Healthcare Options

Health Plan Options 2014 Beginning in 2014, the ACA generally will require all U.S. Citizens and permanent residents to maintain health insurance coverage that qualifies as “minimum essential coverage”, or be subject to a tax penalty. Minimum essential coverage includes coverage under an “eligible employer-sponsored plan”, which includes any plan other than a plan that provides only “excepted benefits” Employees covered under an eligible employer-sponsored plan are prevented from receiving premium subsidies or cost-sharing subsidies even if they otherwise qualify. Certain benefits are always treated as “excepted benefits” because they are not considered health insurance. These include accident-only coverage, disability income insurance, and worker’s compensation benefits. Other benefits are considered “excepted benefits” if they are offered separately and not coordinated with benefits under another group health insurance plan. These include specific disease and hospital indemnity or other fixed indemnity programs.

What are the circumstances under which fixed indemnity coverage constitutes excepted benefits? The Departments' regulations provide that a hospital indemnity or other fixed indemnity insurance policy under a group health plan provides excepted benefits only if: The benefits are provided under a separate policy, certificate, or contract of insurance; There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and The benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor. The regulations further provide that to be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred. Various situations have come to the attention of the Departments where a health insurance policy is advertised as fixed indemnity coverage, but then covers doctors' visits at $50 per visit, hospitalization at $100 per day, various surgical procedures at different dollar rates per procedure, and/or prescription drugs at $15 per prescription. In such circumstances, for doctors' visits, surgery, and prescription drugs, payment is made not on a per-period basis, but instead is based on the type of procedure or item, such as the surgery or doctor visit actually performed or the prescribed drug, and the amount of payment varies widely based on the type of surgery or the cost of the drug. Because office visits and surgery are not paid based on "a fixed dollar amount per day (or per other period)," a policy such as this is not hospital indemnity or other fixed indemnity insurance, and is therefore not excepted benefits. When a policy pays on a per-service basis as opposed to on a per-period basis, it is in practice a form of health coverage instead of an income replacement policy. Accordingly, it does not meet the conditions for excepted benefits.

Health Plan Options Variable Hour (Temporary) Employees Limited Medical plans with deductibles, co-pays, and annual dollar limits are eligible employer sponsored plans which are generally subject are not excepted benefit plans are subject to the ACA insurance regulations, fiscal year plans can continue to operate under a waiver until the end of the plan year ending in 2014 Fixed dollar indemnity plans, are not covered by the ACA These plans with the inclusion of preventive care, wellness benefits and pediatric care may meet the minimum essential coverage requirements of the ACA. However, since these plans are not considered healthcare plans, employers may be at risk to both penalties under code 4980H Fixed dollar indemnity plans will continue to exist after 1/1/14, and they can be used to provide variable hour (temporary) workers with supplemental coverage “Skinny plans”, plans which do not meet the 60% minimum value prong but are not categorized as “excepted benefits”. These meet the definition of minimum essential coverage

Health Plan Options 2014 Essential Health Benefits: Starting in 2014 Individual & Small Group Exchange Market Requirements The Affordable Care Act ensures health plans offered in the individual and small group markets, both inside and outside of the Affordable Insurance Exchanges (Exchanges), offer a comprehensive package of items and services, known as essential health benefits. Essential health benefits must include items and services within at least the following 10 categories: Preventive Care & Wellness Hospitalization Prescription Drugs Ambulatory Services Emergency Services Laboratory Services Mental Health & Substance Use Disorder Services (In & Out Patient) Rehabilitative & Habilitative Services, includes Medical Equipment Maternity & Newborn care Pediatric Services including oral and vision care Essential health benefits must be covered for individual and small market plans both inside and outside of the exchange. Large group insurance coverage does not need to include EHB’s to be minimum essential coverage.

Health Plan Options 2014 Core Benefits: Starting in 2014 Large Group Requirements The Affordable Care Act does not require Large Group Plans whether self-funded or fully insured to include all the essential benefits. Instead 4 core benefits are required; Physician & Mid-Level Practitioner Care Hospital & Emergency Room Services Pharmacy Benefits Laboratory & Imaging Services The following Small Group Benefits can be excluded from Large Group plans Mental Health & Substance Use Disorder Services (In & Out Patient) Rehabilitative & Habilitative Services, includes Medical Equipment Maternity & Newborn care Pediatric Services including oral and vision care Both Self-Funded & Large Group plans (in most states, groups with more than 50 employees) are required to meet the cost-sharing limits and the benefit levels, but are not required to provide the full scope of essential health benefit coverage as minimum essential coverage.

Health Care Plan Affordability Under 4908H, now starting January 1st, 2015 the employer “pay or play”, employers must pay a $2,000 annual penalty ($166.67/mo) for not offering benefits on all their full-time employees. The penalty is an excise tax; it is not deductible and is paid as a bottom line expense. Large employers are only required to offer minimum essential coverage which is defined as a group health plan. If the employer offers only minimum essential coverage or an unaffordable plan, the employee can receive a subsidy from the exchange to buy benefits thru the exchange. For each employee receiving a subsidy, the employer receives a $3,000 annual penalty or ($250/mo). The excise taxes are levied thru the IRS and will probably be collected with the firm’s quarterly taxes. If the plan is an affordable minimum value (60% actuarial value, carrier pays 60% of costs) than the employer will not incur a penalty even if an employee receives an exchange subsidy.

Health Plan Options 2014 for Full-Time Employees Fully Insured Carrier Plans; HMO’s, POS, EPO’s, PPO’s, HDHP, ACO’s Note: As of 2014 Strict community ratings for healthcare plans, experience ratings will be prohibited. Ratings based on age 3:1, tobacco 1.5:1, family composition, and geographic region. (will increase premium rates for large group plans) Self Funded Plans & Level Premium Self Funded Plans Customizable healthcare plans, less expensive than fully insured plans, for groups over 75, level premium plans groups of 25-250 Defined Contribution Private Exchange Employer makes a cash contribution to savings accounts which employees use to purchase insurance products of their choice Premiums have increased at a compounded rate of 8% for the last 10 years- Kaiser Family Foundation “High Performing (self funded) companies are trending at or below 3%”- Towers Perrin

Plan Affordability Self-Only Premium Plan Affordability is based on the Self-Only (employee) rate of a health care plan The employee only premium of the healthcare plan must be less than 9.5% of the employee’s adjusted gross income (W-2, box 1), if less than 9.5% the plan is affordable even if the employee pays 100% of the premium. For the large group healthcare plan to be qualified, it must offer at least the 4 core benefits A Plan must have an actuarial value of at least 60% (plan pays for 60% of benefits) Dependents are defined as children under age 26, the spouse is not included as a dependent The Employer is not required to make a contribution If a plan is affordable and meets the 60% actuarial value (bronze level) than even if an employee receives a tax subsidy from the exchange there is no employer penalty.

Minimum Essential Coverage Minimum Essential Coverage is defined by Section 5000 (A)(f) of the Internal Revenue Code. The IRC states that minimum essential coverage can consist of either; 1) Government sponsored health care coverage such as Medicare or Medicaid 2) An “eligible employer sponsored plan” 3) A plan “offered in the individual market within a State” 4) A “grandfathered health plan” 5) Anything else that the Secretary of Health and Human Services deems appropriate

“SKINNY PLAN DESIGN” Plan will allow employer to eliminate the risk of the $2,000 penalty for all FT employees (less 30) shifting the risk to $3,000/ee receiving a subsidy

Fully Insured vs Self-Funded Fully Insured Self Funded Carrier Profit Maximum Claims Liability Employer Keeps Unused Claims Dollars Pooling Premium Stop Loss Premium Expected Claims Expected Claims Administration Administration

Self Funded Plan Benefits Not subject to conflicting state health insurance regulations/benefit mandates, as self-insured health plans are regulated under federal law (ERISA). (NJ saves 8% of premium) Not subject to state health insurance premium taxes, which are generally 2-3 percent of the premium's dollar value. Offers control over insurance programs, and thereby improves cash flow and maintains company health plan reserves for investment, reduces plan operating costs Creates a customized health benefit plan that meets the needs of the workforce, which attracts and retains employees. Supplies claims data to proactively manage risk. Most self-insured companies can mitigate risk and lower administrative costs by working with a health plan management firm that offers: Stop Loss Placement/Management Claims Processing/Adjudication Network Access and Management Medical Management

Fully Insured Major Medical Disadvantages Significant rate increase every year 2. Community rating * (the good supporting the bad) 3. Little to no meaningful information * (what is the health of my employees?) 4. State mandated coverages 5. Limited competitive options 6. Employer has 0% interest in 100% of the premium

The overwhelming majority of Large Employers are Self-Funded, Why? Transparency Knowledge of where all the dollars are going Loss control focused on your employees specific needs Plan design flexibility (i.e. No State Mandated Coverage's) Lower administrative costs Elimination of insurance carrier profit Cash flow advantages, no pre-funding of self insured claims Law of large numbers – able to absorb claims fluctuations

Self Funded Administrative Support Enrollment meetings ID cards, booklets, forms, online support Premium Billing Customer Service –Dedicated team for each employer – Employee’s and Human Resources Weekly Online Claims Funding Report Provider Network Issues Risk Management Programs No new burdens for the employer