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Healthcare Reform – Are you Ready? A Discussion of Readiness Strategies

Healthcare Reform – Are you Ready? A Discussion of Readiness Strategies. Southeast Employee Benefit Conference April 23, 2013. Discussion Content. Overview of 2013 and 2014 preparations Who Must be Offered Coverage and Why? Definitions Timelines and Measurement Periods

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Healthcare Reform – Are you Ready? A Discussion of Readiness Strategies

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  1. Healthcare Reform – Are you Ready?A Discussion of Readiness Strategies Southeast Employee Benefit Conference April 23, 2013

  2. Discussion Content • Overview of 2013 and 2014 preparations • Who Must be Offered Coverage and Why? • Definitions • Timelines and Measurement Periods • Transitional Relief • Additional Rules • Employer Shared Responsibility • Cost Effective Strategies • Critical Success Factors

  3. PPACA…..Are We Ready for 2014? Hopefully, we have all stopped crying by now!

  4. Health insurance exchanges • Individual coverage mandate • Financial assistance for exchange coverage of low-income individuals • Medicaid expansion (not all states) • New health plan regulations • HIPAA wellness limit increases • Shared responsibility penalties • Additional reporting and disclosure • Reporting for FTE/Affordability req. • Dependent coverage to age 26 for any covered employee’s child** • No annual dollar limits** • No pre-existing condition limits** • Waiting periods limited to 90 days • Additional new standards for new or “non-grandfathered” health plans, including limited cost-sharing, WPC&S • Health insurance industry fees begin (reinsurance pool) • Dependent coverage to 26 (no other employer coverage available)* • Lifetime dollar limits prohibited and annual dollar limits restricted* • No pre-existing condition limitations for children up to age 19* • Rescissions prohibited* • Additional standards for new or “non-grandfathered” health plans, including non-discrimination provisions for insured plans and mandatory preventive care with no cost-sharing • No health FSA/HRA/HSA reimbursement for OTC drugs • Penalties increased to 20% for non-qualified HSA distributions • Voluntary Form W-2 reporting for 2011 health coverage • Pharmaceutical manufacturers’ fees start • Medicare, Medicare Advantage benefit and payment reform • Insurers subject to medical loss ratio rules (MLR)* Timeline: Key Changes for Employers (Defined as Employers who employed at least 50 FTE’s during the previous calendar year) • Employers must distribute uniform benefit summaries to participants (SBC) • Employers must provide 60-day advance notice of material modifications (ex: AE) • Voluntary Form W-2 reporting for 2011 health coverage • Auto-enrollment of full-time employees (awaiting guidance) • Change in tax treatment for over-age dependent coverage • Change Medicare retiree drug subsidy tax treatment • Early retiree medical reinsurance • Medicare prescription drug “donut hole” beneficiary rebate • Break time/private room for nursing moms 2010 2011 2012 2013 2014 2018 • Health FSA maximum limited to $2,500 (indexed) • Exchange Notice due to EE: Deferred • Increased Medicare payroll tax on wages exceeding $200,000/ individual; $250,000/couples, 0.9% • New Medicare tax on net investment income for taxpayers with incomes exceeding $200,000/ individual; $250,000/couples • Research fees due 7/1/2013 for 2012 • Change in Medicare retiree drug subsidy tax treatment takes effect • Mandatory Form W-2 reporting for 2012 health coverage • Excise tax on “high cost” or Cadillac plans * Applies to all plans, including “grandfathered” plans, effective for plan years beginning on or after Sept. 23, 2010 (Jan. 1, 2011, for calendar year plans). Collectively bargained plans may have a delayed effective date. ** Applies to all plans, including grandfathered plans, effective for plan years beginning on or after Jan. 1, 2014. 4

  5. 2013 and 2014 Overview Things you should have already done, or have a plan to complete soon • 2013 deliverables • W-2 reporting for 2012 tax year • Distribution of Uniform Summary of Coverage (SBC) • Anniversary dates & enrollment effective 9/23/2012 and thereafter • Flexible Spending Account cap ($2,500) • Comparative Research Tax (2012 due July 2013) • Women’s preventive care & screening

  6. 2013 and 2014 Overview Things you should be making plans to do now! • Final guidance on many items is forthcoming or proposed • Automatic Enrollment • Transitional Reinsurance Fees • Notices to employees about Exchanges and coverage subsidies (Delayed) • FTE determination and tracking methodology

  7. When Must Coverage Be Offered • Generally based on hours worked or amount of hours reasonably expected to work as of hire date • Employee reasonably expected to work full-time • Employee reasonably expected to work part-time (less than 30 hours) • Variable hour and seasonal employees not reasonably expected to work full-time

  8. Tracking FTE’s for Eligibility • Full Time Employee = at least 30 hours or more per week • Initial Measurement Period (IMP) • Standard Measurement Period (SMP) • Stability Period (SP) • Considerations for determining and administrating Safe Harbor FTE eligibility tracking

  9. Treatment of Variable Hour Employees • Variable hour employee • An employee working 30 hours/week during a measurement period is “full-time” for purposes of subsequent “stability period,” regardless of hours of service during stability period. • Measurement period: 3 - 12 consecutive months • Stability period • If “full-time” during measurement period: stability period must be at least 6 consecutive calendar months following measurement period and no shorter than the measurement period • If not “full-time” during measurement period, stability must be no longer than the measurement period • Transition relief for 2014 only

  10. Ongoing Employee 12 month measurement period 2 month administration period 11/1/2012 – 10/31/2013 measurement period 11/1/2013 – 10/31/2014 measurement period 11/1/2014 – 10/31/2015 measurement period 1 2 3 11/1 – 12/31/2013 admin. period 1 11/1 – 12/31/2014 Admin period 2 11/1 – 12/31/2015 Admin period 3 1 2 3 1/1/2014 – 12/31/2014 stability period 1/1/2015 – 12/31/2015 stability period 1/1/2016 – 12/31/2016 stability period 2013 2014 2015 2016

  11. New Variable Hour & Seasonal Employee Initial 12 month measurement period 1+ month administration period Employee 3/15/2014 DOH Initial Measurement Period 3/15/14 – 3/14/15 Initial Stability Period 5/1/2015 -4/30/2016 1 + Month administration period (AP begins the day following the end of the IMP through the next calendar month – May 1) 2014 2015 2016

  12. New Variable Hour & Seasonal Employee 12 month measurement period 1+ month administration period Initial Employee 3/15/2014 DOH Minimum Coverage Period Even if employee determined NOT to be 30+ hours during first standard measurement period Initial Measurement Period 3/15/14 – 3/14/15 Initial Stability Period 5/1/2015 -4/30/2016 1 + Month administration period Standard Measurement Period 11/1/2014 – 10/31/2015 Standard Stability Period 1/1/2016 – 12/31/2016 2 Month administration period 12 month measurement period 2 month administration period Standard 2014 2015 2016

  13. New Variable Hour & Seasonal Employee 12 month measurement period 1+ month administration period Initial Employee 3/15/2014 DOH Minimum Coverage Period Even if employee determined NOT to be 30+ hours during first standard measurement period Initial Measurement 3/15/14 – 3/14/15 Initial Stability 5/1/2015 -4/30/2016 1 + Month administration period 12 month measurement period 2 month administration period SMP 11/1/2014 –10/31/2015 Stability Period 1/1 – 12/31/2016 Standard 2 Month admin period SMP 11/1/2015 – 10/31/2016 Stability Period 1/1 – 12/31/2017 SMP 11/1/2016 – 10/31/2017 Stability Period 1/1 – 12/31/2018 2014 2015 2016 2017 2018

  14. Employer Shared Responsibility Have at least 50 FTEs? No penalty applies! NO YES $2,000 penalty per FT employee (minus first 30) if at least one FT employee receives the tax credit Offer Coverage? NO YES Plan provides minimum required value? NO • Lesser of: • $3,000 per FT employee receiving tax credit* • Or • $2,000 per FT employee (minus first 30) YES NO Is coverage affordable? YES No penalty applies! • Only applies to FTEs with household incomes of 400% of FPL or less

  15. Cost Effective Strategies • Fully Insured vs. Self Insured • Technology and Reporting • Outsource vs. Insource • Tool assessment • Benefit Administration • Actuarial value of current and future plans • Re-allocating compensation • Wellness and health risk improvement strategies • Outcome based • On-site clinics

  16. Cost Effective Strategies • Communication strategies must be re-defined • Salary banding of payroll contributions • Actuarial value of current and future plans • Defined Contribution with a base HDHP • buy-up options for better plan choices • Re-allocating compensation • Re-define dependent contributions • Dependent Verification • Eliminate spouses eligible for insurance elsewhere • Charge for each family member that participates in the plan

  17. Transitional Relief Can you defer compliance? • Transitional Relief for Plans whose Fiscal Year fall other than on a calendar year basis • In English – if your plan year begins other than January 1, you may be able to defer compliance with PPACA until the policy year start.

  18. Critical Success Factors #1 – Senior management involvement early and often #2 – Re-invent your employee communication process #3 - Run an actuary-supported financial impact study of the available options #4 - Assess, and if necessary amend your hiring practices and use of full & part-time workforce #5 - Amend your business model to reflect incremental costs #6 - Take action sooner rather than later

  19. Healthcare Reform – Are you Ready? Questions?

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