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The Affordable Care Act and Health Benefits: What Y ou N eed to Know

The Affordable Care Act and Health Benefits: What Y ou N eed to Know. AFSCME International Convention, Chicago, IL July 15, 2014 Mary Meeker and Sally Tyler AFSCME Research Department. Agenda. Review ACA goals ACA market reform provisions enacted and upcoming

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The Affordable Care Act and Health Benefits: What Y ou N eed to Know

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  1. The Affordable Care Act and Health Benefits:What You Need to Know AFSCME International Convention, Chicago, IL July 15, 2014 Mary Meeker and Sally Tyler AFSCME Research Department

  2. Agenda • Review ACA goals • ACA market reform provisions enacted and upcoming • Impact on Employee Benefit Plans and Bargaining • Wellness programs • “Pay or Play” - employer 4980H penalties • New fees/taxes on plans • Medicaid Expansion and Marketplaces • Q & A

  3. (Mis)Information? • Misrepresentation • Half-Truth • Dishonesty • Deception • Distortion • Confusion

  4. Implementation:ACA Goals/Objectives • Expand Coverage: Create Exchanges and Expand Medicaid • Control Costs: Insurance Market Reforms • Improve Quality: Delivery System/Payment Reforms

  5. Market Reforms already implemented • Young adult coverage • No lifetime limits • No annual dollar limits on EHB • No pre-existing condition limits • Preventive care with no cost-sharing * • MLR requirements for fully-insured plans

  6. Market Reforms already implemented (continued) • Patient protections * • Increased penalty for “nonqualified” HSA distributions • FSA/HRA/HSA can only reimburse prescribed OTC drugs • FSA contributions capped at $2500 • No waiting periods over 90 days

  7. Market Reforms already implemented (continued) • EHB package * • “Marketplaces” • Medicaid Expansion • Max out-of-pocket ($6350/$12700) – all non-grandfathered plans • “Health-contingent” wellness program incentive increases to 30% of premium

  8. Upcoming Provisions • Employer Shared Responsibility Payments - 2015 • “Marketplaces” may open to large employers-2017 • Excise tax - 2018

  9. Grandfathering • A “grandfathered” plan is a plan in existence on March 23, 2010 • Grandfathered plans are exempt from some of the mandates - but not all • Plans lose grandfathered status if they make significant changes • Grandfathered status is determined separately for each plan option

  10. Losing Grandfathered Status • Elimination of all or substantially all benefits to diagnose or treat a particular condition; • Any increase in a percentage cost-sharing requirement (coinsurance); • Any increase in fixed-dollar cost-sharing (e.g. deductibles, out-of-pocket expenses – not copayments) in excess of the rate of medical inflation since March 23, 2010, plus 15%;

  11. Losing Grandfathered Status • Any increase in copayments in excess of the greater of a) the rate of medical inflation, plus 15%, or b) $5.00, increased by medical inflation; • Any decrease in the employer contribution towards the cost of any tier of coverage by more than 5% of the contribution rate in effect on March 23, 2010 (measured for each coverage tier).

  12. What it Means to be Grandfathered Applies to GF plans: • Eliminate lifetime & annual limits • Cover adult children to age 26 • Provide rebates if the medical loss ratio requirements not met, for fully-insured plans only Does not apply to GF plans • Cover preventative care for with no cost-sharing • Eliminate prior authorization or higher cost sharing for non-network ER care • Cap on out-of-pocket costs • Expanded appeals process • Essential Health Benefits

  13. ACA & Employee Wellness Programs • “Participatory” programs – majority of existing programs – not required to satisfy requirements set out in the ACA regulations. • “Health-contingent” programs must satisfy the five conditions set out in the ACA regulations

  14. ACA & Employee Wellness Programs • Participatory Programs (no incentive or incentive not based on a health factor) • Reimbursing gym membership • Filing out HRA • No cost education seminars or “lunch and learns” • Health Contingent Programs (incentive based on health factor) • Activity-only: walking programs, diet or exercise programs • Outcome-based: tobacco surcharge, biometric screening with certain levels required to earn incentive (BMI or cholesterol levels) or requirement for further action if over certain levels

  15. ACA & Employee Wellness Programs (continued) 5 requirements for “health-contingent” programs: • Qualify once per year • Maximum reward of 30% (50% for tobacco related) • Reasonably designed to promote health or prevent disease • Available to all with a reasonable alternative • Disclose the availability of alternative

  16. “Shared Responsibility” for Coverage

  17. Individual MandateCoverage Requirements and Exemptions • Coverage • Employer sponsored coverage • Exchange coverage • Medicaid, Medicare, CHIP, Tricare • Exemptions • Religious objections • Incarcerated • Indian tribes • Undocumented resident • Coverage costs more than 8% of income

  18. Is Employer a “Large” Employer? • Applicable large employer (ALE) has at least 50 full-time employees (including FTEs) during preceding calendar year • Full-time employee: 30hrs/week or 130 hrs/month • FTE calculation includes hours of part-timers and seasonal workers • Controlled Group Employers (IRC § 414) • Hours are aggregated for all “members” to determine ALE status – but 4980H penalties determined member by member • Seasonal Worker Exception • If employer exceeded 50 employees on only 120 or fewer days, and seasonal workers were the only reason, then not an ALE

  19. Employer Shared Responsibility“play or pay” • Applies to employers with 100+ FTEs in 2015 **50+ FTEs in 2016 and thereafter • Penalty (a) no coverage offered to at least 70% FT empls/dependents (95% in 2016) • Penalty amount = $2000 times number of full-time employees (excluding first 80, decreasing to 30 in 2016) • Penalty (b) unaffordable or inadequate coverage offered • Penalty amount = $3000 per full-time employee receiving subsidized coverage • Both penalties are triggered by employee getting subsidized coverage

  20. Additional 1 year delay… • Employers with 50-99 FT employees not subject to penalty in 2015 if: • Employ 50 – 99 FT employees on business days during 2014; and • Do not reduce the size of workforce or overall hours of service for employees between 2/9/14 and 12/31/14; and • Do not eliminate or materially reduce the health coverage offered as of 2/9/14

  21. Employer “Play or Pay” 2015 • Does Employer have 100 FTEs? • Employer is not subject to penalties. No No No No • Yes • Is min essential coverage offered to at least 70% full-time employees/dependents? • Subject to penalty (a) if one full-time emp gets subsidized coverage on exchange • Yes • Does plan pay for at least 60% of cost of covered benefits? (Adequate) • Subject to penalty (b) if employee gets subsidized coverage on exchange • Yes • Is employee contribution for single coverage no more than 9.5% of income? (Affordable) • Yes • Employer does not owe penalty

  22. To Cover or Not to Cover… • Not covered by “employer mandate:” • Spouses • Pre-65 retirees • Part-timers (under 30 hrs/wk) • Consider options and consequences

  23. Full-Time Employee • Works on average at least 30 hrs/week (130 hrs/mo) • Includes all paid hours – regardless of whether actual work is performed • Optional “safe harbors” for employers to use when they can’t reasonably determine full-time status • Measurement period – (3-12 months) • Stability period – (greater of 6 months or length of measurement period)

  24. Employer Assistance and “Marketplace” plans • Employers not permitted to offer tax favored arrangements to purchase individual market coverage • HRA may be used for actives if “integrated” with another group health plan • Employer cannot meet “responsibility” by paying premiums on Exchange plans.

  25. Excise Tax – 2018 • 40% tax on costs (“excess benefit”) of employer-sponsored health coverage above: $10,200 single and $27,500 family* • Threshold amounts include employer and employee: • Health plan premium contributions • Contributions to FSAs, HRAs HSAs and MSAs • Dental and vision excluded if covered separately

  26. Excise Tax - 2018 • Thresholds adjusted for pre-Medicare retirees and plans with majority of employees in “high risk” jobs • $11,850/single and $30,950/family • Adjustments for demographic composition of pool • Details concerning these adjustments unknown • Indexed for inflation • CPI + 1% 2019 • CPI 2020 and beyond

  27. Excise Tax – 2018 Fully-insured plans • Health insurance company liable for tax Self-insured plans • Plan sponsor/benefit administrator (employer) liable *No provisions preventing insurers/employers from passing cost on to employees

  28. Act Now or Later? No implementing regulations for excise tax yet – need clarity and still unknowns Determination of cost Rules “similar” to COBRA rate calculation Employee HSA contributions included? Determining exactly which coverage needs to be accounted for – wellness plans? Which ones? “Separate” dental/vision coverage – self-fundedor just insured? Possible changes or delays?

  29. Solutions or Strategies? Possible options to consider (but still uncertainties…) • High performance networks or centers of excellence • Wellness programs/VBID that target chronic conditions • Carve out dental and vision if not separate • Auditing claims for waste, errors (or dependent audit) • Evaluate new financial terms and performance standards with vendors • HDHPs with shift of some compensation into wages or elsewhere • Explore parsing of covered employees (active, retired, high risk) for impact on tax • ACOs down the road when tested

  30. Other Fees/Taxes on Plans • Comparative Effectiveness Research Fee or PCORI (thru 2019) • Transitional Reinsurance Fee (thru 2016) • Health Insurance Provider Fee

  31. PCORI Fees • All plans (insured and self-insured) must pay a fee to fund comparative effectiveness research • Paid by July 31 of calendar year following end of plan year • 1st year (plans ending after 9/30/2012): $1 per average number of covered lives • 2nd year (plans after 9/30/13): $2 per covered life • 3rd year thru 2019: amount adjusted by inflation • Sunsets in 2019

  32. Transitional Reinsurance Fee • Used to stabilize the individual insurance market • Both insured and self-insured* plans must pay fee • Temporary fee – 2014 thru 2016 • 1st year: $5.25/mo per covered life or $63/year per person (total of $12 billion collected in first year) • 2nd year: $3.67/mo per covered life or $44/year per person ($8 billion total) • 3rd year: TBD ($5 billion total) • Fees apply to “major medical coverage”

  33. Health Insurance Provider Fee/Tax • Annual, permanent tax on insurers beginning 2014 • Amount paid by each insurer is based on market share • $8 billion total in 2014, increasing to $14.3 billion in 2018 then indexed • Likely reflected in premium rates • Estimated premium impact: 2 - 3%

  34. Issues to Look Out For • Attempts to outsource work to get head count down • Reducing hours worked to cut down on number of FT • Increased OT instead of hiring new employees • Attempts to drop spousal coverage or add surcharge • Decreasing employer contribution toward other than single coverage • Downgrading coverage to “bronze” level or offering “skinny” plan to avoid larger penalty (a) • Move to defined contribution approach and “private” exchange

  35. How Does the ACA Expand Health Insurance Coverage? • CBO estimates decrease in uninsured by 26 million by 2017 – reducing rate by half. • 56% of uninsured eligible for financial assistance. • 39% eligible for Medicaid/CHIP. • 27% eligible for tax credits in marketplace. • 10% in coverage gap.

  36. Exchanges or “Marketplaces” • Individuals and small group in 2014 • State option to open to large employers in 2017 • Plans grouped by “metal tier” – Platinum (90%), Gold (80%), Silver (70%), Bronze (60%) • Income based premium subsidies available on a sliding scale for those with incomes up to 400% FPL

  37. More Information • www.afscme.org/healthcare • www.healthcare.gov(24/7 toll free 1-800-318-2596) • www.dol.gov/ebsa/healthreform • www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions-Home

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