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1 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Health Care Reform: Key Impacts Every Employer Should Know.

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Presentation on theme: "1 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Health Care Reform: Key Impacts Every Employer Should Know."— Presentation transcript:

1 1 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Health Care Reform: Key Impacts Every Employer Should Know

2 2 The Required Disclaimer Health insurers continue to receive information from Health and Human Services regarding the Patient Protection and Affordable Care Act. Therefore, this information has and will continue to change. The information provided in this presentation should not be construed as legal advice.

3 3 How a Bill Becomes a (Messy) Law Patient Protection and Affordable Care Act Signed into law March 23, 2010 Later titles in law amend earlier titles Reconciliation Act Resolved critical issues between House and Senate reform bills Signed into law March 30, 2010 Waiting for regulations, interpretations, state laws Some issued interim final Guidance Still waiting for others

4 4 Timeline – Reform Overview 1/1/20103/23/2010 Plans renewed after 9/23/2010 2011-20131/1/2014 And beyond Phase I small business tax credits Medicare Part D donut hole rebates Rate review Grandfather status 90 days National high risk pool Early retiree insurance June 1 HHS internet portal Ind/small group No-pre ex for children < 19 Coverage for dependents <26 Lifetime limit restrictions Annual max restrictions No cost-sharing for preventive benefits Appeal rights Non-discrimination Rescissions limited HSA/FSA/HRA changes (2011) Medical loss ratio rebates Summary benefit requirements Quality care reporting Comparative effectiveness research fee Medical device manufacturer tax W2 reporting FSA Cont. cap – $2500 (2013) Individual mandate Employer pay or play penalty Exchanges Subsidies Medicaid expansion Phase II small business tax credits Insurer fee 2018: Cadillac Plan Tax 2020: Close Medicare Part D donut hole

5 5 Reform Topics Covered Grandfathered Plans Immediate Reforms Non-discrimination Small Employer Tax Credit W2 Reporting FSA, HSA, HRA Changes Reinsurance for Early Retirees Retiree Drug Subsidy Individual Mandate Exchanges Cadillac Plan Tax Miscellaneous Impacts

6 6 Grandfathering If you like your health care plan, youll be able to keep your health care plan. – President Obama Coverage that an individual or group had in place on 23 March 2010 Special rules for collectively bargained plans Grandfather status avoids some, but by no means all reforms For example: First dollar preventive care Limits on certain lifetime and annual $ maximums Rating limitations Note: status does not avoid pay-or-play employer penalties

7 7 Grandfathering (cont.) Easy to lose grandfather status: Elimination of benefit for particular condition Increase coinsurance at all Increase copayments by more than greater of: Medical inflation plus 15% points $5, increased by medical inflation Increase other fixed amount cost-sharing by more than medical inflation plus 15% points Reduce employer contribution > 5% points Reduce or add certain annual or lifetime limits Documentation requirements if grandfathered (notices)

8 8 Grandfathering (cont.) Can make some changes without losing grandfather status: To comply with state or federal law To voluntarily comply with a PPACA change Changes in TPAs Changes in premiums Benefit improvements

9 9 Grandfathering (cont.) Costs of maintaining grandfather plan Limited benefit changes/innovations Cost of maintaining customized plan Benefits of maintaining grandfather plan Avoid some coverage mandates Avoid non-discrimination rule Neutral Dont avoid pay-or-play penalty

10 10 Regence and Grandfathering 1-99 groups: grandfathered status not maintained 100+ groups on Facets products (Regence Preferred (PPO), Innova®, Engage®, Activate SM or HSA Healthplan 2.0 SM ): grandfather discussions will take place during the renewal negotiation process 100+ groups not on Facets: grandfathered status not maintained (exception basis)

11 11 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Benefit Changes

12 12 Benefit Changes – Immediate Immediate = renewal date (or first date of new policy) All Plans (even grandfathered) No pre-ex for children <19 Interpreted as guarantee issue for <19 Coverage of adult children through age 25 Exception for group plans, if child has other group coverage No lifetime maximum dollar limits on essential benefits Limited annual maximums on essential benefits (until 2014) What are essential benefits? No information yet. Ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder, prescription drugs, rehabilitative and habilitative services and devices, lab services, preventive and wellness and chronic disease management, pediatric services including oral and vision care Rescissions/cancelations limited to fraud September 2010

13 13 Benefit – Immediate (cont.) Non-grandfathered plans, in addition to above: No cost-sharing for preventive services Appeal rights (including external appeal) Big change for self-funded groups Out-of-network ER Pediatrician as PCP for child Relevant only if you have HMO-type coverage Access to OB/GYN w/out referrals for women Relevant only if you have HMO-type coverage September 2010

14 14 Benefits – 2012 and beyond 2012: quality of care reporting to HHS – no details yet 2013: uniform summaries of benefits – 4 pages; 12-point 2014: Clinical trial coverage Coverage of essential benefits No annual limits on essential benefits Guaranteed issue – extends to individual plans Cost-sharing limits (deductible maximums) No pre-existing condition waiting periods Rating limits (3:1) 2012-2014

15 15 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Non-Benefit Changes

16 16 Non-discrimination The administration has announced a delay in applicability of the new nondiscrimination rules for insured plans and related excise taxes until plan years beginning after the IRS issues regulations in this area. PPACA extended Internal Revenue Code 105(h) to insured plans Before this, applied only to self-funded plans Rarely enforced, but many large plans conduct discrimination testing Requirement applies to the group health plan, not insurer Compliance testing is a series of mathematical tests Take into account employee salaries, stock ownership, part-time/seasonal employees, length of service, percentage of premiums paid by employer, etc. Insurers will not be able to determine a plans compliance Penalty: $100 per day excise tax Employers with 50 or fewer employees generally exempt Less burdensome than penalty for self-funded plans What to do? Check with your tax or legal professional September 2010

17 17 Small Employer Tax Credit PHASE I – 2010-2013 Pre-requisites No more than 25 full-time equivalent employees Annual average wages $50k Pay at least 50% of cost of premiums Credit amount 35% of employer-paid premium or state average premium 25% for tax-exempt orgs Phase out for >10 employees Business expense deduction for health insurance reduced by amount of credit Claim the credit on your annual tax return Carry back one year; carry forward 20 years 2010-2013

18 18 Small Employer Tax Credit (cont.) PHASE II – 2014 Available only for two tax years Must offer qualified health plans through Exchange Note: cannot get tax credit after 2014 while on a grandfathered plan because not in Exchange Credit amount 50% of employer-paid premium or state average premium 35% for tax-exempt orgs 2014

19 19 W2 Reporting The IRS has deferred the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan. Reporting by employers is optional in 2011. The IRS will be publishing guidance on the new requirement later this year. Value of benefits not subject to federal income tax Includes costs for separate plans (medical, dental, vision) HSA amounts are excluded (already reported on W2) Health FSA contributions excluded Cost calculation will be similar to rules for determining COBRA premiums 2011

20 20 FSA, HSA, HRA Changes Effective January 1, 2011 OTC meds no longer reimbursable, unless prescribed HSA nonqualified distributions penalty increased to 20% Effective January 1, 2013 $2,500 cap on FSA employee contributions (+ COL adj) No limit on amounts contributed by employers 2011; 2013

21 21 Reinsurance for Early Retirees Matters to you if you have: Retiree health coverage Retirees 55 or older but not yet Medicare-eligible Can be reimbursed for 80% of claims between $15k and $90k Subsidy not included in employers gross income Must have provisions in plan to mitigate costs for chronic/high cost conditions; must be certified by HHS; must use the funds to lower costs of the program $5 billion available – likely to be depleted quickly Available June 23 – application and guidance from HHS still to come Similar to Retiree Drug Subsidy June 2010

22 22 Retiree Drug Subsidy Retiree drug subsidy tax change Today: Employers with retiree drug plans who receive the retiree drug subsidy exclude the subsidy from gross income, but still deduct income costs covered by the subsidy Beginning January 1, 2013, subsidy amount no longer deductible Still excluded from income May make sense to terminate retiree drug program Especially as donut hole in Part D programs are eliminated 2011

23 23 Individual Mandate Beginning in 2014, U.S. citizens or legal residents will be required to buy health insurance Penalties (phased in) $93.50 or 1% per person based on household income (2014 tax filing) Increasing to $695 or 2.5% per person based on household income (2016 tax filing) Penalties are 50% of the above amounts if under the age of 18 Individual exemptions: Cant find affordable coverage (as defined by the government) Income does not meet the federal tax-filing threshold 2010 thresholds for taxpayers under age 65 was $9,350 and couples was $18,700 2014

24 24 Exchanges States will establish benefits Exchanges Think Expedia or Orbitz, with uber-regulations Small employers and individuals may purchase coverage through the exchange States may allow large employers to purchase beginning in 2017 Benefit plans in exchange will cover essential benefits Platinum, gold, silver, bronze levels – metal plans Subsidies available in Exchange only Based on income 2014

25 25 Employer Pay or Play Penalties Pay-or-play penalties apply if 50+ employees at 30+ hrs a week Free rider penalty No coverage offered At least one employee receives Exchange subsidy $2,000 penalty x (total # employees – 30) Unaffordable coverage penalty Coverage is offered, but employees cost is > 9.5% of household income or employer pays less than 60% of total cost $3,000 penalty only for each employee who receives Exchange subsidy Penalty does not apply if employee receives Free Choice Voucher Grandfathered plans not exempt from penalties 2014

26 26 Cadillac Plan Tax 40% tax on high cost plans beginning in 2018: $10,200/$27,500 (individual/family) Retirees and high-risk professions: $11,850/$30,950 (indiv/fam) Adjustments based on age/gender of employees Includes both employer and employee contributions to medical, health FSAs, HRAs, HSAs Does not include stand-alone dental or vision, or accident, disability, LTC Tax imposed on excess over threshold amounts Insured plans – insurer pays tax Self-funded plans – group pays tax 2018

27 27 A Few More Impacts (immediately) Nursing mother breaks (immediately) Dedicated space for nursing mothers to pump (not a restroom) Breaks may be unpaid If 50 employee, potential hardship exception (2010) Adoption assistance (2010) Increases pre-tax dollar limit $1,000 to $13,170 (2010) Part D donut hole (2010) $250 rebate for Part D enrollees who reach the donut hole Donut hole gradually closed by 2020 Matters to you if youre providing supplemental coverage to employees

28 28 A Few More Impacts (2012) Comparative effectiveness fee (2012) $1/participant; $2/participant in 2013 (2013) Increased Medicare tax on high income taxpayers (2013) Additional.9% tax on wages above $200k/$250 (ind/joint) Employer has to withhold, but can disregard spouse wages in calculating Employer portion remains unchanged

29 29 For More Information on Reform Issues Federal information State information WA: _care_reform.shtml _care_reform.shtml

30 30 The Regence Group is an Independent Licensee of the Blue Cross and Blue Shield Association. Thank you!

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