Health Care Reform Explained

Transcription

1 Health Care Reform Explained September 10, 2013 presented by: Jack Stumm, CPA & Brian Stumm

2 Welcome Presenters Stumm Insurance, LLC Jack Stumm x105 Brian Stumm x103 Objectives To understand the past and future impact the Affordable Care Act will have on the American public, including both individuals and employers. To help you understand if your company is a large or small employer, and the impact that the law will have on you. Synonyms for Today Health Care Reform Obamacare Patient Protection and Affordable Care Act (PPACA) Affordable Care Act (ACA) 2

3 Agenda Timeline of Events Closer Looks Subsidy (Tax Credit) Examples Marketplace Large Employer Calculation Large Employer Roadmap Bottom Line Question & Answer Session 3

4 Lifetime Maximums Insurance plans prohibited from imposing lifetime benefit limits and restricted annual limits. Dependent Age Limit Insurance plans required to carry dependents up to the age of 26. Preventive Services Insurance plans required to cover preventive services without cost sharing. Pre-Existing Exclusions for Children Insurance plans prohibited from denying coverage to individuals under the age of 19 based on pre-existing conditions. High Risk Pools Temporary (until 2014) high risk pools established for individuals (older than 19) who are denied coverage based on preexisting conditions. Renewability Insurance plans prohibited from rescinding coverage except in cases of fraud or lack of payment State Carrier Reviews States begin reviewing premium trends and companies must justify increases over certain thresholds. There is no new power to block rate increases but plans may be excluded from exchanges. Small Business Tax Credit (Phase I) Small businesses with less than 25 employees and average annual wages of less than $50,000 are eligible for tax credits of up to 35% of the employer s contribution toward the employee s health insurance premium. Employers must subsidize at least 50% of their employees premiums in order to be eligible for the tax credit. Available through 2013 only. Co-Ops Created Create the Consumer Operated and Oriented Plan (Co-Op) program to foster the creation of non-profit, member-run health insurance companies in all 50 states. $6 billion is appropriated to finance the program and award loans and grants to establish Co-Ops by July 1, Illinois creating Co-Op named Land of Lincoln. 4

5 Medical Loss Ratio Insurance plans required to comply with new medical loss ratios (MLR): 80% - Individual Plans 80% - Small Groups 85% - Large Groups Companies required to provide rebates to consumers if they fail to comply with the MLRs. Exchange Funding Funding available for states to begin establishing Exchanges until January 1, Part D Assistance Medicare Part D beneficiaries that fall into the donut hole will receive a 50% discount on covered brand-name prescriptions. This will grow to a 75% discount by OTC Medications Over-the-counter drugs not prescribed by a doctor may not be reimbursed through an FSA or HRA, nor on a tax free basis through an Archer MSA or HSA W2 Reporting Employers with 250+ employees are required to report cost of employer sponsored group health coverage on employee W2s for 2012 tax year. This value is not taxable. Women s Health Insured plans required to expand benefits for Women s Preventive Health Services SBCs Summary of Benefits and Coverages: Beginning with renewals after September 23, 2012, health plans must provide a standardized and easy to understand summary of benefits and coverages as well as a glossary of commonly used insurance terms developed by HHS. 5

6 Medicare Tax Increase Increase in the Medicare tax rate on wages by 0.9% (from 1.45% to 2.35%) on earnings over $200,000 for individual taxpayers ($250,000 for joint filers). Investment Income Tax Increase 3.8% tax increase on investment income for taxpayers making $200,000 per year ($250,000 for joint filers); however in real estate transactions there is an exemption in current law for $250,000 on the sale of a principal residence ($500,000 for joint filers). FSA Limits Pre-tax contributions to FSAs limited to $2,500 per year. Marketplace Notices Employers required to provide notice to employees of marketplace availability by October 1, National Long Term Care** A national long term care assistance/disability insurance plan (CLASS) is established. The benefit is tied to one s inability to perform two or three Activities of Daily Living (ADLs) and the benefit amount is varied based on the scale of functional ability with a $50-7/day cash benefit. All working adults will be automatically enrolled in the program unless they choose to opt-out. **Implementation of this program halted indefinitely by Department of Health & Human Services 6

7 New Rules Insurance plans required to abide by guaranteed issue, minimum benefit standards, revised rate bands (agebased and community-rated) for individual and small group market (2-50 employees). Individual Mandate Individuals required to purchase health insurance or face a tax penalty * : 2014 greater of 1% of family s income OR $95 per adult, $47.50 per child, up to family maximum of $ greater of 2% of family s income OR $325 per adult, $ per child, up to family maximum of $ greater of 2.5% of family s income OR $695 per adult, $ per child, up to family maximum of $2, and beyond - indexed to inflation. * The overall penalty is capped at the national average premium of a bronze level plan purchased through an exchange. Subsidies for Individuals Premium tax credits (subsidies for purchase of health insurance) available via exchanges for individuals/families with incomes between 100% and 400% of federal poverty level, who do not receive affordable & essential employer based coverage. Family Size Federal Poverty Guidelines* % 200% 300% 400% 1 $11,490 $22,980 $34,470 $45,960 2 $15,510 $31,020 $46,530 $62,040 3 $19,530 $39,060 $58,590 $78,120 4 $23,550 $47,100 $70,650 $94,200 5 $27,570 $55,140 $82,710 $110,280 6 $31,590 $63,180 $94,770 $126,360 7 $35,610 $71,220 $106,830 $142,440 8 $39,630 $79,260 $118,890 $158,520 9 $43,650 $87,300 $130,950 $174,600 Marketplaces (Exchanges) Exchanges are created and open to individuals and small businesses (2-50 employees). Exchanges will include four tiers of essential benefit plans: Platinum 90% AV Gold 80% AV Silver 70% AV Bronze 60% AV * These figures are approximate 7

8 Subsidy (Tax Credit) Examples Individual Family Status Income Percentage of income that may be spent on health insurance Estimated value of the employee s annual tax credit in year-old with qualified employer coverage 30 year-old with no employer coverage Any $35, % of household income Single $35, % of household income $0 - No one in the family qualified to buy coverage in the exchange or get a subsidy $155 (based on Kaiser Family Foundation s projection of a $3440 annual single premium in 2014) Individual s annual premium costs would be $ year-old with no employer coverage Married, 2 children $35, % of household income $8,720 (based on Kaiser Family Foundation s projection of a $10,108 annual family premium in 2014) Family s annual premium costs would be $1, year-old with qualified employer coverage Any $55, % of household income $0 - No one in the family is qualified to buy coverage in the exchange or get a subsidy 45 year-old with no employer coverage Single $55,000 N/A $0 Individual may buy coverage in the exchange but would not qualify for subsidy Individual s annual premium payments would be $5,609 based on Kaiser Family Foundation s projection of 2014 single premium 45 year-old with no employer coverage Married, 2 children $55, % of household income $10, 100 (based on Kaiser Family Foundation s projection of a $14, 250 annual family premium in 2014) Family s annual premium costs would be $4,135 8

9 Platform Government-created platform for the sale of health insurance, intended to bring all qualified plans into one forum by establishing common rules regarding the offering and pricing of insurance, and providing information to consumers. Marketplace (Exchange) Products Private carriers, State co-ops and government programs such as Medicaid and Children s Health Insurance Program (CHIP). Pricing** Community-rated based on age, geography and tobacco status. Qualified consumers (up to 400% of the poverty level) will receive government assistance to purchase private insurance through the use of premium tax credits. Congressional Budget Office (CBO) makes clear average premiums could be 27-30% higher because the law demands greater insurance coverage. **Products and pricing are to be available for viewing on October 1, 2013, but coverage is not effective until January 1,

10 Large Employer Mandate (Pay or Play) Employers with more than 50 full-time equivalent employees who do not offer their employees essential health insurance will be subject to a $2,000 tax penalty/full-time employee/year (first 30 employees exempted from calculation) Further, even if the employer offers essential health insurance to employees, BUT the single employee cost of the least expensive qualified plan is greater than 9.5% of the employee's W-2 gross earnings, the mandate also requires an employer to pay a penalty of the lesser of: A) $2,000 per full-time employee; or B) $3,000 for each employee who declines the group plan, enrolls in a EHB plan on the "Marketplace", AND qualifies for a government premium subsidy based on their income level. **Implementation of this program halted until 2015 by Department of Health & Human Services Proposed rules for the information reporting provisions under IRS Code Sections 6055 and 6056 are expected to be published in summer 2013 and will reflect the 2014 transition relief. Waiting Periods Waiting periods for coverage cannot exceed 90 days cont. Health Insurance Tax New tax is levied on insurance companies based on net premiums written on fullyinsured plans. This tax will raise an estimated $8 billion in 2014, reaching $14.3 billion by The tax does not sunset and is indexed thereafter. Expected to be ~2.3% of premium. Reinsurance Tax New tax is levied on all policies for the next 3 years. Expected to be ~$5.25 per month of premium for every individual/employee. Small Business Tax Credit (Phase II) Credit extended for two years, but only available in the SHOP. Medicaid Expansion States must expand Medicaid to 133% of federal poverty level. States will receive 100% federal financing from , 95% financing in 2017, 94% financing in 2018, 93% financing in 2019, and 90% financing in 2020 and beyond. 10

11 Large Employer Calculation 11

12 Large Employer Roadmap Start Does the employer have at least 50 full-time equivalent employees? No No Penalty Applies Yes No Does the employer offer coverage to all full-time employees? No A Penalty Applies The penalty is $2,000 annually times the number of full-time employees minus 30. Yes Affordability Test Is the employee s required premium contribution for single coverage for the employer s lowest cost plan 9.5% or less of the employee s gross annual income? No Yes Marketplace Subsidy Do any employees purchase coverage in a Marketplace and receive a premium tax credit or cost-sharing subsidy? No Minimum Value Test Does the employer sponsored plan provide minimum value? Yes No Yes A Penalty Applies The penalty is the lesser of $3,000 times the number of full-time employees receiving premium tax credits, or $2,000 times the number of full-time employees minus 30. No Penalty Applies 12

13 Small vs. Large Employers Plan Consideration Small Employer (under 50) Large Employer (over 50) Eligibility Hours Requirement (depends on carrier) 30+ Eligibility (depends on carrier) 95% of employees and dependent children Waivers n/a Required (or auto-enroll for over 200) 90-Day Waiting Period Applies Applies Rates Age-rated, community-rated Company specific, based on actuarial factors Out of Pocket Maximum $6,350 (single) & $12,700 (family) No restriction? Plan Design (depends on carrier) Bronze Minimum (60% actuarial value) Affordability No limit Can not exceed 9.5% of gross wages SHOP 2014 only one carrier to choose from 2015 all carriers not until 2015? n/a Tax Credit Available in SHOP only Not available Participation Requirement (depends on carrier) Gone?? No change 13

14 SHOP Expansion States are permitted to allow businesses with more than 100 employees to purchase coverage in SHOP Marketplaces Cadillac Tax A 40% excise tax is levied on insurers of employer-sponsored health plans with aggregate values that exceed $10,200 for individual and $27,500 for family. The tax is applied to the amounts that exceed the threshold and it will be indexed for inflation. 14

15 Bottom Line Employer Considerations Does my plan meet minimum requirements? Is my plan grand-fathered? Is my plan affordable? What are my net costs today? Is the penalty cheaper? How will employees react? Will my employees be eligible for subsidies? What are the tax advantages to the business? Are benefits important for talent acquisition? How are we managing plan costs? Can we renew early, and if so, should we? What compliance obligations do we have? Is our broker/consultant appropriate? Employee Considerations Is coverage cheaper on Marketplace? Is cost of insurance tax deductible? Does my spouse have access to insurance? Am I prepared to pay a penalty? How important is my doctor? 15

16 Questions and Answers Jack Stumm x105 Brian Stumm x103 16