Health Care Reform, How will it Impact your Business

1. Health Care Reform, How will it Impact your Business Business Education Series Training Arvada City Hall August 2013 by Ellen E. Stewart, MSHA, JD, FHFMA Berenbaum Weinshienk, PC estewart@bw-legal.com

2. Outline • Where we are now • Benefits – Required Changes • Penalties • Accountable Care Organizations • Rebate Calculations • Grandfathering of plans • New ERISA requirements • Next steps in 2014 and Beyond • Health Benefit Exchange in Colorado

3. ACA • First plan year on or after 9/23/10: • Age 26 Coverage – Up to age 26, or end of year in which turn 26, regardless of “tax dependency” or marriage. • Grandfathered plans may exclude dependents who have other employer-sponsored coverage. • No retroactive rescissions, unless intentional fraud or misrepresentation. Affects dependent audits and COBRA. • Prohibition on lifetime limits on essential benefits. • Only restricted annual limits on essential benefits permissible until 2014. • 2011: $750,000 • 2012: $1,250,000 • 2013: $2,000,000 • No pre-existing condition exclusions for kids under 19.

4. ACA • First plan year on or after 9/23/10 • Coverage of preventive health services and immunizations without cost sharing. • If emergency services provided, no pre-authorization for emergency care and must have same cost sharing in- and out-of-network. • Ability to choose own primary care provider, OB/GYN, and pediatrician. • One year grace period for compliance with internal appeals and external reviews processes.

5. ACA 2011 Changes • Non-Discrimination Rules for Insured Plans – affects executive / management–only plans. May affect post-employment executive agreements. • Value of health coverage reported on W-2s, but not taxed. • No longer permissible to reimburse OTC drugs without a prescription, excluding insulin, from an Flexible Spending Accounts, Health Spending Account, or Health Reimbursement Account. • Eligible small businesses and non-profits may claim a health care tax credit on their 2010 business taxes.

6. ACA – Changes in 2012 & 2013 • As of 1/1/12, 1099s must be issued for certain payments made to another person in the course of the payer’s trade or business that constitute fixed or determinable income aggregating $600 or more in any tax year. • As of 1/1/13, $2,500 cap (indexed) on contributions to FSAs offered under a cafeteria plan.

7. ACA – Changes in 2014 • Individuals required to maintain “minimum essential coverage” for self and dependents, or pay penalty. • Play or Pay Penalties: “Applicable large employers” must pay penalty if a full-time employee receives certain subsidized coverage through exchange. (more than 50 FTE’s – excluding seasonal employees who work less than 120 days during the year and FTE must work 30 hours per week) • Type of coverage that triggers penalty depends on whether employer offered coverage. POSTPONED

8. Penalities • Large Employer Penalty (not offering coverage) POSTPONED • Penalty is if any employee receives a premium credit toward their exchange plan • A monthly penalty in 2014 • Formula: • Number of FTEs – 30 x 1/12 of $2,000 (2014) • After 2014 indexed by the premium adjustment percentage for the full year • Large Employer Penalty (offering coverage) POSTPONED • Penalty if amount of employee contribution for the coverage exceeds 9.5% of the employee’s household income or if the plan pays for less than 60% of covered expenses. • Small employers are not affected BUT can receive a tax credit if meet certain requirements (see HBE discussion below)

9. Health Care Structures Under Health Care Reform (cont.) • Accountable Care Organizations (ACO) – are a new form of entity outlined under the Affordable Care Act (ACA). ACO’s may be assuming financial risk for the care of patients under global fees/capitation/case rates. Originally designed for Medicare recipients may be expanded to include commercial payers. • Colorado has a Pioneer ACO, Physician Health Partners

10. Rebate Calculations • Rebate calculations based on medical loss ratio (MLR) • MLR = incurred claims plus expenses to improve quality* • (adjusted for blended rate calculation) • earned premium less taxes and fees So, if plan • MLR = claims $10,000,000 • premiums (net) $12,000,000 • *quality expenses include: evidence-based medicine, clinical guidelines/protocols (but not designed primarily to control cost), can also include IT expenses to enhance quality

11. Rebate Calculations Credibility adjusted MLR • Credibility adjustment means an adjustment to account for random fluctuations in claims for smaller plans • Minimum loss ration standards are calculated each year by type of plan – individual, small group, large group (under Public Health Service Act)

12. Rebate Calculations Calculation of Rebate = Minimum MLR 80% CA – MLA 83% No rebate = <%> But if minimum Minimum MLR 85% CA – MLA 83% = 2% then multiply by earned premium ($12,000,000) = rebate Rebate would be = $240,000 Rebates must be paid as either a premium credit against future premiums or by a check

13. ERISA • Substantive benefit changes apply to group health plans and issuers offering individual and group policies - does not apply to: stand-alone dental and vision plans retiree-only plans • Different substantive benefit changes apply to grandfathered and non-grandfathered plans

14. Grandfathering • Grandfathered Status – Automatically if in effect on March 23, 2010. • Status applies to each individual group, not product being sold. • Originally appeared desirable to remain grandfathered. Upon issuance of regulations, not a large impact if lost.

15. Grandfathering • Loss of Grandfathering Possible if: • Enter into new insurance policy, even if previously offered by insurance company. • Elimination of all benefits to diagnose/treat a condition. • Certain increases in co-insurance, deductibles, out-of-pocket limits, or copayments. • Lowering current annual limit or instituting new annual or lifetime limit. • Certain decreases in plan sponsor’s contribution towards cost of coverage. • Merger, acquisition, restructuring if principal purpose is to cover new individuals under grandfathered plan.

16. Grandfathering • No Effect on Grandfathering • Stop covering all individuals covered on 3/23/10, provided have continuously covered at least 1 person since 3/23/10. • Enroll family members of individuals covered prior to 3/23/10. • Change premiums. • Legal compliance. • Change TPAs. • Certain Transitional Rules Available

17. ERISA • This means now ERISA plans must: - include as denials, reductions, terminations or failure to provide a payment for a benefit. - urgent claims must be decided in 24 hours. - claimants must be given a “full and fair” review. • Claimants can review claim file with all information relevant to the claim • Must be able to present evidence and testimony • Plan must give claimant new or additional evidence considered. • no conflict of interest (i.e., paying adjustors based on number of denials) • culturally and linguistically appropriate notices • requires strict adherence to claims procedures • mandates continued coverage while waiting for an appeal • must adopt either a state external review process or the federal external review process

18. ERISA State Process:Each state must have a process for independent external review of denied claims (only 5 states do not have a process currently) Federal Process: • Allow claimant to file request for review up to 4 months after receipt of adverse benefit determination • Plan must complete a preliminary review of the claim in 5 days • 1 day after completing review, plan must issue a written notice to claimant • Plan must assign an accredited IRO (independent review organization) to review the claim. Plans must contract with 3 IRO’s and rotate claims among them (IOR’s must be accredited by a URAC (formerly Utilization Review Accreditation Commission, a non-profit organization), accredited reviewer

19. Patient Protection and Affordable Care Act (PPACA) (cont.) Federal Process (cont.): • IRO must review claim de novo and decide in 24 or 72 hours • If IRO reverses decision of plan, plan must provide immediate coverage. No financial incentives to IRO for denying claims. Failure to follow process subjects plans to tax of $100 per day of non-compliance. TPA’s must comply with these rules.

20. Health Benefit (Insurance) Exchanges (HBE) – Colorado is Connect for Colorado • January 1, 2014 states required to establish exchanges to facilitate the purchase of qualified health plans in the individual and small group markets • Can be governmental or non profit • If a state fails to set up an exchange then the federal government will operate the exchange for the state • Federal dollars are available to help establish exchanges

21. HBE • There can be more than one exchange in each state • Each HBE must however serve a region but the regions can cross state lines • The HBE’s are designed to facilitate enrollment in health insurance plans as well as Medicaid, CHIP and other health plans. Employees may be eligible for a subsidy on a sliding scale from 138 to 400% of the Federal Poverty level. • HBE’s must conduct public education about the products, enrollment and also operate a grievance mechanism

22. Connect for Colorado • Will be ready October 1st • Plans anticipated to be available: Anthem, Cigna, Colorado Choice, Colorado Health OP, Denver Health, Humana, Kaiser Permanente, New Health Ventures, Rocky Mountain Health Plans, and a division of United. • Check the CFC website at www.connectforhealthco.com

23. Plan Analysis - Colorado Consumer Health Initative (CCHI) • Denver Individual Plans 27 year old: $207 to $373 per month 40-year old: $253 to $454 per month Denver Family Plan (2 parents age 40, children under 18) $756 to $1,360 per month • Durango Individual Plans 27-year old: $207 to $504 per month 40-year old: $253 to $615 per month Durango Family Plan (2 parents age 40, children under 18) * $756 to $1,840 per month

24. Plan Analysis • Fort Collins Individual Plans • 27-year old: $197 to $406 per month • 40-year old: $240 to $495 per month • Fort Collins Family Plan (2 parents age 40, children under 18) $718 to $1,481 per month

25. Colorado HBE • Information for businesses includes: a calculator for the small employer tax credit (fewer than 25 employees who earn an average less than $50,000 per year) FAQ’s including sample letters Effects on COBRA And more

26. Connect for Colorado • Connect for Colorado has information for individuals including the following: • A calculator to determine the amount of the subsidy you may be entitled to receive • FAQs about: • Cover Colorado (now Get Us Covered) and the transition on 2014 to the marketplace • Navigators or Health Coverage Guides

27. QUESTIONS ?