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Health Care Reform: A Practical Look from the HR Perspective

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Health Care Reform: A Practical Look from the HR Perspective Presented to the HRACC April 26, 2011 Bruce B. Barth Robinson & Cole LLP – PowerPoint PPT presentation

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Title: Health Care Reform: A Practical Look from the HR Perspective


1
Health Care Reform A Practical Look from the
HR Perspective
  • Presented to the HRACC
  • April 26, 2011
  • Bruce B. Barth
  • Robinson Cole LLP

2
Please note
  • This seminar is designed to provide accurate
    information about the subject matter. However,
    it provides general information only and does not
    constitute legal advice. No attorney-client
    relationship has been created. If legal advice
    or other assistance is required, let me know
    directly. My contact information is displayed at
    the end of this presentation.

3
Agenda
  • Timeline for PPACA
  • Now
  • 2012
  • 2013
  • 2014
  • 2018
  • Noncompliance consequences
  • Exemptions
  • Legislative court challenges

4
Timeline for PPACA
  • Considerations before 2014
  • Guidance affects implementation and effective
    dates
  • 2014 and beyond
  • Exchanges
  • Individual mandate
  • Employer mandate
  • Other law changes
  • Grandfathering plans
  • Challenges to PPACA implementation

5
Timeline Now
  • Early retiree reinsurance
  • High-risk pools
  • Dependent coverage for adult children under the
    age of 26
  • Restrictions on rescission

6
Timeline Now
  • Participants can select primary care provider
  • No preauthorization or increased cost sharing for
    emergency
  • No preauthorization or referral requirement for
    OB/GYN services
  • First-dollar coverage required for certain
    preventive care
  • Elimination of the preexisting condition
    exclusion for children under age 19
  • Routine costs of patients who are part of
    clinical trials covered

7
Timeline Now
  • Small business tax credit
  • Simple Section 125 cafeteria plans are available
    for companies with less than 100 employees
  • Tax on distributions from a health savings
    account is increased from 10 to 20
  • Adoption assistance limits increased

8
Timeline Now Medical Loss Ratios
  • Plans must spend a certain percentage of premium
    dollars on clinical services and quality
    activities or else issue rebates to policyholders
  • 85 medical loss ratio for large group market
  • Ratio does not apply to self-insured plans
  • Greater transparency regarding where premiums are
    going

9
Timeline Now OTC Drugs
  • No reimbursement for medications, including a
    health FSA or an HRA, unless the medicine
  • requires a prescription,
  • is available without a prescription (i.e., OTC)
    but the individual otherwise obtains a
    prescription, or
  • is insulin
  • Health FSA and HRA debit cards may be used to
    purchase OTC drugs as long as certain procedures
    are followed
  • Equipment, medical supplies (e.g., bandages), and
    devices are not subject to the prescription
    requirements

10
Timeline Now Nursing mothers
  • Must provide a reasonable break time
  • Applies for one year after the childs birth
  • No limit on the number of the breaks
  • No guidance on the duration of such breaks
  • Must provide a place other than a bathroom and
    must be shielded from view and free from
    intrusion from coworkers and the public
  • Employers with fewer than 50 employees are exempt
    if providing the break or the place to express
    milk would impose an undue hardship
  • Does not preempt state law if the state law is
    more protective of its employees

11
Timeline Now Claims and Appeals
  • Urgent care time reduced to 24 hours
  • Must provide continued coverage pending the
    outcome of an appeal
  • Strict compliance - any mistake in meeting these
    requirements allows the claimant to proceed to
    court
  • External review process independent review
    organizations
  • Effective generally January 1, 2012 (effective
    date has recently been delayed from July 1, 2011)
  • Model notices available

12
Timeline Now Lifetime Annual Limits
  • No lifetime limits for essential health benefits
  • Reasonable annual limits related to essential
    health benefits
  • 750,000 for plan/policy years before Sept. 23,
    2011
  • 1.25 million for plan/policy years beginning on
    or after Sept. 23, 2011, but before Sept. 23,
    2012
  • 2.0 million for plan or policy years beginning
    on or after Sept. 23, 2012, but before Jan. 1,
    2014
  • 2014 annual limits eliminated
  • Retiree medical and HRA considerations
  • Waivers of annual limit granted if requirement
    results in significant decrease in access to
    benefits or significant increase to premiums

13
Timeline Now Annual Limit Waivers
  • One-year waiver, and application must be
    submitted no less than 30 days before the
    beginning of the plan year
  • Generally applies only to policies that were in
    place before September 23, 2010
  • Notice to participants is required
  • Regulators have approved 94 of requests,
    covering over 1000 plans with over 2.4 million
    people
  • No waivers will be granted for years beginning on
    or after January 1, 2014

14
Timeline Should Have Been Now, Delayed W-2s
  • W-2s must disclose cost of employer-provided
    health benefits
  • IRS notice made such reporting optional for 2011
  • Optionally report the amount in Box 12, using
    code DD
  • No additional directions or details regarding the
    calculations involved in reporting this
    information
  • Effective for 2012 Form W-2s
  • Delayed effective date if not required to file
    more than 250 W-2s in prior year

15
Timeline Should Have Been Now, Delayed
Nondiscrimination
  • Originally, for plan years beginning on or after
    September 23, 2010, nondiscrimination
    requirements were to apply to fully insured plans
  • Rules similar to self-insured
  • Awaiting guidance for implementation
  • Will likely require an "eligibility test" and
    a "benefits test"
  • Take actions now to prepare
  • Effective reasonable time after guidance issued

16
Nondiscrimination Key Concerns
  • Highly compensated individuals (HCIs)
  • The five highest-paid officers
  • Shareholders who own more than 10 of the value
    of the employer stock, or
  • The highest paid 25 of all employees
  • To be nondiscriminatory on its terms
  • Required employee contributions must be identical
    for each benefit level
  • Maximum benefit level must not vary based on age,
    years of service, or compensation
  • Same type of benefits must be available to HCIs
    and to non-HCIs
  • Must be no varying waiting periods

17
Timeline Uncertain, Now Delayed Automatic
Enrollment
  • Employers with 200 or more full-time employees
  • FAQ states regulations will be issued to provide
    rules for determining full-time employee status. 
    Until those regulations are issued, employers
    will not be required to comply with the automatic
    enrollment requirements.

18
Timeline Uncertain, Now Delayed Advanced SMM
  • 60-day advance notice of material modifications
    FAQ states it will not become effective until
    the summary of benefits and coverage explanation
    becomes due
  • General summary plan description and summary of
    material modifications rules continue to apply to
    most group health plans under ERISA

19
Timeline 2012 and 2013
  • Report health care quality and wellness
    initiatives to HHS
  • Fee of 2 per average number of enrollees/lives
    (1 for policy/plan years ending during fiscal
    year 2013)
  • To fund comparative effectiveness research
  • Bills introduced to repeal the comparative
    effectiveness research not likely to go anywhere

20
Timeline 2012 Summaries
  • 4-page summary of benefits and coverage must be
    provided to applicants and enrollees before
    enrollment or reenrollment
  • Requires HHS to issue guidance by March 23, 2011
    (not yet issued)
  • Act states it is effective March 23, 2012
  • Penalty of up to 1,000 per failure plus possible
    breach of fiduciary duty action
  • 60-day advanced notice of plan material
    modifications

21
Timeline 2013 Exchange Notice
  • Employer notice must be provided beginning on
    March 1, 2013, to notify employees in writing of
  • The existence of the Exchange
  • Potential eligibility for federal assistance if
    the employers health plan is unaffordable
  • The fact that they may lose the employers
    contribution if they purchase health insurance
    through the Exchange without a voucher

22
Timeline 2013 Taxes
  • Additional 0.9 Medicare tax on wages in excess
    of 250,000 for joint return filers, and 200,000
    for others
  • 3.8 tax on unearned income for joint filers with
    modified AGI in excess of 250,000, 200,000 for
    singles, 120,000 for married filing separately
  • Effective January 1, 2013, the maximum amount
    that can be made available through a health FSA
    limited to 2,500, indexed

23
Timeline 2014 Exchanges
  • State health exchanges are required to be
    established for individuals and small businesses
    of 100 or fewer employees
  • Prior to 2016, states can limit this to
    businesses with up to 50 employees
  • Beginning 2017, states can allow the state health
    exchanges to become available for all employers
  • Federal exchange if state does not comply
  • Exchange will have a variety of insurance options
    to satisfy the new mandates

24
Timeline 2014 Individual Mandate
  • To avoid penalty, nearly all individuals will be
    required to have minimum essential coverage
  • Subsidies/Vouchers for those up to 400 of
    federal poverty level or if employer coverage is
    not affordable
  • Medicaid will be expanded
  • For 2014, penalty is 95/uninsured adult or 1 of
    household income over filing threshold
  • For 2015, penalty is 325 or 2
  • For 2016 and after, penalty increases to 695 or
    2.5

25
Timeline 2014 Employer Mandate
  • Law does not require employers to offer coverage
  • BUT, large employers may face a penalty if they
  • Do not offer coverage
  • Offer coverage that is not affordable, or
  • Offer coverage that does not meet the minimum
    essential standards
  • Large employer is an employer who has 50 or more
    full-time employees or full-time equivalents
  • Full-time employees - those that work 30 or more
    hours a week, calculated on a monthly basis
  • Penalty amount only applies with respect to
    full-time employees, not full-time equivalents

26
Timeline 2014 Employer Mandate
  • If full-time employees (and dependents) are not
    offered minimum essential coverage, penalty
    applies if at least one full-time employee
    receives federal assistance to purchase through
    Exchange
  • Penalty 2,000 multiplied by the total number
    of full-time employees, not taking into account
    the first 30 employees

27
Timeline 2014 Employer Mandate
  • A penalty also applies if the coverage offered
    is
  • Unaffordable because the employees required
    contribution is more than 9.5 of employees
    household income, or
  • The plan pays for less than 60 of covered health
    care expenses
  • This penalty is equal to
  • At least 3,000 multiplied by the number of
    full-time employees receiving assistance
  • BUT, no more than 2,000 multiplied by the number
    of full-time workers, not taking into account the
    first 30 employees

28
Timeline 2014
  • Elimination of preexisting condition exclusions
    for all participants
  • No annual dollar limits
  • Waiting periods cannot exceed 90 days
  • No cost sharing (out-of-pocket maximum and annual
    deductible) in excess of the limits on
    high-deductible health plans
  • Wellness incentive limit increased from 20 to
    30

29
Timeline 2018
  • Cadillac plan tax becomes effective
  • 40 tax on excess health coverage
  • Tax imposed on issuers of fully insured plans and
    on administrators with respect to self-funded
    plans
  • 10,200 for single and 27,500 for family
  • Retirees and high-risk professions - 11,850 for
    single and 30,950 for families
  • Adjusted for inflation

30
What Happens If a Plan Doesnt Comply? 100 per
Day Excise Tax!
  • COBRA
  • Special enrollments
  • Mental health parity
  • Dependent coverage to age 26
  • No lifetime limits and restricted annual limits
    on essential health benefits
  • No rescissions
  • Appeals and external review
  • Preexisting condition exclusion for those under
    19
  • Preventive care
  • Choice of health care professionals and emergency
    services
  • Nondiscrimination rules

31
Excise Tax Example
  • For an insured plan, the potential penalty is
    100 per individual for each day the violation
    continues. So if a plan with 500 participants
    provides discriminatory benefits to the top three
    executives, the potential penalty is 100 a day
    for each of the other 497 employees
  • Compare this to the penalty for a discriminatory
    self-insured plan, which is loss of tax benefits
    for the highly compensated individuals who
    benefited from the discrimination

32
Grandfathered Plans
  • A grandfathered plan is generally any plan in
    which an individual was enrolled on March 23,
    2010

33
What Grandfathered Plans Are Exempt From
  • Reporting health care quality and wellness
    initiatives to HHS
  • Incorporating cost-sharing limits on
    out-of-pocket and deductible expenses
  • Covering routine costs of patients who are part
    of clinical trials
  • Providing participants with the right to select a
    primary care provider/pediatrician
  • Elimination of preauthorization or referral for
    OB/GYN services

34
What Grandfathered Plans Are Exempt From
  • Elimination of any preauthorization or increased
    cost sharing for emergency services
  • First-dollar coverage for preventive care
  • Providing minimum essential benefits
  • Changes to the appeals process
  • Nondiscrimination requirements for fully insured
    plans

35
What Grandfathered Plans Must Still Comply With
  • Restrictions on annual and lifetime limits
  • Preexisting condition exclusion requirements
  • Coverage for adult children to age 26
  • New tax rules (including changes for FSAs)
  • 4-page summary
  • Employer mandates
  • Providing notice of grandfathered status
  • AND grandfathered plans are still subject to the
    excise tax if they do not comply.

36
What Affects Grandfathered Status?
  • Eliminating all or substantially all benefits to
    diagnose or treat a condition, or any necessary
    element to diagnose or treat a condition
  • Decreasing or imposing a new annual limit on the
    dollar value of benefits
  • Increasing any cost-sharing (coinsurance)
  • Increasing a fixed-amount cost-sharing
    requirement, other than a copayment, by more
    medical inflation plus 15
  • Increasing a fixed-amount copayment by more than
    the greater of
  • 5 increase by medical inflation or
  • A total that is more than the sum of medical
    inflation plus 15

37
What Affects Grandfathered Status?
  • Decreasing the employer's contribution rate
    toward the cost of any tier of coverage by more
    than 5
  • Guidance for insurers so that they can determine
    if contribution rate has changed
  • Over time, this becomes more and more difficult
    to maintain

38
What Does Not Affect Grandfathered Status?
  • Changing a self-insured plan's TPA
  • Changing an insured plans carrier after Nov. 15,
    2010
  • Making changes effective after March 23, 2010,
    pursuant to a legally binding contract entered
    into on or before March 23, 2010
  • The loss of grandfathered status for one policy
    does not mean you lose it for all
  • Can be grandfathered for one policy, but not
    another

39
When Does a Plan Lose Grandfathered Status?
  • When the amendment becomes effective
  • Plans could lose grandfathered status during a
    plan year

40
Legislative Challenges to PPACA
  • House approved a complete repeal Senate did not
  • Legislators trying to attack through
    appropriations
  • President Obama has promised to veto any repeal
    bill
  • Opt-out bill for states gaining some traction
  • Massachusetts
  • Connecticut SustiNet

41
Court Challenges to PPACA
  • At issue is the individual mandate
  • 3-2 in favor of PPACA being constitutional
  • Florida judge threw out the PPACA in whole
  • Individual mandate was so intrinsically linked to
    the rest of PPACA
  • More than 20 challenges to some aspect of PPACA
    have been filed around the country
  • Oral arguments in the first appellate reviews are
    scheduled for May and June
  • Until USSC hears, PPACA remains in effect

42
Contact Information
  • Bruce B. Barth
  • Partner
  • bbarth_at_rc.com
  • 860-275-8267 Phone
  • 860-275-8299 Fax
  • Admitted in Connecticut, Colorado,
  • and the District of Columbia
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