Health Reform After the Election The Big Picture of Obamacare

1
Health Reform After the ElectionThe Big Picture
of Obamacare

• James R. Griffin Jeffery P. DrummondJackson
  Walker L.L.P.901 Main Street, Suite 6000Dallas,
  Texas 75202jgriffin_at_jw.com jdrummond_at_jw.com
  214.953.5827 214-953-5781

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• Conceptual Issues

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Jeffery P. Drummond

• Focuses on healthcare transactional, regulatory,
  and administrative matters.
• Primarily represents physicians and physician
  groups, hospitals and health systems,
  laboratories, and other primary and ancillary
  healthcare providers.
• Particular emphasis on Stark, Anti-Kickback, and
  other federal and state anti-referral statutes
  HIPAA and medical record privacy and security
  issues pharmacy and laboratory issues tax
  exempt entities and tax exempt financing.

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The Supreme Court Decides

• National Federation of Independent Business v.
  Sebelius
• June 28, 2012
• Chief Justice Roberts, joined by Justices
  Ginsburg, Sotomayer, Breyer and Kagan
• Constitutional issues considered
• Individual Mandate
• Medicaid Expansion

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The Supreme Court Decides

• We do not consider whether the Act embodies
  sound policies. That judgment is entrusted to the
  Nations elected leaders. We ask only whether
  Congress has the power under the Constitution to
  enact the challenged provisions.

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The Supreme Court Decides

• The Framers created a Federal Government of
  limited powers, and assigned to this Court the
  duty of enforcing those limits. The Court does so
  today. But the Court does not express any opinion
  on the wisdom of the Affordable Care Act. Under
  the Constitution, that judgment is reserved to
  the people.

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Whats Wrong with American Healthcare? (Why so
expensive for such bad results?)

• Results arent all that bad
• Cancer survival rates are exceptional
• Different data standards (e.g., infant mortality)
• Unhealthy population with bad habits
• Diet/obesity
• Drugs and guns
• We have the best toys
• We get the most care
• We get care up to the last day (No LCP)

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Normal Commercial Transaction
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How Does the American Healthcare System Work?

• Three parties
• Provider, Patient, Payor
• Unlimited wants
• No natural governor on costs
• A right, or just an expectation?
• Charity hospitals/providers
• Governmental safety net programs
• EMTALA

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OPM Other Peoples Money
Provider standards Networks COB
Copays Deductibles Pre-existing cond. Lifetime
limits
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Conceptual Insurance Issues

• Is health insurance risk management (purchasing
  indemnification?)
• Reimbursement to cover costs/expenses
• Calculate whether to self-insure
• Is health insurance a warranty or customer
  service plan?
• Pay more upfront for repair/replace defects
• All you can eat buffet

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How Does Insurance Work?

• Generally provided through employment
• Voluntary Participation
• Sharing/pooling of Risk
• Allocation based on risk profile?
• Higher risk activities, higher premiums
• Risk reduction activities, lower premiums
• Premium average cost admin profit
• The Free-Rider Problem

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The Free-Rider Problem

• Can you buy fire insurance when your house is
  already burning?
• Pre-existing condition is limited fix
• What to do with those who dont buy insurance?
• Refuse to provide care
• Safety nets for poor and old
• Possible charity for the rest
• Non-poor poor, illegals,

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The Problem to be cured by ObamacareThe
uninsured

• Large numbers of uninsured (not otherwise in
  safety net) dont get healthcare
• Not really true EMTALA ensures ER coverage
• charity, bad debt account for rest
• Cost-shifting impact
• Insured get in-network pricing, so uninsured
  are charged huge amounts (which they dont pay)
• Uninsured costs picked up by insured
• Medicare/caid underpayments add to the shift

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Other problems to be cured by Obamacare

• Greedy insurance companies drive up premiums,
  dont pay doctors fairly, deny care and coverage
• MLR, end of pre-existing conditions and lifetime
  limits, essential health benefits
• Greedy doctors/hospitals charge too much, collect
  debts unfairly
• ACOs and MSSP, end physician-owned hospitals

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Potential Non-Obamacare Solutions

• Re-mutualization of insurance companies
• Cross-border insurance sales
• Bare minimum policies
• Changes to tax treatment of insurance costs
• Health Savings Plans
• High-deductible plans

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ObamaCares Solution the Mandate(Increase the
insured population)

• End the Free-Rider problem by outlawing
  free-riders.
• Liberty issue
• Too many exceptions
• Too little enforcement
• Require businesses to provide insurance (Mass.)
• insurers to provide essential benefits, limit
  profits
• Establish additional markets to provide
  additional avenues for insurance purchases
• Basic economics work against this
• Increase Medicaid population

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Tangential Issues Mandate

• What are essential health benefits?
• The contraception kerfuffle
• How to apply burden to employers?
• And how will employers evade it?
• How to deal with those who wont play?
• Medical Loss Ratios (could increase costs)
• Problems with Health Insurance Exchanges
• Waiver abuse (rule of law issues)
• Regulatory agencies taking legislative action

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The contraception coverage issue

• Broad range of contraceptives/abortifacients
  considered to be essential health benefits.
• Very limited exception initially offered for
  religious institutions (effectively only
  churches).
• Lawsuits ensued, with mixed results.
• HHS proposed revised regulations last Friday
  separated religious employers (churches
  themselves) and eligible organizations.

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The new contraception coverage rule

• Eligible Organization is an entity that
  self-certifies that it meets the following
• Opposes providing specified contraceptive
  services on account of religious objections
• Operates as a nonprofit entity
• Holds itself out as a religious organization
• Provides self-certification to insurer
• Eligible Organizations insurance plan then does
  not have to include coverage for the specified
  contraceptive services.

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The new contraception coverage rule

• However, the insurer must automatically provide
  insurance for the specified contraceptive
  services through a separate insurance policy for
  each plan participant
• Insurer may not charge copays/deductibles to the
  patient for the separate insurance
• Insurer may not charge premium to the Eligible
  Organization for the coverage

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The new contraception coverage rule

• Insurer must provide notice of availability of
  the separate insurance to beneficiaries/participan
  ts
• The organization that establishes and
  maintains, or arranges, your health coverage has
  certified that your group health plan qualifies
  for an accommodation with respect to the federal
  requirement to cover all Food and Drug
  Administration-approved contraceptive services
  for women, as prescribed by a health care
  provider, without cost sharing. This means that
  your health coverage will not cover the following
  contraceptive services contraceptive services
  specified in self-certification. Instead, these
  contraceptive services will be covered through a
  separate individual health insurance policy,
  which is not administered or funded by, or
  connected in any way to, your health coverage.
  You and any covered dependents will be enrolled
  in this separate individual health insurance
  policy at no additional cost to you. If you have
  any questions about this notice, contact contact
  information for health insurance issuer.

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The new contraception coverage rule

• Insurer may offset cost of providing the separate
  plan against user fees it may otherwise pay to
  participate in a federally-facilitated exchange.
• Student health insurance plans appear to be
  included in the Eligible Organization category
  if the sponsoring entity meets the definition.
• Self-insured plans are not yet included, but 3
  proposed methods would use the TPA to place the
  contraceptive insurance with another insurer

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Non-Mandate Provisions

• Health Insurance Exchanges (HIX)
• ACOs and MSSP
• Medicare Changes
• Medicaid Expansion
• New Requirements for Providers
• Structural issues

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Health Insurance Exchanges
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Accountable Care Organizations

• Providers can form ACOs and participate in the
  Medicare Shared Savings Program
• Shared savings only
• Shared savings and losses
• Defining and measuring savings and losse
• Structural Issues
• Stark, Anti-Kickback, etc.
• Antitrust

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Medicare Changes

• Part C (Medicare Advantage) changes
• Restructure payment levels
• MA plans must pay back if MLR is too low
• Part D (prescription drug) changes
• Changes in subsidies
• Fill in the donut hole
• Experiment with bundled payments, value-based
  purchasing

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Medicaid Expansion

• Increase pool of eligible individuals to anyone
  earning less than 133 of FPL
• Phase-in of state responsibility
• Federal government pays 100 through 2016
• 95 in 2017, 94 in 2018, 93 in 2019, 90
  thereafter
• Originally, once a state took the first new
  dollar, it could not later reduce eligibility
• States not required to participate may drop out

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New Requirements for Providers

• Required to implement an effective compliance
  program (details not yet available)
• Must disclose financial relationships with drug
  companies and other referring providers
• Non-profit hospitals must perform a community
  needs assessment every 3 years, publish
  financial assistance policy, not balance bill
  if patients could get financial assistance
• Whole Hospital Stark exception ended.

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Structural Issues

• New Taxes Pharma companies, Insurance companies,
  medical devices, tanning salons
• IPAB and comparative effectiveness
• CLASS Act (already dead)
• Physician-Owned Hospital changes
• Quality initiatives
• Demo projects
• In-home care
• Bundled payments

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Ridiculous and Sublime

• Medicaid coverage for former foster children
• Indian healthcare provisions
• Chain restaurant menu nutrition information
• Revenue provisions
• Tanning bed tax
• Medical device tax
• The law of unintended consequences

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How Obamacare will/wont work

• Its not a government takeover of the healthcare
  industry its a tax on industry participants to
  drive more people into insurance coverage
• Make more employers provide coverage (Mass.)
• Tax/subsidize individuals
• Wont cover everyone, no matter what
• If/when it doesnt work, it WILL be a stepping
  stone in the drive toward a single-payor system
• Counter-reaction could push other factors
• Re-mutualization of insurance
• Tiers of coverage or service

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• Practical Implications

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James R. Griffin

• Focuses on employee benefits and executive
  compensation, advising clients on issues arising
  under the Internal Revenue Code, ERISA and other
  laws.
• Addresses issues affecting 401(k) and pension
  plans, executive compensation plans, stock option
  plans, and other group benefit plans.
• Represents clients in controversy matters,
  including Internal Revenue Service (IRS) and
  Department of Labor (DOL) audits, investigations,
  examinations and voluntary compliance
  proceedings.

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Roadmap

• Individual Mandate
• Employer Mandate
• Essential Health Benefits and Minimum Value
• Market Reforms
• Benefits Provisions
• Other Tax and Fee Increases

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Individual Mandate

• All citizens are required to have qualifying
  health coverage
• Penalty (tax) greater of 695 individual/2085
  family or 2.5 of household income, subject to
  phase in (95 or 1 in 2014) through 2016,
  increasing by COLA thereafter
• Exemptions granted Indians, prisoners, illegal
  immigrants, poor, those who would be covered by
  Medicaid in states that dont opt in
• Premium credits available for those who purchase
  coverage and are below 400 FPL

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Roadmap

• Individual Mandate
• Employer Mandate
• Essential Health Benefits and Minimum Value
• Market Reforms
• Benefits Provisions
• Other Tax and Fee Increases

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Employer Mandate

• Flowchart
• Employer Penalties
• Employer Penalty Questions
• Exchanges
• Premium Tax Credits
• Cost Sharing Subsidies

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Employer Penalties
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Employer Play or Pay Penalty

• An employer that does not offer health coverage
  to its full-time employees and their dependents
  is subject to a nondeductible "play OR pay"
  penalty if any full-time employee enrolls for
  coverage through an Exchange and qualifies for
  the premium tax credit or cost-sharing reductions
• 2,000 for each full time employee over 30

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Employer Play and Pay Penalty

• Applies if a large employer offers its full-time
  employees (and their dependents) the opportunity
  to enroll in coverage but the coverage does not
  provide minimum value or is unaffordable and
  one or more full-time employees receive
  subsidized coverage through an Exchange
• Penalty is 3,000 for each full-time employee
  receiving subsidized coverage through an Exchange

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Employer Penalty Questions

1. What is a large employer?
2. How are FTEs counted?
3. What are variable hour employees counted?
4. When is coverage affordable?

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What is a large employer?

• An employer that employs an average of at least
  50 full-time or full-time equivalent (FTE)
  employees on business days during the preceding
  calendar year
• A full-time employee with respect to any month is
  an employee who is employed an average of at
  least 30 hours of service per week
• Affiliated entities and entities under common
  control (such as a parent corporation and wholly
  owned subsidiary corporations) are treated as a
  single entity for determining large employer
  status
• Successor employers are considered to be the same
  as predecessors
• Special rule for new employers

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How Are FTEs Counted?

• FTEs are determined by calculating for each
  month of the prior calendar year the aggregate
  number of hours of service (not exceeding 120
  hours for any one employee) worked by all
  non-full-time employees (those not employed for
  an average of 30 hours per week), including
  seasonal employees, and dividing by 120, and then
  adding the number of monthly FTEs together and
  dividing by 12

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How are Variable HourEmployees Counted?

• Variable hour employees work 30 or more hours in
  some weeks and fewer in other weeks
• Optional Look Back Measurement Method
• Measuring Period
• Administrative Period
• Stability Period

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Variable Hour EmployeesInitial
Initial Measurement Period Initial Administrative Period Initial Stability Period
The initial measurement period must start no later than the first day of the month after the employees start date and must be no shorter than 3 months, and no longer than 12 months The initial administrative period starts immediately after the last day of the initial measurement period and must be no longer than 90 days The initial stability period starts immediately after the last day of the initial administrative period and must be the same length as the standard stability period for employees who were determined to be full time, no shorter than the longer of 6 calendar months, or the initial measurement period, and for employees determined to be part time, no longer than the shorter of The initial measurement period plus 1 month, or the remainder of the standard stability period in which the initial measurement period ended.
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Variable Hour EmployeesStandard
Standard Measurement Period Standard Administrative Period Standard Stability Period
The standard measurement period must be no shorter than 3 months, and no longer than 12 months The standard administrative period starts immediately after the last day of the standard measurement period and must be no longer than 90 days The standard stability period starts immediately after the last day of the standard administrative period and must be for employees who were determined to be full time, no shorter than the longer of 6 calendar months, or the standard measurement period, and for employees who were determined to be part time, no longer than the standard measurement period

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When is Coverage Affordable?

• Coverage is affordable if the employees premium
  obligation for self-only coverage does not exceed
  9.5 percent of the employees households
  modified adjusted gross income
• Employer Safe Harbors
• W-2
• Lowest cost employer coverage
• 9.5 of FPL

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Exchanges

• Regulated public marketplace to provide eligible
  individuals and small businesses with access to
  quality, affordable health care coverage under
  Qualified Health Plans
• Open enrollment scheduled to begin in October
  2013
• Challenges
• Getting the state and Federal exchanges built
• Getting the exchanges ready to accept a flood of
  applications
• Informing and educating the uninsured
• Federally facilitated exchanges (FFEs)
• SHOPS to be provided, but there is little
  guidance available

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ExchangesState and Federal
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ExchangesNotices

• Employers are required to provide their employees
  with written notice about the Exchanges by March
  1, 2013. On January 24, 2013, the Department of
  Labor officially announced a delay until Summer
  or Fall of 2013.
• Content of Exchange Notice
• Information about the existence of the Exchange,
  including a description of the Exchange services
  and how an employee may contact the Exchange
• If the employer's share of the cost of coverage
  is less than 60 percent, a statement that the
  employee may be eligible for premium tax credits
  and cost-sharing reductions if purchasing
  coverage through the Exchange
• If the employee purchases coverage through the
  Exchange, a statement that the employee will lose
  the employer contributions and that employer
  contributions are excludable from income tax

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Individual Premium Tax Credits (PTC)

• Purpose is to reduce the cost of health coverage
  obtained through an Exchange
• Citizens and legal residents (and not in jail)
• Incomes between 100 and 400 of the Federal
  poverty level
• Credit is refundable and advanceable
• Paid monthly to lower the premium that is
  required for Exchange coverage

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PTC2013 Federal Poverty Level
One Person Family of Four
100 11,490 23,550
400 45,960 94,200
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PTCEmployer Health Plan Exception

• PTCs are not available to an employee who is
  offered employer health coverage unless
• The plan does not have an actuarial value of at
  least 60, or
• the employees share of the premium for SELF ONLY
  employer plan coverage exceeds 9.5 of income
• Premium tax credits not available for those
  enrolling in catastrophic plans

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PTC--Amount

• PTC amount is based on the premium for the second
  lowest cost silver plan in the Exchange and area
  where the person is eligible to purchase coverage
• A silver plan is a plan that provides the
  essential benefits and has an actuarial value of
  70
• The amount of the tax credit is variable so that
  the premium a person would have to pay for the
  Silver Plan would not exceed the specified
  percentage of income, adjusted for family size

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PTCPremium Based on Income Level
Household Income (as percentage of Federal Poverty Line (FPL) Premium as a Percent of Household Income
Up to 133 2 of income
133-150 3 4 of income
150-200 4 6.3 of income
200-250 6.3 8.05 of income
250-300 8.05 9.5 of income
300-400 9.5 of income
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PTCExample

• Pat is 45 years old and has an income in 2014
  that is 250 of poverty (about 28,735)
• The cost of the Silver plan in the Exchange in
  Pats area is projected to be about 5,733
• Pat would not be required to pay more than 8.05
  of income, or 2,313, to enroll in the silver
  plan
• The tax credit available to Pat would be 3,420
  (5,733 premium minus the 2,313 limit on what
  Pat must pay)

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Cost-Sharing Reductions

• Protect lower income people with health insurance
  from high out-of-pocket (OOP) costs at the
  point of service
• Limit the plans maximum OOP costs
• Reduce cost sharing amounts (i.e., deductibles,
  coinsurance or copayments)
• Reduced cost-sharing is available for families
  with incomes at or below 250 of the FPL so that
  they may enroll in plans with higher actuarial
  values

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CSSReduced OOP and Average Value
Household Income Reduction in Maximum OOP Limit Plan AV Requirement
100-150 of FPL 2/3 94
150-200 of FPL 2/3 87
200-250 of FPL 1/2 73
250-300 of FPL 1/2 70
300-400 of FPL 1/3 70
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Question and Answer Break

• Roadmap
• Individual Mandate
• Employer Mandate
• Essential Health Benefits and Minimum Value
• Market Reforms
• Benefits Provisions
• Other Tax and Fee Increases

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Essential Health Benefits

• Listed Services and State Benchmark Plan
• Applicability
• Out of Pocket and Deductible Limits
• Actuarial Value

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EHBListed Services

• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity and newborn care
• Mental health and substance use disorder
  services, including behavioral health treatment
• Prescription drugs
• Rehabilitative and habilitative services and
  devices
• Laboratory services
• Preventive and wellness services and chronic
  disease management
• Pediatric services, including oral and vision
  care

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EHBBenchmark Plan

• EHB must be covered at least to the extent they
  they are covered by the states benchmark plan
• Proposed Texas EHB Benchmark Plan
• Blue Cross Blue Shield of Texas
• BestChoice PPO, RS 26
• The largest enrollment plan of any product in the
  states small group market
• No coverage for adult dental or vision, cosmetic
  orthodontia or long-term care

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EHBApplicability

• Applies to Individual and small group markets
• Applies to non-grandfathered Plans
• EHBs do not apply to self-insured or largegroup
  plans

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Out of Pocket Limits

• No group planincluding self-insured and large
  group planscan require OOP payments that exceed
  the HSA limits
• For 2013
• 6,250 for an individual
• 12,500 for a family
• Cost sharing for care received out of network in
  network plans does not count toward the cost
  sharing limits
• Emergency care must be provided out of network
  without increased cost sharing

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Deductible Limits

• Deductible limit on small group plans
• 2,000 for single coverage
• 4,000 for family coverage
• Subject to inflation adjustments and to variances
  that are necessary to reach the actuarial value
  of a specific metal level plan

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Actuarial Value
Metal Plans Metal Plans
Bronze 60
Silver 70
Gold 80
Platinum 90

• Actuarial value is defined as the percentage that
  is paid by a health plan for the total allowed
  costs of benefits for a standardized population
• It is a measure both of the value of services
  covered by the plan and of the cost-sharing that
  a plan member must cover

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Actuarial ValueHRAs and HSAs

• HRA and HSA contributions can count toward
  medical spending if they are expected to be spent
  in a benefit year
• Proposed regulations do not address counting
  employer contributions to HRAs that are used to
  pay insurance premiums

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Roadmap

• Individual Mandate
• Employer Mandate
• Essential Health Benefits and Minimum Value
• Market Reforms
• Benefits Provisions
• Other Tax and Fee Increases

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Market Reforms

• Applies to individual and small group markets
• 1 to 100 employees
• Applies to non-grandfathered plans
• Insurers are required to sell insurance coverage
  to any applicant
• No exclusions for pre-existing conditions

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Market ReformsPermitted Factors

• Permitted factors in premium rates
• Age with a maximum 3 to 1 ratio
• 1 year bands
• Tobacco Use with a 1.5 to 1 ratio
• Geographic location
• Household composition and size

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Market ReformsProhibited Factors

• Prohibited factors in setting premium rates
• Individual or family status
• Rating area
• Age, except as stated above
• Tobacco use, except as stated above
• Health status
• Claims experience

• Gender
• Industry
• Occupation
• Duration of coverage
• Eligibility for tax credits
• Prior source of coverage
• Credit worthiness

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Roadmap

• Individual Mandate
• Employer Mandate
• Essential Health Benefits and Minimum Value
• Market Reforms
• Benefits Provisions
• Other Tax and Fee Increases

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Benefit Plan Provisions

• Reduced Limit on FSA Balances
• Summary of Benefits and Coverage
• Wellness
• Contraception Coverage
• Medical Loss Ratio Rebates

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Reduced Limit On Flexible Spending Account (FSA)
Balances

• Health FSA contributions by employees will be
  limited to 2,500 per year starting in the 2013
  plan year
• Not applicable to dependent care assistance (day
  care) benefits
• Grace period amounts that remain after the 2012
  plan year for up to 2-1/2 months are not affected

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Summary of Benefits and Coverage (SBC)

• Effective September 23, 2012
• Provide improved information to
• better understand the coverage they have, and
• allow them to compare their coverage options
  across different types of plans and insurance
  products
• Fully insured and self insured plans
• Grandfathered and non-grandfathered plans

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Wellness

• ACA promotes the implementation and expansion of
  employer wellness programs to
• Improve health, and
• Help control health care spending
• Wellness programs are authorized under the ACA as
  an exception to the general prohibition on health
  status underwriting by plans, which takes effect
  on Jan. 1, 2014
• Applies to grandfathered and non-grandfathered
  plans
• Effective for plan years that begin on or after
  Jan. 1, 2014

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WellnessParticipatory

• Generally available without regard to an
  individuals health status
• Examples include programs that
• Reimburse for the cost of a fitness center
  membership
• Provide a reward to employees for attending a
  monthly, no-cost health education seminar
• Provides a reward to employees who complete a
  health risk assessment without requiring them to
  take further action

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WellnessHealth Contingent

• Generally require individuals to meet a specific
  standard related to their health to obtain a
  reward
• Examples include programs that
• Provide a reward to those who do not use, or
  decrease their use of, tobacco
• Provide a reward to those who achieve a specified
  cholesterol level or weight as well as to those
  who fail to meet that biometric target but take
  certain additional required actions

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Wellness

• 30 of cost of coverage discount or surcharge/50
  for participation in a smoking cessation program
• May be structured as rewards or as surcharges
• There are a number of ways to structure your
  wellness program. To explore your options,
  contact wellness_at_frostinsurance.com or call (866)
  227-2099

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Contraception Coverage

• ACA requires employer-provided health care plans
  to provide all FDA approved contraceptive
  methods, sterilization procedures, and patient
  education and counseling for all women with
  reproductive capacity, without cost

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Contraception Coverage

• Effective for plan years that begin on or after
  August 2012
• Exemptions for
• Churches and houses of worship
• Nonprofit religious employers whose employees
  primarily share its religious tenets and who
  primarily serve persons who share its religious
  tenets. (1 year delay only)

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Contraception Coverage

• Penalty is 100 per day per individual for each
  day the plan does not comply
• More than 40 lawsuits have been filed
• 7th Circuit temporarily barred enforcement of the
  contraception mandate against an Illinois
  contruction firm (12/28/12). 8th Circuitsame
  10th Circuit opposite
• United States Supreme Court denied Hobby Lobbys
  emergency appeal to suspend the fines during the
  time that it appealed its challenge to the ACA in
  the court of appeals

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Medical Loss Ratio Rebates

• Insurers must spend a minimum percentage of
  premium dollars on medical services and
  activities designed to improve health care
  quality
• 80 for Individual and Small Group markets
• 85 for Large Group markets
• Aggregated market data in each state
• Not specific to a particular group health plans
  experience
• Fully insured policies/not self-funded plans
• Paid to policyholder of ERISA plans by August 1
• Notices to subscribers

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Roadmap

• Individual Mandate
• Employer Mandate
• Essential Health Benefits and Minimum Value
• Market Reforms
• Benefits Provisions
• Other Tax and Fee Increases

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Other Tax and Fee Increases

• W-2 Reporting
• Non Fiscal Cliff Tax Increases
• Fees
• Patient Centered Outcomes Research Institute
  (PCORI)
• Reinsurance Program
• Cadillac Tax (2018)

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W-2 Reporting

• Applies to employers that were required to file
  250 or more W-2 forms in the preceding year
• Applies to 2012 W-2s that are distributed to
  employees starting in 2013
• Report total cost of group health benefit plan
  coverage
• Box 12, Code DD
• Informational only/Reported cost is not taxable
• Employee coverage only is reported

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W-2 Reporting

• Total cost includes
• Employer portion
• Employee portion
• Pre-tax
• After-tax
• Cost of coverage
• Any reasonable method that is applied
  consistently for all employees who terminate
  employment during the year

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W-2 Reporting

• Does not apply to
• excepted benefits, such as accident, disability
  income, supplemental liability and workers
  compensation insurance
• Stand-alone dental and vision plans
• HRA, HSA and Health FSA amounts
• Employee assistance plans, wellness programs and
  on-site medical clinics if the employer does not
  charge a premium

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Non-Fiscal Cliff Tax Rate Increases

• Additional Medicare Tax
• Starts in 2013
• Rate is 0.9
• Applies to Married Filing Jointly filers with
  combined wages, other compensation and
  self-employment income of more than 250,000
• Employer withholding begins, per employee, on
  wages in excess of 200,000 in a calendar year
• Employer is not required to notify affected
  employees

93
Non-Fiscal Cliff Tax Rate Increases

• Investment Income Surtax
• Starts in 2013
• Medicare contribution tax
• Rate is 3.8
• Applies to lesser of
• Net investment income
• Excess of modified adjusted gross income over
  250,000 for married filing jointly

94
Non-Fiscal Cliff Tax Rate Increases

• Reduced Medical Itemized Deductions
• Taxpayers under age 65 can deduct unreimbursed
  medical expenses that are more than 10 of
  adjusted gross income
• If taxpayer or spouse is 65 before December 31,
  2012, 7.5 floor continues to apply through 2016

95
PCORI

• Fee to fund research to evaluate and compare the
  health outcomes and clinical effectiveness, risks
  and benefits of
• Medical treatments
• Services
• Procedures
• Drugs
• Applies to
• Insured planIssuer liable
• Self-insured planPlan sponsor liable

96
PCORI

• Plan and policy years ending after Sep. 30, 2012
• Does not apply in policy years ending after Sep.
  30, 2019
• 1 for the first year (and 2 for later years)
  times the average number of lives covered under
  the plan (including dependents)
• Due July 31, 2013
• IRS Form 720

97
PCORI

• Counting Covered Lives
• Actual count methodcount the number of covered
  lives covered on each day in the plan year and
  divide that result by the number of days in the
  year
• Snapshot methodquarterly average
• Actual count for dependents, or
• 2.35X for dependents
• Form 5500 methodmay only be used if the 5500 is
  timely filed without regard to extensions
• July 31 for calendar year plans

98
PCORI

• Covered Plans
• Accident and health plans
• Health reimbursement arrangements
• Excluding an HRA that is integrated with a
  self-insured group health plan or health
  insurance coverage
• Retiree only medical plans

99
PCORI

• Exemptions
• Stand-alone dental and vision plans
• Health flexible spending accounts
• Health Savings Accounts
• Employee assistance programs, wellness programs
  and disease management programs that do not
  provide significant benefits
• Plans designed specifically to cover primarily
  employees working and residing outside the US

100
Transitional Reinsurance Program

• Established by ACA to fund state non-profit
  reinsurance entities for the purpose of
  establishing a high-risk pool for the individual
  market
• Applies to
• Health insurance issuers
• Third party administrators on behalf of
  self-insured group health plans

101
Transitional Reinsurance Program

• Annual contribution rate for 2014 is estimated to
  be 63 per covered life
• Methods for counting covered lives are similar
  but not identical to PCORI
• Counting will be done during the first 9 months
  of 2014, 2015 and 2016

102
Where do we go from here?

• Review forms and notices to confirm compliance
• Determine if you are a large employer
• Determine whether additional planning is needed
  for variable hour employees
• PLAN for 2014 renewals to understand the big
  picture
• Frost Insurance can help you structure employee
  benefits solutions that work, and navigate the
  complex regulatory system resulting from the
  reform

103
Health Reform After the ElectionThe Big Picture
of Obamacare

• James R. Griffin Jeffery P. DrummondJackson
  Walker L.L.P.901 Main Street, Suite 6000Dallas,
  Texas 75202jgriffin_at_jw.com jdrummond_at_jw.com
  214.953.5827 214-953-5781