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What You Need to Know on the Implementation of the Affordable Care Act

Get a comprehensive overview of the Affordable Care Act implementation, including provider issues, PCORI fees, transitional reinsurance program, insurer fees, waiting periods, minimum essential coverage, and employer shared responsibility.

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What You Need to Know on the Implementation of the Affordable Care Act

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  1. What You Need to Know on the Implementation of theAffordable Care Act Presented to the WSAC Employee Health Care Benefit Forum June 5, 2013 DiMartino Associates

  2. The ACA: An Overview • PPACA Overview • Provider Issues/Implications for Employers • PCORI Fees • Transitional Reinsurance Program • Insurer Fees • 90 Day Waiting Periods • Minimum Essential Coverage • Employer Shared Responsibility • Exchange Model Notice • HRA Impact…short introduction

  3. The ACA: An Overview Objectives of the Legislation: • Lower the cost of healthcare for everyone. • Expand access to care for all. • Create mechanism for improving/measuring quality of care.

  4. Provider Issues Medicare/Medicaid: • Effective 1/2014 Medicaid eligibility will expand to those up to 133% of the FPL (Federal Poverty Level ) from 100%...could add 30M to Medicaid enrollment. • Medicare/Medicaid moving towards episodic based payments and less fee for service. • Whether it’s hospitals or physicians, reimbursements will be lower in the future. …so why is this important for employers?

  5. Provider Issues • Hospital Payor Mix (by admissions): • Medicare = 51% • Medicaid = 12% • Charity = 4% • Bad Debt = 5% • Private = 28%

  6. Provider Issues • Likely Trends: • Shrinking hospital margins will reduce plant reinvestment…less capital investment! • Physicians will continue to seek employment models with hospitals and larger entities. • Consolidation of hospitals/physician practices will continue. • Care options will likely reduce in rural areas. • …Potential cost transfer to private market!

  7. Provider Issues Implications for Employers: • Initially look for insurers to battle with providers over reimbursements. • Long run, expect different kinds of payment models to emerge including: shared risk contracting, less fee for service and more capitation. • Provider networks likely to become smaller and more efficient.

  8. PCORI Fees • PCORI Fees= Patient-Centered Outcome Research Fees • Effective: plan years ending after 9/30/2012. • Purpose: evaluate and compare outcomes and clinical effectiveness. • Imposed on insurers and self-funded groups. • Plans impacted: active plans, retiree plans, FSA and HRA plans (unless tied to a self-funded health plan). • Fee Structure: • PY Ending after 9/30/2012 = $1 per covered life • PY Ending after 9/30/2013 = $2 per covered life • PY Ending after 9/30/2014 thru 9/30/2019= TBD

  9. PCORI Fees • Who pays the fees? • Insurers will pay on behalf of their fully insured customers. • Self-funded plans will need to pay on the Federal Excise Tax Form 720. • When are they due? • Fees are due by the end of July in the year following the close of the Plan Year. • Plans years ending between 9/30/12 and 12/31/12 will file prior to 7/31/13 • Plan Years ending after 12/31/2012 will not file until 7/31/2014.

  10. Transitional Reinsurance Program • Fees imposed 2014, 2015 & 2016 will raise $25 billion to: • Fund adverse selection in the individual market • Repay Treasury for the Early Retiree Reinsurance Program (ERRP) from 2010 • All employers with group health plans are impacted. • Insurers will pay on behalf of their customers. • Self-funded may pay HHS directly or have their TPA do so on their behalf. • HHS estimated 2014 contribution = $63.00 “per life.” • Employee count based on 1st 9 months of calendar year.

  11. Insurer Fees • All Insurers will be subject to these fees beginning January 1, 2014. • The tax is permanent and will gradually increase over time. • It is intended to fund premium subsidies in the Exchange. • Self funded plans are exempt. • Insurers will be passing this tax on in renewal rates beginning in 2014. • 2014 = 2.0% to 2.25% • Subsequent years are tied to premium growth but tax will increase to as high as 3.0%.

  12. 90 Day Waiting Periods • This provision is effective for Plan Years beginning on or after 1/1/2014. • Impacts employers regardless of number of full time (30 hour/week) employees. • A new full time employee otherwise eligible for coverage cannot be subject to a waiting period for entering the plan longer than 90 days from date of hire. • From a practical perspective, employee waiting periods will not exceed the 1st of the month following 60 days from date of hire.

  13. Minimum Essential Coverage What does it mean for a County Employer? • MEC is the minimum level of benefits you can offer to avoid penalty under “Pay or Play” rules. • Must meet 60% minimum value test…a plan meets this criteria if it is expected that it will pay at least 60% of the total allowed costs of benefits. • Minimum value calculator is now available on the HHS website. • Employers need to be certain that they offer at least one plan that meets the 60% threshold to all eligible employees. Note: The plan must also meet the affordability definition under the Employer Shared Responsibility rules.

  14. Employer Shared Responsibility • Which Employers must comply and when: • Effective January 1, 2014 (transition rules for non-calendar year plans apply for 2014). • Employ 50 or more employees on a typical business day during the prior calendar year are considered a large employer for the next year. • Include all full-time employees for each month of the year. • For less than full time employees, add the total number of hours (not < than 120 hours/month) and divide by 120 • Add the Full-Time Plus FTE then divide by 12 • If > 50 then you are a large employer for the coming year. • Seasonal employees of more than 120 calendar days per year must also be included…more guidance to be issued.

  15. Employer Shared Responsibility • The Large Employer Shared Responsibility Rules (ESR): • Employers failing to offer a MEC plan to at least 95% of their eligible employees will be subject to a fine of $2,000/employee (disregarding the first 30 employees) if any eligible employee: • Enrolls in coverage on the Exchange and, • Qualifies for a premium tax credit. • Employers offering a MEC plan may still be subject to a $3,000 penalty for each employee who enrolls in the Exchange and receives a premium tax credit if: • The Plan is determined to be unaffordable (EE Only contribution exceeds 9.5% of household income but there is a Safe Harbor tied to 9.5% of wage). • Fails to offer minimum value (60% level of benefits).

  16. Employer Shared Responsibility • Variable Hour Employees “straddle” the 30/hour/week: • There is a complex system for determining if this type of employee is eligible for the Plan. • Standard Measurement Period: time frame to measure the hours worked (may be from 3-12 months). • Administrative Period:The period following the Standard Measurement Period (up to 90 days). • Stability Period: The period in which an employee’s status cannot change…typically the Plan Year. • If they work a 30 hour average during the Measurement Period then they are eligible for the Plan for the following Stability Period. • This is an annual exercise for employers (and employees!)

  17. Employer Shared Responsibility • Employer Strategies to Consider: • Be sure you offer at least one MEC plan that meets the 60% minimum value test. • Verify your plan will meet the affordability criteria. • Manage the use of seasonal employees to < 120 days. • Manage hours of variable hour employees to affect plan eligibility and budget objectives. • Engage with payroll vendors and other advisors to begin collecting data now!

  18. Exchange Model Notice Employers are required to notify employees of the availability of coverage through the Exchange: • Originally to be sent to employees before the end of March 2013, this was delayed until fall 2013. • Last month the DOL released Model Notice for Employers to use as well as instructions: • Must be distributed to ALL employees before October 1st. • New COBRA model election notice includes information on health coverage alternatives offered through the Exchanges. • New employees will need to be provided the notice within 14 days of date of hire.

  19. Accountable Care Act and Changes to HRA • The ACA places restrictions on how HRAs work: • The ACA prohibits health plans from imposing lifetime or annual limits. • As defined in the ACA, HRA falls under the definition of a health plan. • The Internal Revenue Code defines a HRA as a limited employer contribution health plan so it has limits. • …hence the conflict!

  20. Accountable Care Act and Changes to HRA • Implications for Employers and Employees: • No change for HRA plans that are fully integrated into a health plan. • This will also apply to HRAs that provide “retiree only” benefits. • Non-integrated (not tied to another health plan) HRAs will be subject to the provisions of the Law.

  21. In Conclusion • The ACA will have far-reaching impact on providers, insurers, employers and individuals. • Employers will see new taxes plus increased healthcare costs due to both benefit changes and fees imposed on insurers. • Staying in compliance will require additional time and attention to detail. • Begin the journey early… get your staff educated!

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