Health Care Reform and the Employer Mandate

Transcription

1 Health Care Reform and the Employer Mandate A Framework for the Play or Pay Decision North Carolina League of Municipalities October 23, Towers Watson. All rights reserved.

2 Today s Discussion Review of the law and its requirements Individual mandate Employer mandate and other employer requirements Health insurance Exchanges Employer considerations Putting it together Questions 1

3 Health Care Reform Taking Effect Over Multiple Years PPACA enacted First wave of changes affecting most employer plans Presidential and Congressional elections Major reform elements take effect Individual mandate and premium assistance subsidies Employer pay or play mandate and related requirements State based insurance exchanges Insurance underwriting and rating reforms; additional market reforms Certain immediate reforms took effect Administration and communication requirements Exchange applications and certification First Exchange open enrollment States may open exchanges to large employers Excise tax takes effect Throughout: evolving interpretations, governmental guidance, litigation, legislation, preparation for major changes, unpredictability 2

4 Key Elements for Employer Decisionmaking Individuals Obtain coverage for self and dependents or Pay penalty Employers Offer coverage to all employees and their dependents or Pay penalties Exchanges available to: Organize market Enable comparison shopping Facilitate enrollment Administer subsidies 3

5 Meeting the Law s Requirements: Key Questions for Employers and Employees Employers Am I subject to the employer mandate? If I don t offer coverage, will my employees be able to find other coverage? Will it be affordable? Can my employees get a better deal on the Exchange? Do I need to offer coverage to attract and retain good employees? To ensure or improve productivity? If I exit, will I make up for the benefit employees will lose? What is the cost? Employees What does the individual mandate mean for me and my family? What kind of coverage will meet the requirements? Where can I buy it? How much will it cost? Can I get coverage from my employer? How does the Exchange work? Will Exchange coverage be any good? Will we qualify for subsidies? How do we find out? 4

6 Individual Mandate

7 Individual Mandate At-a-Glance Medicaid Employer coverage CHIP Individual market plan State high-risk pool? Exchange coverage Other? Grandfathered plan Am I exempt? Exemptions from mandate or penalty: Penalty phases-in Greater of: No affordable coverage Religious conscience objection Income below tax filing threshold Member of Indian tribe Short coverage gap Hardship and others 2014: 1% income over filing threshold or $ : 2% income over filing threshold or $ : 2.5% income over filing threshold or $695 Penalty indexes after

8 Subsidies Available for Those with Income between 100% and 400% of the Federal Poverty Level Income Level as % FPL Based on family of 3; Federal Poverty Limit (FPL) Threshold for 2012 Dollar Range Premium as % household income <100% Up to $19,090 Not subsidy eligible; Medicaid? Dollar range Value of Silver plan with cost-sharing subsidy % $19,090-$25,390 2% $382-$508 94% 133%-150% $25,390-$28,635 3% 4% $762-$1,145 94% 150%-200% $28,635-$38,180 4% - 6.3% $1,145-2,405 87% % $38,180-$47, % % $2,405-$3,841 73% 250%-300% $47,725-$57, % - 9.5% $3,841-$5,440 70% 300%-400% $57,270-$76, % $5,440-$7,254 70% N/A N/A Premium tax credits Based on second-lowest cost Silver plan Sliding scale for those within income bracket Dollar amounts depicted on an annual basis Cost-sharing subsidies Apply only to Silver coverage For those at lower end of income scale, makes Silver coverage more generous than Platinum 7

9 Employer Requirements

10 Overview of Employer Coverage Mandate Beginning in 2014, applicable large employers must: Offer coverage to all full-time employees (and their dependents) or Pay tax penalties if employees receive tax credits/subsidies for Exchange coverage Key definitions: Applicable large employer: employed on average at least 50 full-time employees during the preceding calendar year Full-time employee: 30 hours or more per week on average each month Future regulations to provide that 130 hours per calendar month to be treated as equivalent to 30 hours/week Special rules and safe-harbors to determine full-time status for variable hour employees

11 10 Employer Coverage Mandate: Penalties Definitions No Employer Coverage Offered Penalty = $2,000 x all full-time employees (minus 30) Employer Coverage Offered Penalty = $3,000 x each subsidized full-time employee Maximum = $2,000 x all full-time employees (minus 30) Triggered if any full-time employee receives premium tax credit or cost-sharing subsidy in Exchange Triggered if full-time employee receives premium tax credit or cost-sharing subsidy because the employer s coverage: Costs more than 9.5% of household income Doesn t meet 60% minimum value

12 Affordability and the 9.5% Rule Yes Is employer coverage affordable to the employee? Does it provide minimum value? Is contribution for single coverage in lowest-cost (LSC) 9.5% of family income? Does plan pays at least 60% of plan eligible expenses No Each $100 of monthly contribution correlates to $12,632 of annual family income Employees not eligible for premium subsidies to purchase Exchange coverage Is family income 4x of federal poverty level? Yes No No $3,000 employer play penalty for each employee obtaining subsidies Employee may qualify for premium subsidies to purchase Exchange coverage (if employer plan declined) Employer pays $3,000 "play" penalty per subsidized employee Employee does not qualify for premium subsidies to purchase exchange coverage (unlikely to decline employer plan) Employer not subject to $3,000 play penalty per employee IRS developing guidance on affordability of family coverage Employer contribution policy determines whether any employees will qualify for federal subsidies 11

13 Employer Affordability Examples Employee A Employee B Status: Single Status: Single Household income: $37,000 Required contribution: $3,330 % of household income: 9% Eligible for premium subsidy? NO Household income: $37,000 Required contribution: $3,700 % of household income: 10% Eligible for premium subsidy? YES 12

14 Other Plan Mandates, Market Reform and Employer Requirements Eligibility for adult children to age 26 Lifetime and annual dollar limit restrictions No rescissions Preexisting condition exclusion requirements Summary of Benefits and Coverage (SBC) Medical Loss Ratio (MLR) First-dollar preventive care cost sharing Insured plan nondiscrimination rules Internal claims and appeals; external review requirements Patient protections/patients bill of rights Reporting and disclosures, such as W-2 reporting Notices about Exchanges and subsidies Reporting to IRS and employees about coverage Waiting period limitations Guaranteed availability and renewability No discrimination based on health status Provider nondiscrimination Cost-sharing limits Coverage for individuals participating in approved clinical trials 13

15 New Fees and Taxes Impacting Employer Health Plan Costs (Other than the employer mandate penalty and high-cost excise tax) Fee Background Patient-Centered Outcomes Research $1 per covered life in 2012; $2 per covered life in 2013; index thereafter; sunset in 2019 Funds comparative clinical effectiveness research Transitional Reinsurance Unspecified per capita amount sufficient to fund a reinsurance pool of at least $12b in 2014, $8b in 2015 and $5b in 2016 Per capita rate to be announced in March 2013 Fee on Branded Pharmaceutical Manufacturers and Importers Sufficient to raise revenue specified in statute; revenue goals range from $2.5b to $4.1b depending on the year Medical Device Manufacturers Tax 2.3% excise taxes on medical devices sold after 2012 Certain devices exempt (such as eyeglasses, contact lenses, hearing aids and others typically purchased directly by the public). Health Insurance Tax Imposed on entities engaged in business of health insurance Based on net premiums written on U.S. health risks Sufficient to raise $8b in 2014, gradually increasing to $14.3 billion in 2018, then indexed to rate of premium growth 14

16 Exchanges

17 Minimum Responsibilities of Exchanges Certify Qualified Health Plans Operate 24/7 web portal and toll-free number Implement health plan rating system/enrollee satisfaction system Determine subsidy eligibility and maintain electronic cost calculator Connect with employer and public programs for eligibility/enrollment Review patterns of rate increases Determine exemptions from individual mandates Communicate info to Dept of Treasury & employers Establish a Navigator program to facilitate enrollment 16

18 Subsidy Eligibility Determined by Household Income Family income under 133% FPL Family may be eligible for Medicaid (if state expands) If employer coverage is available Family income from 100% to 400% FPL Family is eligible for subsidy in exchange If employer coverage is offered, but is unaffordable or fails to meet minimum value requirements Family income over 400% FPL Family may purchase unsubsidized coverage in exchange If employer coverage is available Family may choose the employer plan or Medicaid Family may choose the employer plan or subsidized coverage in exchange If employer offers coverage that is affordable Family may choose the employer plan or unsubsidized coverage in exchange 2012 FPL Single Individual Family of 4 Family may choose the employer plan or unsubsidized coverage in exchange 100% $11,170 $23, % $14,856 $ % $44,680 $92,200 17

19 Coverage Through Public Health Insurance Exchanges Plan Offerings Platinum (90% Value) Gold (80% Value) Silver (70% Value) Bronze (60% Value) Key Requirements Guarantee issue No medical underwriting No pre-existing condition limits Rating rules (3:1 maximum age rating) Essential health benefits Preventive care at 100% No lifetime or annual limits Cost-sharing restrictions Qualified health plans available through the health insurance Exchanges will provide plans with standardized relative values to individuals and small groups, with federal subsidies based on income to offset premium cost 18

20 Exchange Enrollee Profile Uninsured (16M) Employer Coverage > 9.5% Income (1.5m) Individual Market (1m) Losing Medicaid >138% FPL (2m) Losing Employer Coverage (3.5m) It is expected that 39% of exchange participants will not have a usual source of care Exchange Privately Insured Fair/Poor Health 13% 6% - 7% Fair/Poor Mental Health No more than High School Diploma Exchange members are expected to be: Lower income Less educated More diverse In poorer health Less sophisticated consumers 8% 4% 77% 55% Source: A Profile of Health Insurance Exchange Enrollees, March 2011, Kaiser Family Foundation; 19

21 State Activity by Purpose of Legislative or Executive Action AK WA VT HI CA OR NV ID AZ UT MT WY CO NM ND SD NE KS OK MN IA MO AR WI IL MI OH IN KY TN NY PA WV VA NC SC ME CT NJ DE MD DC NH MA RI MS AL GA Existing Exchange Law or Executive Order establishes Exchange Law or Executive Order provides Exchange study or sets intent to create Exchange State announced it will not establish an Exchange or has halted Exchange planning Veto or other legislative action to block Exchange No final legislative or executive action taken by state TX LA FL No law or executive order in NC Source: Towers Watson, as of July 18,

22 Three Exchange Models and Federal Services Available State-based Exchange State operates all Exchange activities State may use federal services for: Premium and cost-sharing subsidy determinations Exemptions Risk adjustment program Reinsurance program State Partnership Exchange FFE, but state handles: Plan management and/or Consumer assistance May use federal services for: Reinsurance program Medicaid and CHIP eligibility assessment or determination Federally facilitated Exchange (FFE) HHS operates State may elect to perform or use federal services for: Reinsurance program Medicaid and CHIP eligibility assessment or determination States must submit Exchange blueprints by November 16, 2012 States must submit blueprint if they want to Operate state-based or partnership Exchange Coordinate with FFE If state does not submit blueprint: HHS will operate FFE and perform all functions Individual and small business (SHOP) Exchanges will be merged Small employer will be defined as under state law (NC = 50 employees) 21

23 Subsidies and Federally Facilitated Exchanges Statutory language says premium tax credits available for coverage through Exchange established by state IRS final regulations provide that premium tax credits will also be available in federally facilitated Exchanges Opponents of the law seeking to make this a possible battleground Differing legal interpretations and expectations Strict adherence to language on state-based Exchanges vs. Argument that intent and broader reading of the law indicate federal Exchanges are intended to operate as statebased Exchanges Precedent for deference to final rules issued by executive branch agencies Oklahoma filed suit challenging IRS rule 22

24 Putting It All Together

25 Employer Considerations Special issues for small employers Employer mandate does not apply to small employers Small employers participate on small business (SHOP) Exchange Small employers that offer coverage must comply with other health care reform rules SIMPLE cafeteria plan for small employers Issues for all employers Strategy regarding health benefits, employee relations and attraction and retention must be considered Additional guidance from the federal government Is needed Uncertainty surrounding the future of the law and the implementation of the insurance Exchanges remains 24

26 Possible Employer Strategies PLAY Meet minimum requirements Manage plan cost Mitigate rate and cost trend Avoid hitting excise tax cap Balance cost-sharing strategy with subsidy penalties Implement required administrative rules Employer Strategy PAY Pay $2,000 per full-time employee Change health care deal with employees Employees faced with buying through Exchanges Revisit total compensation Provide make up to employees? Gross up to address tax implications for employees Face competitive impact on recruiting/retention PLAY AND PAY Penalty: If self-only contribution exceeds 9.5% of household income and FT employees (>30 hrs./wk.) eligible for subsidy apply for Exchange, employer pays $3,000 nondeductible penalty per employee who does so 25

27 Revisiting the Key Employer Questions Does the employer play-or-pay mandate apply to us?? Key Questions for Employers Will the insurance Exchange be a viable option for our group? For our employees if they go on their own? Are there are other alternatives? What are the implications of changing our health care strategy for our operations and our workforce? Beyond benefits, what is our commitment to workforce health? Is there a necessary connection between health and benefits? If we can free up dollars currently spent on health benefits, will we be expected to reinvest that money in other employee benefits? 26

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