Copyright 2014 American Fidelity Assurance Company

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2 HEALTH CARE REFORM What You Need to Do from Now to 2015 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.

3 SETTING THE STAGE 1,000 pages of legislation drafted and enacted very quickly Rules are still being developed Federal agency guidance Role of states

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5 EXPANDED ACCESS TO COVERAGE Cornerstone of Health Care Reform Public Exchanges Individual mandate Federal premium tax credit to purchase Exchange coverage Employer responsibility

6 PUBLIC EXCHANGES States must operate Exchanges or federal government is providing a default Bronze, silver, gold, and platinum options Coverage is guaranteed issue, no preexisting condition limits, no individual medical underwriting

7 INDIVIDUAL MANDATE Must obtain minimum essential coverage or pay a tax, beginning January 1, 2014 Penalty is capped at average cost of bronze level Exchange coverage Exceptions if coverage is unaffordable, for low income taxpayers, and short coverage gaps

8 FEDERAL PREMIUM TAX CREDIT May use to purchase Exchange coverage Available to certain individuals with household income up to 400% FPL Credit not available if eligible for: Adequate/affordable employer coverage Government provided coverage

9 EMPLOYER MANDATE Penalty may apply if: No coverage offered to full-time employees and dependents Coverage is unaffordable or inadequate Employee enrolls in Exchange coverage and qualifies for a federal premium tax credit

10 EMPLOYER MANDATE (CONT D) Transition relief for non-calendar year plans Large employer : 50+ full time equivalent employees Employers with full-time equivalent employees required to comply by 2016 plan year Members of a controlled group treated as single entity to determine large employer

11 EMPLOYER MANDATE (CONT D) Full-time employees: 30+ hours/week or 130+ hours/month Counting hours Special rules for certain employees: Bona fide volunteers Employees paid a stipend Leased employees

12 METHODS OF CALCULATING TOTAL HOURS WORKED Two methods Monthly measurement period method Look back measurement period method May use different methods only for specified categories of employees May not just use look back method for non-fulltime employees

13 ALLOWABLE CATEGORIES Salaried versus hourly employees Employees who work in different states Collectively bargained versus non-bargained employees Each group of collectively bargained employees covered by a different agreement

14 LOOK BACK MEASUREMENT PERIOD METHOD New employees Not expected to work full-time - measure If reasonably expected to work full-time, treat as full-time without delay for measurement New factors to be taken into account to determine reasonableness Variable hour or seasonal employees - measure

15 LOOK BACK MEASUREMENT PERIOD METHOD (CONT D) Start date for initial measurement period Date of hire First of the month following date of hire First day of the first payroll following date of hire Ongoing employees measure everyone in the category May want to use look back for all employees

16 SPECIAL RULES FOR EDUCATIONAL INSTITUTIONS Apply if 4+ week break in service Average hours over a measurement period that excludes the length of the break, or Treat employee as credited with hours for the employment break Includes anti-abuse rule

17 MEASUREMENT PERIOD TRANSITION RULE General rule: stability period must be at least as long as the measurement period Transition rule: Employers may use a 6 month measurement period in 2014 with a 12 month stability period Measurement period must start no later than July 1, 2014

18 4980H(a) PENALTY Penalty for failing to offer coverage: 1/12th x $2,000 per month/per FTE (after first 80 employees in 2015, 30 employees thereafter) Must offer to substantially all FTEs

19 SUBSTANTIALLY ALL FULL-TIME EMPLOYEES

20 DEPENDENT CHILDREN In order to avoid a penalty, must offer coverage to dependent children Biological and adopted children Through the end of the month in which the child turns age 26 Transition rule: must offer dependent child coverage by plan year beginning in 2016

21 4980H(b) PENALTY Penalty if available coverage is inadequate or unaffordable (or unavailable): 1/12th x $3,000 per month (per employee who qualifies for a premium tax credit) Inadequate: plan pays <60% allowable costs Unaffordable: employee pays >9.5% of household income for employee-only coverage Ineligible: employee falls in the substantially all gap

22 4980H(b) PENALTY (CONT D) Affordability examples: Coverage is affordable Coverage is unaffordable Enroll in coverage anyway Enroll in spouse s plan Enroll in Exchange

23 EMPLOYER MANDATE Mechanics: Notice Timing Method of payment

24 EMPLOYER MANDATE Questions?

25 SUMMARY OF BENEFITS AND COVERAGE Plan sponsor must provide a Summary of Benefits and Coverage (SBC) Effective for annual enrollments/plan years beginning on or after September 23, 2012 Distribute with annual enrollment materials, following special enrollment events, and upon request

26 SUMMARY OF BENEFITS AND COVERAGE (CONT D Government provided template Fully insured get SBC from insurer Self-funded employer fills in template In either case, the employer is responsible Must also provide Uniform Glossary upon request

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28 Employees can rollover up to $500 of Health FSA funds Employers have three options: Grace period HEALTH FSA ROLLOVERS Rollover of up to $500 Neither grace period or rollover Copyright 2013 American Fidelity Assurance Company

29 STAND-ALONE HRAS Stand-alone HRAs violate prohibitions on annual and lifetime limits Employees must elect HRA and other coverage (not just have the option to elect) HRAs may not be used to pay for individual market insurance coverage

30 PCORI FEE Plan sponsors and insurers must pay a fee to help fund comparative effectiveness research Fee must be paid by the following July 31 st File tax form 720 First forms due July 31, 2013

31 PCORI FEE (CONT D) Amount of the fee is based on the average number of covered lives $1 per individual for 1 st plan year ending after Sept. 30, 2012 $2 per individual for the next year Increases in subsequent years

32 2014 MANDATES All plans must comply Waiting periods Annual limit prohibition Preexisting condition limits Coverage for adult children

33 2014 MANDATES Additional requirements for nongrandfathered plans Essential health benefits (insured small group plans) Clinical trials Limits on out-of-pocket maximums Provider nondiscrimination Copyright American Fidelity Assurance Company

34 RESTRICTIONS ON RESCISSIONS Limited to fraud or intentional misrepresentation of material fact Plan document must allow and must provide notice May want to consider dependent verification reviews

35 EXCHANGE REINSURANCE FEE Insurers and plan sponsors of group health plans must pay fee to HHS Applies for 3 years beginning 2014 HHS estimate for 2014: $63/covered life

36 COVERAGE AND WORKFORCE REPORTING Effective January 1, 2015 Employers with 50+ full-time employees must report extensive details about the employer s health coverage and workforce to the IRS Certain reporting is also required for all employers that provide minimum essential coverage

37 COVERAGE AND WORKFORCE REPORTING (CONT D) 2015 reports due February 28, 2016 (or March 31, if filing electronically) Must provide a written statement to each employee named in the return each year

38 AUTOMATIC ENROLLMENT Plan sponsors with 200+ full-time employees must automatically enroll newly eligible full-time employees Must provide notice Employees may opt out Effective date to be established by regulations

39 CADILLAC TAX Effective 2018: 40% non-deductible excise tax Imposed on aggregate value of health coverage that exceeds threshold amounts Applies for specified health coverage

40 CADILLAC TAX (CONT D) General thresholds: $10,200 individual coverage $27,500 family coverage Indexed for inflation CPI-U: 3-4% per year Medical inflation: 7-10% per year

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42 CADILLAC TAX 6 Years 80% Actuarial Value 60% Actuarial Value Excise Tax Threshold

43 ACTION PLAN Assess the impact of the Employer Mandate Obtain/complete/distribute SBCs Consider status of stand-alone HRAs and possible revision Prepare to pay PCORI fee

44 ACTION PLAN (CONT D) Grandfathered plans Reassess eligibility and value Gather documentation Plans losing grandfathered status Adopt additional plan design mandates Revise employee communication Copyright American Fidelity Assurance Company

45 ACTION PLAN (CONT D) Comply with 2014 mandates Budget for Exchange Reinsurance Fee Watch for guidance May want to begin considering costmanagement strategies or changes in health coverage

46 HEALTH CARE REFORM MADE EASY AFAS is ready to assist: HCReducation.com VIP s and monthly webinars Health Care Reform consulting (packages, retainer arrangements, and custom solutions) In-depth Workshops

47 HEALTH CARE REFORM MADE EASY AFAS is ready to assist (cont'd): Time management software to assist with the Employer Mandate Variable hour employee billing Notice compliance support and fulfillment Resources to help communicate plan changes to employees

48 Thank you! 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.