Health Care Reform Update: 2012 and Beyond 1

Agenda Supreme Court Legislative Regulatory Planning for the Future 2

SCOTUS: The Good, Bad and Ugly Three days of hearings starting on Monday, March 26, The schedule of the issues is as follows: –Whether the Anti-Injunction Act (AIA) prohibits the Court from hearing the case before the individual tax is imposed for not having health care coverage –Whether the individual mandate is constitutional –If the individual mandate is found unconstitutional, whether it is severable from the rest of PPACA –Whether the Medicaid expansion is unconstitutional Worst Case Scenarios –AIA prevents a Supreme Court decision until 2016 –The individual mandate is unconstitutional and severable 3

Legislative: All Bark, No Bite Federal –Repeal –Defund –Review –Wait 4

Regulatory Interim Final Regulations –Expect them to remain “interim” Dependent coverage to age 26 Grandfathered plans Pre-existing condition exclusions Lifetime and annual limits Rescissions Patient Protections Preventive Health Care Coverage, and Internal/External Appeals Further Guidance in 2012 –Unlikely in regulatory form, most likely subregulatory –Presidential election: prepare for the worst, and act on the best Form W-2 reporting Guidance is done for 2012 (generally the cost of COBRA) May get additional guidance or changes when guidance is issued for the excise tax 5

Regulatory (cont.) Uniform Summary of Benefits and Coverage (SBC) –PPACA required distribution for enrollments on and after March 23, 2011 –Proposed regulations issued August 17, 2011 –Final regulations published February 14, 2012 Applies to participants and beneficiaries who enroll or re-enroll beginning on the first day of the first open enrollment period that begins on or after September 23, 2012 For enrollments other than open enrollment, applies beginning on the first day of the first plan year that begins on or after September 23,

Regulatory (cont.) SBC (cont.): Final Regulations Policy Considerations –Premium Information. Not required on the SBC. –Electronic disclosure. To current participants (via DOL electronic disclosure regulations) and eligible employees if a post card is sent informing the individual that it is available. –Form Flexibility. Provides flexibility to the extent the plan’s terms cannot reasonable be described in a manner that is consistent with the instructions and allows “best efforts” –Coverage Examples. Dropped breast cancer and now only baby delivery and diabetes, but leaves room for more in the future (up to six). –Elimination of Stand-Alone Requirement. May be included in an SPD if it is “prominently displayed” in the front of the SPD. 7

Regulatory (cont.) SBC (cont.): Final Regulations Policy Considerations –Timing of Updates. If a material modification is made to terms of the plan or coverage that would effect the SBC (other than for renewal or reissuance), the notice must be provide 60 days in advance of the effective date of the change. –Covered Individual. If both the participant and beneficiary live at the same address, only one SBC needs to be sent. –SBC at Renewal. Only required to provide an SBC for the benefit package in which enrolled and not all options under the plan. –Culturally Appropriate Language. HHS to provide the template, in Spanish, Tagalog, Chinese and Navajo. –Terminology Change. Policy to coverage; insurer to plan, policy period to coverage period. 8

Regulatory (cont.) Essential Health Benefits –CCIIO December 16, 2011 Bulletin. For 2014 and 2015 the benchmark plan can be any of the followi ng: the largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market; any of the largest three State employee health benefit plans by enrollment; any of the largest three national FEHBP plan options by enrollment; or the largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the State. –CCIIO post of top three plans in each state and the top three federal plans as a follow-up to the bulletin –CCIO FAQs: self-funded plans may use a permissible definition if it is authorized by the Secretary of HHS (presumably one listed in the Bulletin) 9

Regulatory (cont.) Comparative Effectiveness Surcharge –Starts for plan years ending after September 30, –The first year is $1 per average life under the plan and then $2 for the following years. –For plan years beginning after September 30, 2014, the $2 will be adjusted by multiplying the previous year’s amount by the percentage increase in the projected per capita amount of the National Health Expenditures, as most recently published by HHS. –The tax no longer applies for plan years ending after September 30, –In June 2011, the IRS issued Notice , but no other guidance has been issued. 10

Planning for the Future 2013 –Limits on FSA contributions of $2500 –Notice to employees of the Exchanges –Coverage of additional preventative services for women at 100 percent 2014 –Pay or play mandate Treasury and the IRS intend to issue proposed regulations or other guidance: –Allowing employers to use an employee’s Form W-2 wages as a safe harbor for determining the affordability of employer coverage –Addressing the intersection of the employer mandate and the 90 day maximum waiting period, where the employer will not be subject to the mandate penalty during the waiting period 11

Planning for the Future 2014 –Pay or play mandate (cont.) Treasury and the IRS intend to issue proposed regulations or other guidance: –Allowing employers to use a “look-back/stability period safe harbor” not exceeding 12 months to determine whether a current employee is a full-time employee –Providing rules for newly hired employees to determine whether the employee is a full-time based on f an employee is reasonably expected to work full-time on an annual basis and does during the first three months, the employee must be offered coverage at the end of the period to avoid the possible penalty. 12

Planning for the Future 2014 Treasury and the IRS intend to issue proposed regulations or other guidance: –Providing rules for newly hired employees to determine whether the employee is a full-time based on if, at the time of hire, it is not possible to determine that the employee is expected to work full-time: »If the employee works full-time during the first three months, and, at the end of the period, the employee’s hours during this period are reasonable as representative of the average hours the employee is expected to work on an annual basis, the employee will be considered full-time for purposes of the employer penalty. »If the employee works full-time during the first three months, and, at the end of the period, the employee’s hours during this period are not representative of the average hours the employee is expected to work on an annual basis, the plan is permitted an additional three-month period to determine the employee’s status for purposes of the employer penalty. 13

Planning for the Future 2014 –Individual mandate –Autoenrollment Technical Release provides that no guidance will be ready to take effect until 2014, and employers are not required to comply until guidance is issued –90 Day Waiting Period The 90 day waiting period begins when the employee is otherwise eligible for coverage Upcoming guidance will discuss the 90 day waiting period and eligibility periods based on hours of service completed –Maximum Deductibles ($2,000/$4,000) and OOP Limits (same as HSA compatible HDHP except a different cost-of-living adjustment) –Must cover routine patient costs associated with participation in a clinical trial 14

Planning for the Future (con’t) 2014 (con’t) –HIPAA wellness incentives codified with a differential increase of 30 percent –No discrimination against a provider acting within the scope of his or her license –Reporting coverage to the IRS and participants and beneficiaries –Disclosure of plan data and financial information Claims payment policies and practices Periodic financial disclosures Data on enrollment Data on disenrollment Data on the number of claims that are denied Data on rating practices Information on cost-sharing and payments with respect to any out-of-network coverage Information on enrollee and participant rights Any other information the Secretary of HHS determines appropriate 15

Planning for the Future (con’t) 2018 –Excise tax ($10,500 (individual)/$27,500 family 16

QUESTIONS? 17