1 Health Care Reform Your Timeline for Compliance June 2010 © USI Insurance Services LLC All rights reserved.

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3 Today’s Agenda  Immediate Considerations  On the Horizon  Action Planning

4 Key Components Health Care Reform consists of two pieces of legislation:  Patient Protection and Affordable Care Act, enacted March 23, 2010 (Senate Bill)  Health Care and Education Affordability Reconciliation Act of 2010, enacted on March 30, 2010 (House Companion Legislation)

5 Immediate Considerations March 23, 2010  Grandfathered status established ¬ Coverage in place on March 23, 2010 is considered grandfathered ¬ Changes made to coverage after this date (except enrollment changes) may cause the plan to lose this status  Small business tax credit available (see On and after March 30, 2010  Children up to age 27 in the taxable year receive tax favored treatment of health benefits June 21, 2010  Early retiree reinsurance program becomes available

6 Immediate Considerations For all plans effective the first plan year on or after September 23, 2010  No annual limitations on essential benefits, except as allowed by HHS  No lifetime limitations on essential benefits  Cover adult children to age 26 (special exception applies for grandfathered plans)  No pre-existing condition exclusions on children under age 19  No rescission

7 Immediate Considerations For non-grandfathered plans effective the first plan year on or after September 23, 2010  Cover preventive care at 100%  105(h) nondiscrimination rules apply to insured plans  If plan requires PCP designation, allow enrollees to designate any in-network doctors (including OB/GYN and pediatrician)  Emergency services covered as in-network and no required preauthorization  New appeals process for insured plans

8 Immediate Considerations As of January 1, 2011  No OTC drugs or medicines through a health FSA, HRA or HSA without a prescription ¬ Supplies, equipment and diagnostic devices appear permissible (Rev. Rul ) ¬ Insulin still permissible  W-2 reporting of health benefits for taxable year ¬ (W-2 issued in 2012)  CLASS Act ¬ Employer may (but is not required to) allow employees to make payroll contributions to the program  20% penalty on non-medical HSA distributions

9 On the Horizon 2012  New benefits summary provided to enrollees  HHS reporting 2013  $2,500 cap on the health FSA  Increased Medicare tax on high-income earners ¬ 2.35% on wages; 3.8% on unearned income  New health plan fees for Outcomes Research Fund  Employer notice on the existence of the Exchange

10 On the Horizon 2014  State-based Exchanges operational and tax subsidies available to lower income individuals  Individual mandate and large employer penalties (50 or more employees) are in effect  $3,000 per FTE receiving government assistance; capped at $2,000 multiplied by the number of FTEs in excess of 30  Free Choice Vouchers  Automatic enrollment for large employers (200+)  Wellness program rewards expanded (30%)  IRS and participant coverage notification

11 On the Horizon 2014  Benefit Design Reforms – All Plans ¬ No pre-existing condition exclusions ¬ Plan cannot impose more than a 90-day waiting period ¬ No annual benefit limitations ¬ Eligibility for children up to age 26  Benefit Design Reforms – Non-grandfathered Plans ¬ Limited out-of-pocket costs ¬ Deductible limitations on small groups

12 On the Horizon 2017  States may allow large employers (over 100 employees) to purchase coverage through the Exchange 2018  40% excise tax on high cost plans

13 Action Planning Immediate  Await further guidance  Review plans to see whether you benefit from early retiree reinsurance program or small business health care tax credit  Review tax treatment of children covered by the plan – update documents accordingly (have until December 31, 2010 to amend cafeteria plan)

14 Action Planning First Plan Year following September 23, 2010  Ensure plans meet new reform requirements  Weigh value of “grandfathered status” against proposed plan design changes  Communicate OTC changes effective January 1, 2011  Ensure capabilities for W-2 reporting

15 Action Planning On the Horizon  Prepare employees for changes to the health FSA  Begin thinking about your workforce, current benefit offerings and the employer penalties  Look at plans to determine exposure to 40% excise tax  Think about new compliance obligations and current resources – plan for more work within HR and Benefit teams

16 Thank you! ALICIA SCALZO WILMOTH, JD Kibble & Prentice, a USI Company p