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Affordable Care Act (ACA) An Overview of Key Provisions

Affordable Care Act (ACA) An Overview of Key Provisions. Locey & Cahill, LLC Presentation to the: New York State Association of Management Advocates for School Labor Affairs, Inc. 37 th Annual Summer Conference Date: July 22, 2014 Location: High Peaks Resort, Lake Placid, NY.

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Affordable Care Act (ACA) An Overview of Key Provisions

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  1. Affordable Care Act (ACA)An Overview of Key Provisions Locey & Cahill, LLC Presentation to the: New York State Association of Management Advocates for School Labor Affairs, Inc. 37th Annual Summer Conference Date: July 22, 2014 Location: High Peaks Resort, Lake Placid, NY

  2. Affordable Care Act (ACA) Overview of Key Provisions and the Impact of the ACA on School Districts and BOCES

  3. ACA Key Mandated Benefits • Dependent Coverage to Age 26 • Natural Born Child / Adopted Child • Regardless of Marital Status • Regardless of Financial Dependency • Regardless of Residency • Can be Employed with Health Insurance • If Grandfathered, Provision Effective 2014 • Covered Lives Increased by 4% to 5% • Overall Paid Claims Increased by 1% to 2%

  4. ACA Key Mandated Benefits 2010 Changes (09-23-2010) • No Pre-Existing Conditions • Plan Appeal Processes • No Lifetime Limits on EHB • No Annual Limits on EHB (2014) • Preventive Care – No Cost Sharing • Women’s Preventive Health Services • Including Birth Control/Contraceptives (08/01/2012) • EHB = Essential Health Benefits

  5. ACA Key Mandated Benefits 2011 Changes • Minimum Medical Loss Ratios • Clinical Services/Quality Costs = > 85% of Premium • OTC Meds No Longer Eligible for FSA/HSA • 2012 Changes • Summary of Benefits and Coverage • Annual Fees on Pharmaceutical Industry • Patient-Centered Outcomes Research Trust Fund • $1.00/Life (2012/2013) $2.00/Life (2013/2014)

  6. ACA Key Mandated Benefits 2013 Changes • Medical Expense Deduction 7.5% to 10.0% • FSA Limits = $2,500 per year • Medicare Part A Tax Increase 1.45% to 2.35% • Individuals > $200,000 and Families >$250,000 • Medical Device Tax = 2.3% Excise Tax • W-2 Reporting of Aggregate Cost of Coverage • Small Employers are Exempt (<250 W-2’s)

  7. 2014 ACA Major Changes On January 1, 2014, several other key components of the Affordable Care Act were scheduled to be implemented, including the following: • The Individual Mandate to Purchase Health Insurance • The Implementation of State and Federal Health Insurance Exchanges • Premium and Cost Sharing Subsidies and Tax Credits • The Employer Requirement to Offer Health Insurance Coverage • Delayed Until January 1, 2015 for Employers of >100 Employees • Delayed Until January 1, 2016 for Employers of >50 Employees • The Allowing of Health Insurance Premium Rewards or Credits for Wellness Programs • The Imposition of Fees on the Health Insurance Sector • Patient Centered Outcomes Research Institute Fees • Transitional Reinsurance Program Fees • Health Insurance Sector Fees

  8. ACA Individual Mandate Deadline to Sign-Up March 31, 2014 Deadline extended for those who “started the process, but failed to complete it.” Penalties • 2014 • $95 Per Adult / $47.50 Per Child • Not to Exceed $285 Per Family or 1.0% of Family Income • 2015 • $325 Per Adult / $162.50 Per Child • Not to Exceed $975 Per Family or 2.0% of Family Income • 2016 • $695 Per Adult / $347.50 Per Child • Not to Exceed $2,085 Per Family or 2.5% of Family Income

  9. ACA Individual Mandate Does Not Apply If: • You are part of a religion opposed to acceptance of benefits from a health insurance policy • You are an undocumented immigrant • You are incarcerated • You are a member of an Indian Tribe • You family income is below threshold for filing a tax return • ($10,000 for an individual / $20,000 for a family in 2013) • You have to pay more than 8% of your income for health insurance, after taking into account any employer contributions or tax credits

  10. ACA Individual Mandate Does Not Apply If You are Covered by the Following: • Medicare • Medicaid or CHIP (Children’s Health Insurance Program) • Tricare (for service member, retirees, and their families) • The Veteran’s health program • An employer offered plan • Insurance you purchase on your own that > or = to a Bronze Plan • A grandfathered health plan in existence prior to ACA enactment

  11. ACA Insurance Marketplace Health Insurance Exchanges in New York State www.HealthBenefitExchange.ny.gov What is an Exchange? “An Exchange is an organized marketplace designed to help people shop for and enroll in health insurance coverage.   Individuals, families and small businesses will be able to use the Exchange to help them compare commercial insurance options, calculate costs and select coverage online, in person, over the phone or by mail.  The Exchange will also help people to check their eligibility for health care programs like Medicaid and sign up for these programs if they are eligible. The Exchange will also be able to tell what type of financial assistance is available to applicants to help them afford health insurance purchased through the Exchange.  Insurance coverage can be purchased through the Health Benefit Exchange beginning in October 2013 and will be effective January 1, 2014.” Source: New York Health Benefit Exchange web-site (www.HealthBenefitExchange.ny.gov)

  12. ACA Insurance Marketplace Metal Levels of Coverage: The Affordable Care Act contains language which defines the Actuarial Value (AV) of a health insurance plan’s coverage based on the percent of health care expenses covered by the plan for a typical population. Health insurance plans will be placed into four categories based on their Actuarial Value (AV): • Platinum Plan Models Actuarial Value (AV) = to 90% • Gold Plan Models Actuarial Value (AV) = to 80% • Silver Plan Models Actuarial Value (AV) = to 70% • Bronze Plan Models Actuarial Value (AV) = to 60%

  13. ACA Insurance Marketplace • What Would a Bronze Plan Look Like? • Deductible = $3,000 per individual / $6,000 per family • Coinsurance Amount = 50% of allowed or approved amount • Rx Plan = 3-Tier Rx Formulary Plan ($10/$35/$70) • Out-of-Pocket Maximum = $6,350 per individual / $12,700 per family • Preventive Care = No Member Cost • Adult Routine Exams/Physicals (including immunizations) • Well Child Care (including immunizations) • Women’s Preventive Health (including birth control) • Essential Health Benefits = Deductible and Co-Insurance or Co-Payment

  14. ACA Insurance Subsidies Kaiser Family Foundation Subsidy Calculator www.Kff.org/interactive/subsidy-calculator/ • Family Income = $50,000 (2014 dollars) • No Employer Coverage • Two Adults (ages 39 and 40) / Two Children • All Members are Non-Smokers • Household Income = 318% Poverty Level in 2013 • 2013 Unsubsidized Premium = $11,499 (Silver Plan Level) • Maximum % of Income for Premium = 9.5% • Premium Member Pays = $7,125 • Federal Tax Credit Subsidy = $4,374 * This is for illustrative purposes only based on a number of assumptions.

  15. ACA Insurance Subsidies

  16. ACA Employer Mandate • Step 1: What Employers are Affected: • All Employers who have at least 50 full-time equivalent employees are subject to this mandate. This includes employers with a combination of full-time and part-time employees who equal 50 full-time employee equivalents. • Full-Time Employees are defined as working 30 hours per week for 120 days on average during a year. There is a “look back” period allowed of not less than 3 months and not more than 12 months as a “measurement period.” • If you have part-time employees, you have to divide your total monthly part-time hours by 120 to determine the full-time employee equivalent of this segment of your population. • If you have less than 50 full-time equivalent employees you are exempt from this mandate.

  17. ACA Employer Mandate Step 1 (continued) – Sample Calculation: Full-Time Employees: 40 + Full-Time Equivalent Employees: 16 ((20 Part-Time Employees x 96 (24 x 4) Hours) ÷ 120) = 16 = Total Full-Time Equivalent Employees 56 Assumptions: Employer has 40 Full-Time Employees Employer has 20 Part-Time Employees who average 24 hours per week

  18. ACA Employer Mandate • Step 2: Do You Offer Coverage to 95% of Your Full-Time Employees (avg. 30 hours of service per week) which is considered affordable and which is considered to provide a minimum level of coverage? • If Yes, Mandate Applies and the Process Continues. • If No, Employer may be Subject to Penalties as Follows: • If you have at least one employee receive a premium tax credit or cost sharing subsidy in an Exchange you must pay the penalty. • Penalty = $2,000 per year times the number of full-time employees minus 30 and this penalty increases each year after 2014 by the growth in health insurance premiums. • For 2015, Threshold Reduced to 70% of Full-Time Employees as a result of IRS Final Regulations Issued on February 10, 2014.

  19. ACA Employer Mandate • Step 3: Do You Offer Coverage = or > the Minimum Value? • Minimum Value of Coverage = Bronze Plan or Better • A Bronze Plan has an Actuarial Value of 60% as Defined by the ACA • If Yes, Mandate Applies and the Process Continues. • If No, Employer may be Subject to Penalties as Follows: • Employees may purchase coverage in a Health Insurance Exchange and receive a premium tax credit. To receive a premium tax credit family income must be less than 400% of the Federal Poverty Level. • Penalty = $3,000 annually for each full-time employee receiving a premium tax credit up to $2,000 per year times the number of full-time employees minus 30 and this penalty increases each year after 2014 by the growth in health insurance premiums.

  20. ACA Employer Mandate • Step 4: Do you Offer Employees Affordable Coverage? (Do any Employees Pay >9.5% of their W-2 Wages for Your Coverage?: • If No, Employer Meets Standard = No Penalties. • If Yes, Employer may be Subject to Penalties as Follows: • Employees may purchase coverage in a Health Insurance Exchange and receive a premium tax credit. To receive a premium tax credit family income must be less than 400% of the Federal Poverty Level. • Penalty = $3,000 annually for each full-time employee receiving a premium tax credit up to $2,000 per year times the number of full-time employees minus 30 and this penalty increases each year after 2014 by the growth in health insurance premiums.

  21. ACA Employer Mandate • Preparation Steps: • Determine the Actuarial Value of the Health Insurance Plan(s) • Identify any full-time employees whose premium contribution for an individual plan is >9.5% of their Salary. • Sample Calculation: • Premium Contribution ÷ 0.095 = Salary Threshold • Individual Plan Monthly Premium = $600 • Employee Contribution = 20% • Employee Annual Contribution = $1,440 • $1,440 ÷ 0.095 = $15,157.89 (Salary Threshold)

  22. ACA Employer Mandate • Identify Part-Time Variable Hour Employees Who May Work More Than 30 Hours on Average • Reduce or Eliminate Variable Hour Positions Where Possible • Eliminate Dual Part-Time Positions • Establish a Time Tracking System for Variable Hour Employees and Positions • Define Hours for Stipend Positions • Cap the Number of Days a Substitute Teacher Works

  23. ACA Employer Mandate • Identify any full-time employees who are not offered health insurance coverage, such as: • Adjunct Professors/Teachers • Athletic Team Coaches • Band Instructors • Bus Drivers for Extra Curricular Activities • Club Advisors/Teachers • Drama Teachers/Instructors • Substitute Employees/Teachers

  24. ACA Employer Mandate • Establish a District/BOCES policy limiting the number of days a substitute employee/teacher may work each year. • Recommendation = No More Than 100 Days. • Establish a District/BOCES policy for each extra curricular activity paid position which specifically lists the number of hours for each position. This policy should also note that any hours worked above the stipulated number of hours will be considered volunteer hours. • Example – High School Football Coach works 14 weeks which includes 2 hours of practice per day 5 days per week, plus 5 hours per game, and pre-season camp of 6 hours per day for 10 days. Total hours worked will equal 240 hours for the 14 week season.

  25. ACA Employer Mandate Measurement Options : • Monthly Measurement Method: With the Monthly Measurement Method, an employer would have to determine each employee’s hours of service each month. • Look-Back Measurement Method: The Look-Back Measurement Method requires an employer to determine the employee’s status as a “full-time” employee by calculating service hours in a prior period (measurement period). Said coverage would be effective during a future period (stability period).

  26. ACA Employer Mandate Identifying Full-Time Employees: On-Going Employees: • Did the employee work on average 30 hours per week during the “Standard” Measurement or Look-Back Period? If yes, coverage has to be provided during the Stability Period. • “Standard” Measurement or Look-Back Period – a 3 to 12-month period of time where an employer determines who is a “full-time” employee. • Do I have to pass a Board Resolution Defining my Measurement Period? No, we have seen several legal opinions that state that you do not need your Board of Education to pass a resolution defining your Measurement Period. That being said, we recommend setting a consistent Measurement Period for all employees.

  27. ACA Employer Mandate Identifying Full-Time Employees: New Employees: • Is the new employee reasonably expected to work an average of 30 or more hours per week during their first 12-months of employment? • If yes, they must be treated as a “full-time” employee. • If no, the employer may not have to offer the new employee coverage. However, if it is determined during the “Standard” or “Look-Back” Measurement Period they must be offered coverage during the Stability Period.

  28. ACA Employer Mandate Identifying Full-Time Employees: Seasonal or Variable Hour Employees: • Did the employee work on average 30 hours per week during the “Standard” Measurement or Look-Back Period? • If yes, coverage has to be provided during the Stability Period. • If no, the employer is not obligated to offer the employee health insurance coverage.

  29. ACA Employer Mandate Sample School District/BOCES Model: Measurement Period: 07/01/2013 to 06/30/2014 Administrative Period: 07/01/2014 to 08/31/2014 Stability Period: 09/01/2014 to 08/31/2015

  30. ACA Employer Mandate IRS Q&A – May 13, 2014 Q1. What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

  31. ACA Employer Mandate Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

  32. ACA Employer Mandate IRS Reporting Requirements: IRS recently issued final regulations regarding the reporting requirements associated with the Affordable Care Act. Compliance with the reporting requirements of Sections 6055 and 6056 of the Internal Revenue Service (IRS) Code. Reporting will be provided on a combined form 1094-C and 1095-C Reporting for the 2015 Calendar Year by January 31, 2016

  33. ACA Employer Mandate IRS Combined Form 1094-C and 1095-C: • Top Part of Form – 1094-C • This part of the form deals with information related to IRS Code Section 6056. This provision requires all employers to furnish the IRS with information pertaining to the coverage offered to their employees. • Bottom Part of Form – 1095-C • This part of the form deals with information related to IRS Code Section 6055. This provision requires self-insured applicable large employers to provide information regarding the coverage offered to their employees.

  34. ACA Employer Mandate Who Needs to Report: • Fully-Insured Plans Complete Top Part of Form – 1094-C • This would include those employers contracting with an insurance company via a minimum premium contract, experience-rated contract, or a community-rated contract. • Self-Insured Plans Complete Both Part of Form – 1095-B and C • Insurers and Other Providers, such as Self-Insured Multiple-Employer Plans and Providers of Government Sponsored Coverage will Report Only Under IRC Section 6055 Using a Separate Form.

  35. ACA Wellness Programs • Participatory Wellness Programs • A Wellness Program that either does not require an individual to meet a standard related to a health factor in order to obtain a reward or that does not offer a reward at all. • Health-Contingent Wellness Programs • These types of Wellness Programs require an individual to attain or maintain a certain health outcome in order to obtain a reward (such as not smoking, attaining certain results on biometric screenings, or meeting targets for exercise).

  36. ACA Wellness Programs • Health-Contingent Wellness Program Requirements: • The total reward for such wellness programs offered by a plan sponsor does not exceed 30%* of the total cost of coverage under the plan. • The program is reasonably designed to promote health or prevent disease. For this purpose, it must have a reasonable chance of improving health or preventing disease, not be overly burdensome, not be a subterfuge for discriminating based on a health factor, and not be highly suspect in method. • The program gives eligible individuals an opportunity to qualify for the reward at least once per year. • The reward is available to all similarly situated individuals. For this purpose, a reasonable alternative standard (or waiver of the otherwise applicable standard) must be made available to any individual for whom it is unreasonably difficult due to a medical condition to satisfy the otherwise applicable standard during that period (or for whom it is medically inadvisable to attempt to satisfy the otherwise applicable standard). • In all plan materials describing the terms of the program, the availability of a reasonable alternative standard (or the possibility of waiver of the otherwise applicable standard) is disclosed. *Reward could be as much as 50% if determined to be appropriate to reduce tobacco use.

  37. ACA Taxes and Fees Patient Centered Outcomes Research Trust Fund Fees: This provision of the Affordable Care Act requires all health insurance plans, including self-insured plans, to pay a fee to the Federal Government to fund the development of a not-for-profit organization which will do research to evaluate and compare the health outcomes and the clinical effectiveness, risks and benefits of certain medical treatments, services, procedures, drugs and other techniques that will help treat, manage, diagnose, or prevent illness or injury.   These research fees start with the plan or policy years ending on or after September 30, 2012, and ends with plan years or policy years ending before October 1, 2019.  The fee for the 2012/2013 Fiscal Year of our School Consortium, School District, and/or BOCES Clients is $1.00 per covered life for the year.  Said fee must be paid by July 31, 2014 as a one time payment utilizing the IRS Form 720.  This fee increases to $2.00 per covered life for the 2013/2014 Fiscal Year and then will increase by an inflationary factor yet to be determined for future years. 

  38. ACA Taxes and Fees Transitional Reinsurance Program Fees: The Affordable Care Act creates a temporary (2014 to 2016) reinsurance program which will require the Federal Government to collect payments from health insurers to provide payments to plans, both inside and outside the Health Insurance Exchanges that incur high claim costs from enrollees.  This program was established by the Affordable Care Act to help the Health Insurance Exchanges and insurance carriers keep premiums affordable.  The assumption is that covered members of these plans will present a greater risk of claims cost as it is believed that many have not been receiving regular medical care. The result is a patient pool with a greater likelihood to have chronic and catastrophic medical conditions.  Based on current estimates, these fees will equal approximately $5.25 per covered life per month ($63.00 per year).

  39. ACA Taxes and Fees Health Insurance Sector Fees (Premium Taxes) Beginning in 2014, the Affordable Care Act imposes annual fees on the health insurance sector which will be based on each health insurance company’s share of the total market, adjusted for size and corporate structure.  This fee which applies to all insured health insurance plans will be one of the major funding sources for the Affordable Care Act.  The current estimate on the effect of these fees on Excellus BCBS insured plans, according to Excellus’ Finance Department, is approximately 2.50% of paid claims beginning in 2014. Estimated Total Impact of ACA Taxes and Fees: 3.0% to 4.0% Increase in Premiums

  40. Future Planning and Strategies Stagnate Plan Designs Escalating Costs Diminishing Cost Sharing One Possible Solution ACA Cadillac Tax

  41. Biggest Misconception My Health Insurance hasn’t changed in twenty years. • For Most School Districts and BOCES, other than Rx Co-Pays, this statement is false as Health Insurance is ever-evolving and improving in favor of the member: • New Medical Procedures • New Pharmaceuticals • Mandated Benefits (Federal and State) • Affordable Care Act • The fact is Health Insurance has changed dramatically in the past twenty years. Even if a Member’s deductible, co-payment, or out-of-pocket maximum has not.

  42. Historical Negotiating Issues • Health Insurance Evolves Over Time • 3 to 5 Years Between Contracts • Health Insurance Trends Outpace Cost-Sharing Changes • Lack of Focus on True Cost Distribution • Plans are Negotiated Line Item by Line Item • Proposed Changes Become Personal and Emotional • Modest Premium Changes = “Major” Benefit Changes • $50 Deductible to $100 Deductible = 0.5% of Premium Rate • $10 Co-Pay to $20 Co-Pay = 2% of Premium Rate • $5 Rx Brand Co-Pay Change = 3% of Premium Rate

  43. Possible Future Solution The Affordable Care Act may Provide a Solution • Guarantee a Level of Coverage (e.g. Platinum Plan): The Affordable Care Act contains language which defines the Actuarial Value (AV) of a health insurance plan’s coverage based on the percent of health care expenses covered by the plan for a typical population. Health insurance plans are placed into four categories based on their Actuarial Value (AV): • Platinum Plan Models Actuarial Value (AV) = to 90% • Gold Plan Models Actuarial Value (AV) = to 80% • Silver Plan Models Actuarial Value (AV) = to 70% • Bronze Plan Models Actuarial Value (AV) = to 60%

  44. Possible Negotiating Strategy School District or BOCES Health Insurance: • Plan Must be Equal to or Better than Platinum Plan • Employers Can Make Modest Annual Changes to Plan • Changes Limited to Open Enrollment Period Each Year • Open Enrollment Period Consistent with FSA Elections • Mandatory 30 or 60 Day Notice to Employees

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