HEALTH CARE REFORM. Considerations for the Business Manager. Che Yi, American Fidelity Administrative Services

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1 HEALTH CARE REFORM Considerations for the Business Manager Che Yi, American Fidelity Administrative Services This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance. Some products and services may be provided by third party contractors or affiliated companies. American Fidelity Administrative Services does not provide tax or legal advice.

2 OBJECTIVES Review the different stages of Health Care Reform preparation Assess and organize key activity Identify emerging issues Develop an action plan HCR ROADMAP Plan sponsorship provisions Administrative requirements Risk management (Free Rider Penalty) Budgeting Resource allocation Business planning

3 FREE RIDER PENALTY FINAL REGULATIONS Over 200 pages of final regulations released by the Treasury Department and IRS Delays implementation for certain plans: Employers with full-time equivalent employees receive a delay until 2016 Transition relief for non-calendar plans Phase in substantially all requirement at 70% in 2015, 95% in 2016 FREE RIDER PENALTY FINAL REGULATIONS (CONT D) Clarification on some jobs Bona fide volunteers of government or tax exempt organizations Educational employees Student workers Seasonal workers Adjunct faculty Employees paid a stipend

4 FREE RIDER PENALTY FINAL REGULATIONS (CONT D) Confirmation of proposed regulations Days-work equivalency of 8 hrs/day, 40 hrs/wk 30 hours/week or 130 hours/month for full time employees Use of look-back/measurement period rules to determine full time employee Averaging or crediting method for employment breaks of at least 4 consecutive weeks Use of safe harbors for affordability FREE RIDER PENALTY FINAL REGULATIONS (CONT D) Other transitional rules: Dependent coverage rules delayed until 2016 Only have to cover biological and adopted children Must offer coverage for the full month in which they turn age 26 One-time ability, in 2014 preparing for 2015, to use a measurement period of 6 months

5 STAGES OF HEALTH CARE REFORM IMPLEMENTATION 1. Education 2. Administration 3. Strategic Considerations STAGE 1 EDUCATION Expanding access to coverage Public Exchanges Individual mandate Premium tax credits to purchase Exchange coverage Free Rider Penalty (employer mandate)

6 STAGE 1 EDUCATION (CONT.) New fees and taxes PCORI Fee Reinsurance Fee Health Insurer Fee (insured plans only) PATIENT-CENTERED OUTCOMES RESEARCH INSTITUTE (PCORI) FEE The institute will compile and distribute comparative clinical effectiveness research findings Plan sponsors and insurers must pay a fee to help fund comparative effectiveness research

7 PATIENT-CENTERED OUTCOMES RESEARCH INSTITUTE (PCORI) FEE (CONT.) Fee must be paid by the following July 31 st using IRS form 720 Amount of the fee is based on the average number of covered lives $1 per individual for 1 st plan year ending a4er Sept. 30, 2012 $2 per individual for the next year, Increases in subsequent years TRANSITIONAL REINSURANCE FEE Insurers and plan sponsors of group health plans must pay a fee to stabilize Exchange risk Applies for 3 years beginning 2014 HHS and IRS contemplating following schedule: 2014 Fee For Who Invoiced Payable $52.50 Reinsurance and Administrative HHS December 2014 January 2015 $10.50 ERRP IRS 4 th Qtr th Qtr 2015 $63.00

8 HEALTH INSURANCE FEE Applies to entities engaged in the business of providing health insurance Self funded plans, governmental plans, nonprofits, and VEBAs are excluded $8 billion to be collected in 2014 Fee is to be paid by September 30 each year Expect insurers to pass along the cost in premiums STAGE 1 EDUCATION (CONT.) Identify the risk of triggering a Free Rider Penalty 1/12 th x $2,000 per FTE (minus 80/30) per month for not offering coverage to substantially all FTEs 1/12 th x $3,000 per FTE per month for unaffordable or inadequate coverage $3,000 penalty also applies for FTEs who are not offered coverage Penalties are triggered by employees enrolling in Exchange coverage and qualifying for premium tax credits (and indexed for inflation)

9 STAGE 1 EDUCATION (CONT.) Eligibility for premium tax credits Available to certain individuals with household income up to 400% FPL Credit not available if eligible for: Government provided coverage Adequate/affordable employer coverage Variable hour employees Newly eligible employees (130 hrs/month) Managing costs and risks Measurement, administrative, and stability periods TRACKING FOR MEASUREMENT PERIOD: JANUARY 1 PLAN Oct 2013 Nov Dec Jan 2014 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Today Measurement period Nov 1, 2013 to Oct 31, month administrative period Nov 1 Dec 31 Employers with January 1 plan years and 12 month measurement period need to start now Jan 1 effective date

10 STAGE 1 EDUCATION (CONT.) Analyze the various scenarios Identify who will be considered full-time Explore possible strategies Some may include triggering Free Rider Penalties Quantify cost impact and risk exposure of each strategy Communicate to stakeholders STAGE 2 ADMINISTRATION Address data requirements Elements include payroll, benefits, time and attendance, personnel Assess enterprise-wide system capabilities Consider internal and external reporting needs Identify gaps in data Determine risks affiliated with gaps Evaluate solutions, which may include manual processes

11 STAGE 2 ADMINISTRATION Calculate PCORI fees and Reinsurance fees Safe harbor processes to report on lives covered under the plan Actual count: total lives/total days in policy year; Snapshot: # of lives on a date during 1 st, 2 nd or 3 rd month in a quarter (can also use a factor of 2.35 if participant information not available) Form 5500 (if filing) Determine the most advantageous process in advance STAGE 2 ADMINISTRATION Track hours and monitor eligibility Track actual time worked, or default to 8 hours/day or 40 hours/week Consolidate all hours worked, including stipends Rules for special leaves, employment break period, and rehires (credit hours) Include affordability testing in the process Need for timely data and accurate calculations Process for one group must be applied to all

12 STAGE 2 ADMINISTRATION Develop reporting Create key metrics to monitor compliance Identify data elements needed to support medical benefits strategy Consistent report delivery and review Assign reporting responsibilities to staff and functional areas STAGE 3 STRATEGIC CONSIDERATIONS Execute your substantially all plan Budget to reflect new costs and potential penalties Current year costs for new enrollees Future year penalty accrual Establish reporting protocols to track costs Understand workforce management

13 STAGE 3 STRATEGIC CONSIDERATIONS Affordability Contributions Pay (W2, salary/hourly rate) Funding alternatives Evaluate the attributes of self-funding Balance risk tolerance with avoiding Health Insurer fees STAGE 3 STRATEGIC CONSIDERATIONS Cadillac Plan Tax

14 STAGE 3 STRATEGIC CONSIDERATIONS Address your excise tax exposure Rate structure (composite rate, bundling other benefits) Project increase in premiums Cost-shifting and pay increase STAGE 3 STRATEGIC CONSIDERATIONS Collective bargaining Likely a greater focus on wages, moving away from benefits. Eligibility criteria to conform with Health Care Reform? Benefit plans design to avoid Cadillac Plan Tax?

15 STAGE 3 STRATEGIC CONSIDERATIONS Other issues that could influence bargaining Increase in costs from non-bargained, newly eligible employees Impact to Classified employees with prorated benefits Extra duty for non-benefitted, or fullybenefitted employees? THE NEXT STAGES OF HEALTH CARE REFORM 1. Education 2. Administration 3. Strategic Considerations Migration (minimum plan, private exchange, exit strategy) Change management

16 EMPLOYER BENEFIT DELIVERY OPTIONS Sponsored Employer manages benefits and plan provider options Private Exchange Employer offers choices managed by Private Exchange Exit Employer no longer provides access to health plans THE PRIVATE EXCHANGE MARKET SO FAR Approximately 56% of employers are considering using a private exchange for active employees or retirees 1 Approximately 28% of employers plan to move to a private exchange in the next 3-5 years 2 1 New York Times, Private-Health-Insurance-Exchanges-Are-Looming.pdf 2 Wall Street Journal,

17 THE PRIVATE EXCHANGE MARKET SO FAR (CONT.) 1 million expected to be enrolled in Major employers include IBM, Xerox, Time Warner, Walgreens, and Dominoes Pizza Management consulting firms predicting growth to million employees by BenefitsPro, 4 Booz & Co., Accenture, CHANGE MANAGEMENT Enrollment Open enrollment Auto enrollment Wellness incentives Tobacco surcharge

18 CHANGE MANAGEMENT Benefits philosophy Role of benefit Multi-year strategy Workforce planning Employee committee HEALTH CARE REFORM MADE EASY American Fidelity is ready to assist: HCReducaDon.com hfp://benefitsblog.americanfidelity.com VIP s and monthly webinars Health Care Reform consuldng (packages, retainer arrangements, and custom soludons)

19 HEALTH CARE REFORM MADE EASY American Fidelity is ready to assist (cont'd) Time management so4ware to assist with the Free Rider Penalty Variable hour employee billing NoDce compliance support and fulfillment Resources to help communicate plan changes to employees AMERICANFIDELITYCONSULTING.COM

20 CLOSING THOUGHTS Determine which Stage you organization is in Identify hard and soft dollar costs Become proactive Stay abreast of new developments THANK YOU! HCReducation.com Sign up for complimentary VIP s Contact us to learn more! AmericanFidelityConsulting.com Phone: This is only a brief summary that reflects our current understanding of select provisions of the law, often in the absence of regulations. All of the interpretations contained herein are subject to change as the appropriate agencies publish additional guidance. Some products and services may be provided by third party contractors or affiliated companies. American Fidelity Administrative Services does not provide tax or legal advice.

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