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Health Care Reform Timeline & Compliance Update [Enter Month Date], 2012 Template for: GF Plan (for both fully- insured and ASOs) [Insert Client Name]

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Presentation on theme: "Health Care Reform Timeline & Compliance Update [Enter Month Date], 2012 Template for: GF Plan (for both fully- insured and ASOs) [Insert Client Name]"— Presentation transcript:

1 Health Care Reform Timeline & Compliance Update [Enter Month Date], 2012 Template for: GF Plan (for both fully- insured and ASOs) [Insert Client Name]

2 Plan Year 2012: Expanding W-2 reporting: (Starting Tax Year 2012~) Healthcare Reform requires employers to report the cost of coverage under an employer-sponsored group health plan starting from the 2012 W-2 statements, which are issued in Large ERs (more than 250 W-2s): Expanded W-2 reporting (Tax year 2012~) Summary of Benefits and Coverage (SBC) Fully-insured plans : MLR Rebates might be distributed from your Insurer (if applicable) Self-insured plans: Patient-Centered Outcomes Research Institute Fee begin (The actual payment & submission of Form 720 to the IRS will be made starting July For fully-insured plans, carriers will pay on behalf of the plans.) Large ERs (more than 250 W-2s): Expanded W-2 reporting (Tax year 2012~) Summary of Benefits and Coverage (SBC) Fully-insured plans : MLR Rebates might be distributed from your Insurer (if applicable) Self-insured plans: Patient-Centered Outcomes Research Institute Fee begin (The actual payment & submission of Form 720 to the IRS will be made starting July For fully-insured plans, carriers will pay on behalf of the plans.) Enter here

3 Summary of Benefits and Coverage (SBC): Starting in September 2012, health insurers and group health plans including self-insured plans will be required to provide a standard Summary of Benefits and Coverage (SBC) (see below) to all individuals eligible or already enrolled in medical coverage.. 3

4 Summary of Benefits and Coverage (SBC) Cont.: Who is going to create SBCs? Your insurance carrier will create the electronic SBC and send it to you, the plan sponsor. Who is distributing the SBCs to employees and beneficiaries? You, as a Plan Sponsor, need to distribute the SBCs to the below individuals (see next Q&A). To whom must the SBCs be provided? To covered and eligible employees and their beneficiaries as well as COBRA qualified beneficiaries. Can SBCs be distributed to the applicable employees and beneficiaries electronically? Yes. SBCs may be provided electronically, if: The format is readily accessible (such as in an html, MS Word, or pdf format); The SBC is provided in paper form free of charge upon request; and If the SBC is provided via an Internet posting, the plan or issuer timely advises the participants and beneficiaries that the SBC is available on the Internet and provides the Internet address. Plans and issuers may make this disclosure (sometimes referred to as the "e-card" or "postcard" requirement) by . Please see below for the model language provided from the Departments. (Note: You can retrieve the above model language from, When does a Plan sponsor need to start distributing the SBCs to EEs and their beneficiaries? At the same time you distribute open enrollment materials. For example, if you hold an open enrollment from 11/1/2012 to 11/15/2012, the SBCs must be provided with open enrollment materials during the period. (Please note, if the SBC provided at the OE were modified before 1/1/2013, then the revised SBC must be reissued and provided by 1/1/2013. ) Good News! A single SBC may be provided to a family (including furnishing the SBC to the participant in the electronic form) unless the plan issuer has knowledge of a separate address for a beneficiary. 4

5 Plan Year 2012 (Cont.): Medical Loss Ratio Under the healthcare reform, carriers and HMOs have to pay rebates to plan sponsors and/or participants if they don’t meet an MLR standard of at least 80% (for small groups, 100 EEs or less) or 85% (for large groups, more than 100 EEs) by August 1 of the following MLR year. What does the MLR of 80% mean? If a carrier uses 80 cents out of every premium dollar to pay its members' medical claims and activities that improve the quality of care, the carrier has a medical loss ratio of 80%. A medical loss ratio of 80% indicates that the carrier is using the remaining 20 cents of each premium dollar to pay overhead expenses, such as marketing, profits, salaries, and administrative costs. Patient Centered Outcome Research Fee The provision imposes an annual fee on carriers and self-insured plan sponsors starting plan years ending on or after October 1, For calendar year plans, it is effective from January 1, In the first year, the fee is $1 multiplied by the average number of covered lives; and the initial payment will be due by July 31, The second year fee will increase to $2 per enrollee. The fee is collected to fund the newly established Patient-Centered Outcomes Research Institute (“PCORI”) under the healthcare reform. The institute will assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing the quality and relevance of evidence-based medicine through the comparative clinical effectiveness research findings. Who Must Pay the Fees? For self-insured plans  Plan sponsors For fully-insured plans  Carriers For HRA plan integrated with a fully-insured group health plan  Both Plan sponsors and Carriers. The carrier will pay for the fully-insured group health plan including the participants (EEs) and their dependents. The plan sponsor/ER will pay for only those who participate in the HRA plan. 5

6 Plan Year 2013: 6 FSA: Limit contributions to medical FSAs – Max $2,500 Additional Medicare Part A (hospital) tax for High Wage Workers ERs required to provide written notice to EEs about Exchange and subsidies (By March 1) Fully-insured plans: MLR Rebates might be distributed from your Insurer (if applicable) – 2 nd YR* (And, effective thereafter) Self-insured plans : Patient-Centered Outcomes Research Institute Fee (Payment with Form 720 Due by July 31 for the prior plan year) FYI – Exchanges initial open enrollment period for individual & small business markets begins in Oct FSA: Limit contributions to medical FSAs – Max $2,500 Additional Medicare Part A (hospital) tax for High Wage Workers ERs required to provide written notice to EEs about Exchange and subsidies (By March 1) Fully-insured plans: MLR Rebates might be distributed from your Insurer (if applicable) – 2 nd YR* (And, effective thereafter) Self-insured plans : Patient-Centered Outcomes Research Institute Fee (Payment with Form 720 Due by July 31 for the prior plan year) FYI – Exchanges initial open enrollment period for individual & small business markets begins in Oct FSA: Limit contributions to medical FSAs – Max $2,500 If each of two spouses is eligible to elect salary reduction contributions to an FSA, each spouse may elect to make salary reduction contributions of up to $2,500 (as indexed for inflation) to his or her heath FSA. The statutory $2,500 limit applies only to salary reduction contributions under a Health FSA and does NOT apply to an FSA for dependent care assistance or adoption care assistance. Plans may adopt the required amendments to reflect the $2,500 limit at any time through the end of calendar year 2014 (e.g. written cafeteria plan amendment).

7 Plan Year 2013: (Cont.) There are no special rules for nonresident aliens for purposes of this provision. Wages earned by such individuals that are subject to Medicare tax will be subject to Additional Medicare Tax withholding if paid in excess of the threshold. (For additional information, please refer to, the IRS Q&A June “When must an employer withhold Additional Medicare Tax? The statute requires an employer to withhold Additional Medicare Tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. An employer has this withholding obligation even though an employee may not be liable for the Additional Medicare Tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. (See Q&A-3.) Any withheld Additional Medicare Tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040).” ) 7 Additional Medicare Part A (hospital) tax for High Wage Workers PPACA increases the Medicare hospital insurance tax rate on wages by 0.9% (from 1.45% to 2.35%) for higher-income individuals starting in All wages that are currently subject to Medicare Tax are subject to Additional Medicare Tax if they are paid in excess of the below threshold for an individual’s filing status.

8 If your plan loses its GF status, the below is a list of additional provisions that would apply to your plan (2013 ~) 8 Preventive care: No cost sharing (Applies to In-Network Preventive Services) Expanded Prevention Coverage for Women’s preventive services (e.g. well-woman visits and contraceptive methods) Emergency services must cost the same in – or out-of- network Pending (Waiting for further guidance): Nondiscrimination requirements on fully-insured plans Quality of Care Reporting Preventive care: No cost sharing (Applies to In-Network Preventive Services) Expanded Prevention Coverage for Women’s preventive services (e.g. well-woman visits and contraceptive methods) Emergency services must cost the same in – or out-of- network Pending (Waiting for further guidance): Nondiscrimination requirements on fully-insured plans Quality of Care Reporting

9 Plan Year 2014: 9 Health Insurance Exchange will start No Annual Limits on coverage No Pre-existing for any enrollee regardless of age No waiting periods over 90 days for group health plan Wellness: the max reward is raised from 20-30% of the total premium Large ERs (50+ EEs) Pay or Play: Requires large ERs to offer health coverage or pay penalty/tax. Small ERs: Deductibles may not exceed a $2,000 (self-only) or $4,000 (family) annual limitation begins Temporary Reinsurance Fees begin (Eff ~ Carriers are responsible to pay for fully-insured plans. TPAs are responsible to pay on behalf of self-insured plans to HHS.) FYI – Individual coverage mandate begins FYI – Guaranteed Availability/ Renewability – Requires carriers to accept all groups or people that apply for coverage. Health Insurance Exchange will start No Annual Limits on coverage No Pre-existing for any enrollee regardless of age No waiting periods over 90 days for group health plan Wellness: the max reward is raised from 20-30% of the total premium Large ERs (50+ EEs) Pay or Play: Requires large ERs to offer health coverage or pay penalty/tax. Small ERs: Deductibles may not exceed a $2,000 (self-only) or $4,000 (family) annual limitation begins Temporary Reinsurance Fees begin (Eff ~ Carriers are responsible to pay for fully-insured plans. TPAs are responsible to pay on behalf of self-insured plans to HHS.) FYI – Individual coverage mandate begins FYI – Guaranteed Availability/ Renewability – Requires carriers to accept all groups or people that apply for coverage.

10 Plan Year 2014 (Cont.): Health Insurance Exchange An Exchange is a state-based competitive health insurance marketplace where people and small businesses can shop for and buy private health insurance. There are two types of Exchanges: Small Businesses (called “SHOP”) (Group policies) Individual consumers (Individual policies) SHOP: What type of ERs can participate in Exchanges? Year: 2014 ~ or fewer EEs (Small group market) but, States can set the size of the small group market up to 50 EEs (instead of 100 EEs). Year 2016 ~ or fewer EEs Year: 2017 ~ States may let businesses with more than 100 EEs buy large group coverage through the SHOP. Temporary Reinsurance Fee Under the Healthcare Reform, each state is required to establish a transitional reinsurance program to help stabilize premiums for coverage in individual market inside and outside of Exchanges during the years 2014 through If a state decides not to establish a transitional reinsurance program, the Department of Health and Human Services (HHS) will create and operate the program on its behalf. The program is funded through a reinsurance assessment on all health insurance carriers and third-party administrators (TPAs) on behalf of self-insured group health plans. The collected fee is used to support reinsurance payments to carriers that cover high-cost individuals in non- grandfathered individual market plans. Who pays for the fees? For self-insured plans, TPAs pay the fees on behalf of self-insured plans. For fully-insured plans, carriers are responsible to pay the fees. How much is the fee? Waiting for further guidance. HHS stated that details on the fees including the amount and how they are paid are expected to be issued in Fall However, the estimated amount per enrollee per year is in the range of $60 to $90, according to Industry sources. [ Note : Exemption applies to: stand-along dental and vision, FSA, and other plans defined as excepted benefits under Sec. 2791(c). It is highly expected that the fee will be passed on to the group plans from the carriers or TPAs respectively.] 10

11 Plan Year 2014 (Cont.): Pay or Play Who must comply (Applicable large ERs) ? ERs who employed at least 50 FT EEs* on business days during the preceding calendar year. What is it? Applicable large ERs who fail to offer full-time EEs  Min. Essential Coverage (MEC) or offer MEC but  unaffordable or does not provide Min. Value must pay a penalty in which any full-time EE receives a  federal subsidy for the Exchange. Two scenarios where large ERs must pay a penalty I. Not Offering Health Coverage: II. Offering Coverage but Is  Unaffordable or  Does Not Provide Min. Value 11  Min. Essential Coverage Generally includes any coverage offered in the small or large group markets as long as the coverage does not consist of excepted benefits, such as limited-scope dental or vision offered under a separate policy, certificate or contract of insurance etc. Premium tax credit Eligibility: 1. Individual with household income for taxable yr between 100% and 400% of the federal poverty line (FPL); 2. who may not be claimed as a dependent by another taxpayer; 3. who files a joint return if married; and 4 the individual is not enrolled in the his/her ER group coverage.  Unaffordable The required EE contribution towards the cost of “self-only” coverage* exceeds 9.5% of the EE’s W-2 wage reported in Box 1** (It is a safe harbor option proposed by the IRS). *Even if the EE’s contribution for the family coverage does exceed 9.5%. If any FT EE is certified to receive an applicable premium tax credit or cost-sharing reduction AND ER fails to offer to its full-time EEs (and their dependents) the opportunity to enroll in  minimum essential coverage (MEC). Penalty (annual): $2,000 x (number of FT EEs – 30) At least one FT EE has been certified to receive a premium tax credit or cost-sharing reduction AND ER offers its FT EEs (and their dependents) the opportunity to enroll in MEC but either is unaffordable or does not provide min. value. Penalty (annual): $3,000 x number of FT EE(s) who receive a premium tax credit or cost-sharing reduction.  Does not provide Min. Value The plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs. To determine the number of FT EEs, an ER must add up the total number of hours part-time EEs worked in a month divide by 120, and add that number to the number of FT EEs.

12 Plan Year 2015: Who must report : Large ERs (more than 50 FT EEs) To whom : File with the IRS and provide a written statement to the EEs Purpose : For the Internal Revenue Service to verify employer-sponsored coverage and to administer the shared employer responsibility provisions. Report the terms and conditions of the health care coverage provided to the employer’s FT EEs for the year. Legislative status : Notice was issued to assist in the development of the proposed regulations. Waiting for further guidance. Items to be reported : Must include ER’s EIN. and certify whether the applicable large ER offers its FT EEs & their dependents the opportunity to enroll minimum essential coverage and, if so certify, - the duration of any waiting period ; - the months when coverage under the plan was available; - the monthly premium for the lowest cost option in each enrollment category under the plan; and - the ER’s share of the total allowed costs of benefits provided. Reporting to EEs – The ERs will furnish to each FT EE whose info. is required to be reported to the IRS. A written statement includes the ER’s name & address, contact info., the info. relating to coverage provided to that EE and dependents. 12 All Large ERs (more then 50 FT EEs.) : Annual reporting by Applicable Large ERs on Health Insurance Coverage Under Employer-Sponsored Plans.

13 Plan Year 2018: Beginning in 2018, Healthcare Reform imposes a 40% tax on health insurance issuers (for fully-insured) and sponsors of self-funded group health plans for the sum of months in which the aggregate value of ER sponsored health coverage for the EE exceeds: 1/12 of $10,200* (single)/ $27,500 (family) per calendar year. The amount of coverage includes both employer and employee premium payments. [Heads up!: The threshold may be adjusted for age and gender demographics that are different from a national pool. It may also be adjusted if actual health inflation exceeds the government's estimate of health inflation between now and The threshold will then be periodically adjusted for inflation subsequent to 2018.] Legislative and regulatory update: Automatic Enrollment’s effective date has been delayed (Announced on Feb. 9, 2012) 13 “Cadillac Plan”: High- Cost Plan Excise Tax is imposed Nothing in the foregoing is intended to be legal advice nor should it be construed as such. Please consult with your counsel or advisor before taking any action. Sumitomo Life Insurance Agency America, Inc. Last updated on October 11, 2012.

14 SLIA Compliance Portal Login Information The enactment of Healthcare Reform in 2010 created new challenges for Employers. We understand that trying to keep up and comply with HCR along with other federal and state employee benefit regulations can be a daunting and time consuming task for Employers. To ease your burden and provide you the right support, SLIA’s Compliance Portal is a one-stop site to find the right resources and tools to help you get your job done. 1)Go to 2)Click the top left icon  3)Type in: Username: compliance Password: sliaa Access to the SLIA compliance portal is provided as an exclusive benefit to our valued customers. The Portal is updated regularly. Please visit the site often! Sumitomo Life Insurance Agency America, Inc.


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