Obstacles to the Continuation of Health Plans

1. Obstacles to the Continuation of Health Plans October 1, 2013

2. Near term costs of Health Reform Mandates Impact to Group Health and Welfare Funds

3. Fees • Comparative Effectiveness Research Fees • Temporary Reinsurance Program Fees • Health Insurance Provider Fee • Excise Tax on High Cost Plans

4. Comparative Effectiveness Research Fees • All plans (insured and self-insured) must pay a fee to fund comparative effectiveness research • Plan sponsor pays if coverage is self-insured; issuer pays if coverage is insured • First effective for plan year beginning on/after November 1, 2011 • First year—$1.00 per average number of covered lives • Second year—$2.00 per covered life (indexed starting inthird year) • Sunsets in 2019 • Paid by July 31 of the calendar year afterlast day of plan year, using IRS Form 720

5. Payments to Temporary (2014 – 2016) Reinsurance Programs • Goal of reinsurance programs is to stabilize the individual insurance market in 2014 – 2016 • Self-insured plans will have to pay fees to help finance these reinsurance programs • Health insurance issuers will also have to pay fees • Fees will be based on a per capita (i.e., per person) contribution rate set by federal government • Final rate for 2014 is $5.25 per personper month (i.e., $63 per person per year) • Per person (not per employee) • Fees apply to “major medical coverage”

6. Health Insurance Provider Fee • Permanent ACA fee on insured plans (Section 9010) • Based on aggregate premiums written by the carrier • Exceptions for VEBA should also cover self-insured multiemployer plans • Will be reflected in carrier’s rates

7. Excise Tax on High Cost Plans (2018) 40% Excise Tax on Health Plans that Cost Above a Certain Threshold • Threshold $10,200/$27,500 indexed to the CPI-U • Adjustments due to age/gender; increased thresholds for high-risk professions and retirees • Thresholds increased in 2018 if CBO projections incorrect • Appears to exclude most dental and vision; includes health FSAs and HRAs • Multiemployer plans treated as family coverage for all participants; therefore, the threshold is $27,500 formultiemployer plans 7

8. Health Reimbursement Arrangements • Continuation of HRAs threatened by ACA’s prohibition on annual limits by group health plans (GHP). • HRAs are generally GHPs subject to ACA • Retiree HRAs are not subject to ACA annual dollar limit prohibition. • Preamble to Regs on Annual Dollar limit stated that an HRA “integrated” with ACA-compliant GHP would not violate annual dollar limit prohibition.

9. Health Reimbursement Arrangements • DOL FAQs in January, 2013 provided — • Initial definition of “integrated” HRA. • That HRA cannot be “integrated” with individual market coverage. • That under terms of HRA it must be available only to employees who are covered (actually enrolled) in primary GHP. • Left uncertainty whether HRA had to be integrated with ACA compliant plan of same employer or sponsor.

10. Health Reimbursement Arrangements • DOL Technical Release 2013-03 (TR) answers many questions but not all. • “Integration” does not require that HRA and ACA compliant plan share the same sponsor, plan document or file a single Form 5500. • Where HRA is integrated with a plan or another employer/sponsor the information required to satisfy an integration method may be obtained by attestation of the employee.

11. HRAs: Integration Method-Minimum Value Not Required • Sponsor offers ACA-compliant GHP to employee; • Employee is actually enrolled in ACA-compliant GHP; • HRA is available only to employees enrolled in ACA-compliant GHP regardless of sponsor; • HRA limited to reimbursement of co-payments, co-insurance, deductibles, and/or premiums under ACA-compliant GHP + medical care (IRC §213(d)) that is not essential health benefits; and • Under terms of HRA employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from HRA at least annually and, upon termination of employment, employee may opt out or HRA balance is forfeited.

12. HRAs: Integration Method-Minimum Value Required • Sponsor offers ACA-compliant GHP that provides minimum value (MV GHP); • Employee is actually enrolled in MV GHP; • HRA is available only to employees enrolled in a MV GHP regardless of sponsor; and • Under terms of HRA employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from HRA at least annually and, upon termination of employment, employee may opt out or HRA balance is forfeited.

13. Integrated HRAs: Other Provisions • Employee who loses coverage from GHP with which HRA was integrated may continue to use amounts contributed while integrated. • HRA integrated with MV GHP will not be treated as imposing a prohibited annual dollar limit even if MV GHP does not offer a category of essential health benefits and HRA is available to cover that category of essential health benefits.

14. Retiree-Only HRAs (Q-10) • Need not be integrated. • Retiree-only HRA could reimburse purchase of individual policy. • Standalone retiree-only HRA would constitute an employer sponsored plan. • coverage would be minimum essential coverage for any month in which funds are retained in HRA. • Retiree covered by retiree-only HRA for any month is not eligible for premium tax credit for that month.

15. Issues for Multiemployer HRAs • Initial participation: Contributions to HRA may begin under CBA before employee is eligible under GHP. May HRA contributions made before GHP eligibility be made available once the employee becomes eligible in GHP? • It appears not. See DOL FAQs XI, Q-3. • Opt out: Employees must be permitted to permanently opt out and waive future reimbursements from HRA annually and upon termination of employment. If active employee opts out for some reason, may he/she opt in? What happens to future HRA contributions under CBA? • According to the TR the opt out must be permanent. Therefore, future contributions on the employee’s behalf would not be available to the employee.

17. Questions