36 O PTION #1: F OLLOW PPACA AS ORIGINALLY CONTEMPLATED AND OFFER A TRADITIONAL EMPLOYER - SPONSORED PLAN. Employer provides healthcare coverage through a traditional employer-sponsored plan to all full- time employees. No penalties are assessed under PPACA. May be self-funded or fully-funded. This may not be a viable option for many employers due to the rising costs of healthcare. 36

37 O PTION #2: D O NOT OFFER COVERAGE, AND PAY THE PENALTY UNDER §4980H( A ) BEGINNING J ANUARY 1, A LTERNATIVELY, OFFER A STIPEND FOR EMPLOYEES TO OBTAIN COVERAGE THROUGH THE PUBLIC E XCHANGE. Employer no longer offers an employer-sponsored plan. Employer will pay PPACA penalties. Employees must obtain individual coverage under PPACA’s individual mandate. Employees are likely to look to the Exchange. Employer may offer a stipend and/or assist employees in signing up for the Exchange. 37

38 A NOTE ON O PTION #2 BEWARE ! Employer Payment Plans Employer reimburses employee for or directly pays the cost of individual health insurance policy premiums, and Excludes such information from employee’s gross income. EPPs are subject to a $100 per day excise tax. Option #2 Compliance: Cash compensation. After-tax reimbursement. 38

39 O PTION #3: O FFER COVERAGE THROUGH A PRIVATE EXCHANGE. Attractive alternative for employers that can no longer afford Option #1, but do not want to push employees to the public Exchange under Option #2. Private exchange is an employer-sponsored plan. No penalty under PPACA. Defined contribution for the employer. Can include a variety of plan designs and insurers. 39

40 C OMPARATIVE D ATA Background 450 enrolled employees 2013 cost per employee is $12,747 ($5,736,150) All projected costs are net of employee contributions and federal income tax Includes reinsurance fee of $63 and PCORI fee of $2, estimated at $56,030 for Option # projected cost is ($3,889,401) Option #2 (pay the penalty) $962,193 ($2,000 per FTE) Option #2 (pay the penalty and provide a stipend) $3,889,401 Incorporates penalty, taxable stipend, anticipated unemployment insurance tax and increased employee benefit costs (401(k), life and disability insurance premiums) Option #3 Bronze plan projected cost is $2,791,968 40

41 O PTION #4: B ECOME SELF - INSURED AND NEGOTIATE AGGRESSIVE FEE SCHEDULES WITH COMMUNITY - BASED AND TERTIARY FACILITIES. Excellent alternative for very large employers that can steer employees to providers. Negotiate favorable fee schedules with targeted: Community health system. Tertiary health system. All other providers are out-of-network. May also include a partnership with insurance companies. 41

42 O PTION #5: P ROVIDE VALUE - ADDED BENEFITS. Can be combined with Options #1 - #4. Examples: Preventive services and screenings. Wellness check ups. Urgent care services. Gym memberships. Wellness incentives. Drive down the cost of health insurance coverage or provide the employer with access to premium plans. 42

43 S POUSAL MERP Incentivize employees to utilize alternative healthcare coverage that is available to them through marriage. Can be an overlay to a group health plan or a stand-alone group health plan. Can be mandatory or voluntary. Employer reimburses its employees for: Employee contributions required under the spouse’s group health plan, Deductibles and copayments paid under the spouse’s group health plan, and Any other out-of-pocket expenses incurred by the employee under the spouse’s group health plan. May include reimbursement for medical care that would have been covered under the employer’s group health plan, but is not covered under the spouse’s group health plan. 43

44 Q UESTIONS ? Katherine R. Basch Brennan, Manna & Diamond, LLC 75 East Market Street Akron, Ohio


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