Affordable Care Act Update

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Affordable Care Act Update Rev
10/07/2013 Your Presenter Jerry Rhinehart,
CIC, CLU, ChFC, RHU Panama City, FL
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93 TOTAL provisions will be enacted over the 10
year time span that will impact every US
citizen, health insurance coverage, health
insurance companies, pharmaceutical companies,
employers, Medicare, Medicaid, taxes (21 major),
substantial regulations for hospital
physicians, and even required posting of
nutritional content at your favorite fast food
restaurant.
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Health Insurance Premiums and Cost-Sharing
Subsidies (2014)
Provides refundable and advanceable tax credits
and cost sharing subsidies to eligible
individuals. Premium subsidies are available to
families with incomes between 133-400 of the
federal poverty level (FPL) to purchase insurance
through the Exchanges, while cost sharing
subsidies are available to those with incomes up
to 250 of the poverty level.
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Understanding Health Insurance Subsidies (2014)
Required to show proof of a QHP- but no financial
assistance of any form
400 FPL _
_400 FPL
Required to show proof of a QHP- and eligible for
advanced premium tax credits
250 FPL _
_250 FPL
Required to show proof of a QHP- and eligible for
advanced premium tax credits and cost-sharing
reductions
133 FPL _
_133 FPL
Eligible for Medicaid little or no cost
_100 FPL
100 FPL _
2013 CMS
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Those Having (and Not Having) Health Insurance
US () Type Coverage Where NC ()
49 ER Provided Coverage 47
5 Individual Coverage 4
16 Medicaid 17
13 Medicare 13
1 Other Public 2
16 Uninsured 17
307,890,000 9,376,800
2011 KFF.org State Health Facts
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Introduction to Key ACA Terms
? MLR (Medical Loss Ratio 80 Small Group and
Individual 85 Large Group) (eff 01-01-2011)
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Introduction to Key ACA Terms
? MLR (Medical Loss Ratio 80 Small Group and
Individual 85 Large Group) (eff
01-01-2011) ? FPL (Federal Poverty Level 133
- 400) (eff 01- 01-2014) (NOTE Box 1 on the
Employees W-2)
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Introduction to Key ACA Terms
Federal Poverty Level (FPL) National Incomes
(Gross) except for Hawaii and Alaska 2012-2013
Income Single Family of 4
100 FPL 10,170 23,050
133 FPL 15,282 31,322
400 FPL 45,960 94,200
Source http//www.familiesusa.org/resources/tools
-for-advocates/guides/ federal-poverty-guidelines.
html
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Health Reform Implementation Timeline
2013
? Insurance Reforms (CO-OP enhanced use of
e-filing) ? Employer Notice Requirements
(03-01-13) Requires employers to provide written
notice informing employees about the Exchange
and potential eligibility for premium credits.
(Released 06/2013 one for coverage / one for
no coverage)
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Search Jones Day aca exchange notification
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Search Jones Day aca exchange notification
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Health Reform Implementation Timeline
2013

• ? Insurance Reforms (CO-OP enhanced use of
  e-filing)
• Employer Notice Requirements (03-01-13)
  Requires employers to provide written notice
  informing employees about the Exchange and
  potential eligibility for premium credits.
  (Released 06/2013 one for coverage / one for
  no coverage)
• Tax Change

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Key Provisions of Tax Changes (2013)
? New or revised taxes to help pay for
NHCR - Increase threshold for the itemized
deduction for un-reimbursed medical
expenses from 7½ to 10 of AGI - Increase the
Medicare Part A tax rate on wages by 0.9
(from 1.45 to 2.35) on earnings over 200K
(individual) and 250K (married/ filing
jointly). 3.8 assessment on unearned income
(high income tax payers) - Max EE
contribution to FSA for medical - 2,500 per
year - Excise tax (2.3) on medical devices
(hip replacement, x- ray machine, etc.
numerous exceptions exists) - Eliminated ER
deduction for retiree Medicare Part D
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Health Reform Implementation Timeline
2014
? Individual and Employer Requirements
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Individual and Employer Requirements (2014)
? Require U.S. citizens and legal immigrants to
have qualified health coverage - For
Individuals Phased-in tax penalty - For
Large Employers Possible penalties to Large
ER (50 or more FTEs 30 hrs) - Complex
rules and variables exist
This was the individual mandate litigation
ruled upon by the SCOTUS in June of 2012
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Individual Non-Compliance - ACA (2014)

• ? Those who fall under the requirement but
  fail to carry at least the Bronze plans will
  be subject to a penalty (the greater of)
• 95 per year in 2014, 325 in 2015, 695 in
  2016 (half that amount for children under age
  18), up to maximum of three times those penalty
  amounts per family, OR,
• 1 of income above the tax filing threshold in
  2014, 2 in 2015, and 2½ in 2016

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Individual Non-Compliance - ACA (2014)
What are the Potential Financial Penalties to
Individuals who do NOT carry insurance?
- Family of Four (includes 2 children under age
18) 100K Taxable -
Income 2014 2015 2016
100,000 Income 285 975 2,085
100,000 Income 1,000 (1) 2,000 (2) 2,500 (2½)
The penalty is the greater of the two calculations The penalty is the greater of the two calculations The penalty is the greater of the two calculations The penalty is the greater of the two calculations
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Employer Responsibility / Penalties (2014)
? Large Employer (50 EEs) ( Delayed until
2015) - Full time employees (30 hrs) - Part
time employees ? Small Employer (1 to 49 EEs)
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Employer Responsibility / Penalties (2014)
? Possible financial penalties for an ERs that
DOES NOT offer coverage - If ANY FTE
receives premium assistance (due to FPL) from
the government (and through the Exchange) the
ER will face an annual fee of 2,000 imposed
on every full-time EE (excluding the 1st 30
EEs). Penalties are pro-rated monthly. - E
XAMPLE
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Employer Responsibility / Penalties (2014)
For Employers That DO NOT Offer Coverage
- An ER has 65 FTE workers, and does not offer coverage. There is at least one EE who receives premium assistance from the govt
- To determine the financial penalty 65 Total EEs
- Deduct the 1st 30 EEs 30
- Multiply remaining 35 by 2,000 each 35 x 2,000 70,000
- Annual penalty paid by the ER 70,000
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Shared Responsibility Payment
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Employer Responsibility / Penalties (2014)
? Possible financial penalties for an ERs that
DOES offer coverage - If ANY FTE receives
premium assistance (due to FPL) from the
government (and through the Exchange) the ER
will face an annual fee of the lesser of
2,000 imposed on every full-time EE
(excluding the 1st 30 EEs), OR 3,000 for each
FTE that receives a premium subsidy. Penalties
are pro- rated monthly. - EXAMPLE
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Employer Responsibility / Penalties (2014)
For Employers That DO Offer Coverage
- An ER has 65 FTE workers, and does offer coverage. There are 15 EE who receives premium assistance from the government
- To determine the financial penalty 65 Total EEs
- Deduct the 1st 30 EEs 30
- Multiply remaining 35 EEs by 2,000 each 35 x 2,000 70,000
- Penalty paid by the ER 70,000
- OR
- 15 EEs receiving premium asst x 3,000 45,000
- ER assessed penalty lesser of the two 45,000
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Employer Responsibility / Penalties (2014)
? Joes Burgers Shakes - 3
locations - 40 FTEs - 20 PTEs 20 PTEs at
24 hrs per week (1920 hrs / month) 1920 120
16 PTEs 40 FTEs - Joe is now considered a
LARGE EMPLOYER
20 PTE x 24 hrs x 4 1920 hrs / 120 (minimum FTE
work hrs in a calendar month) 16 EEs
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Employer Responsibility / Penalties (2014)
Joes Burgers Shakes Coverage NOT Offered
- ER has 40 FTE workers, and does not offer coverage. There is at least one EE who receives premium assistance from the govt
- To determine the financial penalty 40 Total EEs
- Deduct the 1st 30 EEs 30
- Multiply remaining 10 by 2,000 each 10 x 2,000 20,000
- Annual penalty paid by the ER 20,000
?
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Employer Responsibility / Penalties (2014)
Joes Burgers Shakes Coverage IS Offered
- ER has 40 FTE workers, and does offer coverage. There are 15 EE who receives premium assistance from the government
- To determine the financial penalty 40 Total EEs
- Deduct the 1st 30 EEs 30
- Multiply remaining 10 EEs by 2,000 each 10 x 2,000 20,000
- Penalty paid by the ER 20,000
- OR
- 15 EEs receiving premium asst x 3,000 45,000
- ER assessed penalty lesser of the two 20,000
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Employer Responsibility / Penalties (2014)
How Do Employers Determine Full-Time Status?
Google Towers Watson health care bulletin 7943
- Guidance on Safe-Harbor methods to
determine Full-Time Employee status
- Variable-Hour employees - Seasonal Employees
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Employer Responsibility / Penalties (2014)
Consider this Potential Scenario for the
Uninformed Business Owner in 2014 (Delayed until
2015)
? Mountain Top Resort - Golf Course, Lodge
Spa - 49 FETs - Provides NO Qualified Health
Plan to its EEs - So it pays no ACA shared
responsibility payment - But business improves
so, they hire a new FTE (50) for the entire
year. Look what it will cost as mandated by
the ACA if only ONE FTE receives a
subsidy - 2,000 x 20 (50 30) 40,000
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Employer Responsibility / Penalties (2014)
? FPL and how it will work in 2014 (and
later) - Premium assistance for those
individuals earning less than 400 of FPL.
Currently (2013 numbers), this is income at
45,980 for an individual and 94,200 for a
family of four. - The premium assistance
will INCREASE to eligible individuals /
families as the percentage of FPL goes DOWN.
? The CBOs estimates of the average individual
subsidy 05/2010 was 3,970 10/2012 was
revised to 4,780 02/2013 was revised to
now be 5,510
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Employer Responsibility / Penalties (2014)
? In terms of calculating potential penalties,
part-time employees (and their hours) are only
used to see if an employer is a large
employer. - Penalties (if any) are ONLY
calculated on FTEs - No penalties on part-time
employee, even if that part-time employee
received Premium Assistance. - If no FTE
receives Premium Assistance (only part-time)
the employer will have no possibility of a
penalty.
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Employer Responsibility / Penalties (2014)
? In 2014, Employers (50 FTE) must decide
- Whether to offer medical coverage or
potentially face a financial penalty - If
coverage is provided to employees is it
considered affordable enough to avoid a
potential financial penalty?
NOTE The FPL issue is actually a multiple part
question / test 1) Is the EE under 400 FPL?
2) Does the ER provide a plan that pays least
60 of the health expenses (for the typical
population) 3) Is the EEs required premium
contribution unaffordable - meaning does it
exceed 9.5 of the employees income for
self-only coverage?
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QHP Premium Paid by the Employee Is It
Affordable? - Sarahs annual salary is 40,000.
Her husbands salary with another ER is also
40,000. They have two children under age 18.
They would be eligible for premium assistance due
to the FPL rule. Sarahs ER provides her a
QHP. - Sarahs QHP covers all family members.
The annual cost of the self-only portion is
4,800 annually (400 per month). - The ER pays
90 of Sarahs premium (360 per month) and
Sarah pays the remaining 10 (40 per month).
She pays 100 of the family members
premium. - 9.5 of Sarahs annual income (40,000
x 9.5) is 3,800. That works out to be
316.66 per month. Thus the EE required
premium is considered affordable. Sarah is NOT
eligible for any premium assistance.
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Employer Responsibility / Penalties (2014)
Maximum Premium Payment Under ACA
Percent of Federal Poverty Level in 2012 Maximum Premium As a of Income in 2014
133 2.00
133.01 3.00
150 4.00
200 6.30
250 8.05
300 9.50
400 9.50
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ACA Subsidy ER and EE Rules
? Jimmy Bartender for Beach Grill (has 15
EEs) ? Jimmy is single - his W-2 shows 34,000
(_at_300 FPL) ? Scenario 1 - Beach Grill provides
NO QHP
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ACA Subsidy ER and EE Rules
? Jimmy Bartender for Beach Grill (has 15
EEs) ? Jimmy is single - his W-2 shows 34,000
(_at_300 FPL) ? Scenario 2 - Beach Grill provides
a plan of health that is classified as a
Mini-Med (50,000 annual limits)
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ACA Subsidy ER and EE Rules
? Jimmy Bartender for Beach Grill (has 15
EEs) ? Jimmy is single - his W-2 shows 34,000
(_at_300 FPL) ? Scenario 3 ER provides a Bronze
Plan (QHP) and pays 70 of Jimmys premium. What
Jimmy has to pay works to be 15 of his income.
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ACA Subsidy ER and EE Rules
? Jimmy Bartender for Beach Grill (has 15
EEs) ? Jimmy is single - his W-2 shows 34,000
(_at_300 FPL) ? Scenario 4 Beach Grill provides
a Bronze Plan (QHP) and pays 90 of Jimmys
premium. What Jimmy has to pay works to be 8 of
his income. But Jimmy wants a Gold plan one
that will pay more of covered claims.
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Health Reform Implementation Timeline
2014
? Individual and Employer Requirements ? Insurance
Reforms
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Key Provisions of Insurance Reform (2014)
? Create state-based Health Benefit Exchanges
(Marketplace) SHOP
QUESTIONS What is an Exchange? Who will
operate it? What will it physically look
like? What if a state says NO? (which 27
states including North Carolina have done so)
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States Health Insurance Marketplace Decisions,
May 10, 2013
State-based Marketplace (16 states and DC)
Partnership Marketplace (7 states)
Federally-facilitated Marketplace (27 states)
In Utah, the federal government will run the
marketplace for individuals while the state will
run the small business, or SHOP, marketplace.
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Health Insurance Marketplace (2014)
? Goal of PPACA 1) provide health care to
millions of uninsured Americans, and, 2)
making that coverage more affordable. - Intr
oduce managed retail competition into the
marketplace and encourage better pricing
and quality coverage - Easier
comparison shopping - Offer choices in
standard benefit plans and levels of
coverage - Clear communication regarding
plans and rates
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Health Insurance Marketplace (2014)
PPACA Four Levels (Tiers) of Coverage
Plan Level Percent of Average Medical Cost Covered Consumer Cost-Sharing
Platinum 90 10
Gold 80 20
Silver 70 30
Bronze 60 40
Note Insurance carriers can sell in or out of
the Marketplace. The PPACA will allow states the
option to require additional state specific
mandates. Additionally, insurance carriers (and
agents) may find a niche sales area in the FSA,
supplemental accident, critical illness, or
similar products.
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http//www.zanebenefits.com/blog/bid/315824/North-
Carolina-Health-Insurance-Exchange-Update-Health-P
lan-Rates-Preview
Only three insurance carriers, Blue Cross Blue
Shield, Coventry and FirstCarolinaCare Insurance
Co. in Pinehurst, will participate in the
individual exchange for 2014.
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http//www.forbes.com/sites/theapothecary/2013/09/
25/double-down-obamacare-will-increase-avg-individ
ual-market-insurance-premiums-by-99-for-men-62-for
-women/
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Applicant Qualifying for a Subsidy (FPL) Eff
01-01-2014
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USA Today family glitch
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Applying For, Renewals and Making Changes - ACA
? Applying for and Renewal including new and
revised subsidy
- Oct 1st and then for approximately three month
each year
? What about changes during the calendar year?
- Only for special events M - Marriage A -
Adoption D - Death M - Maternity D - Divorce
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Health Insurance Marketplace (2014)
The Ten Things to Know About Exchanges - a very
good overview and description of the operational
procedures of the Marketplace
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Health Reform Implementation Timeline
2014
? Individual and Employer Requirements ? Insurance
Reforms / Delivery System
Released December 09, 2012 starting 01-01-2014
every Qualified Health Plan will contain a 63.00
annual per-enrollee fee (5.25 per month). It
will continue for 3 years and raise _at_ 25
billion. It will be split as follows 17½ going
to the ACA to for various ACA plans and the
balance (82½) will go to the health insurance
companies to cushion the potential initial
expenses and potential losses regarding
guaranteed issue and no-pre-existing conditions
starting in 2014.
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Google PPACA transitional reinsurance fee
crawford
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• The 2014 Transitional Reinsurance Fee in Action
• - 176 EEs (ER currently pay 80 of premium for
  EE only)
• - 164 Individuals covered
• - 103 Spouses
• - 109 Dependents
• - 476 Total covered heads (2.7 covered heads
  per EE)
• 11 COBRA QB 9 retirees 496 total heads
• 63 x 496 31,248
• - 31,000 plus renewal premium that everyone
  feels will increase in 2014 over 2013 levels!

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Key Provisions of Insurance Reform (2014)
? Create state-based Health Benefit
Marketplaces ? Require Guaranteed Issue and
Guaranteed Renewable plans in the individual,
small groups and Marketplaces - Premiums /
rates must follow required thresholds
concerning ages (3 to 1 limit), rating
area, family composition and tobacco use
(max ratio 1.5 to 1).
Note No FPL subsidy is allowed for the tobacco
surcharge portion on individual plans. Nor is it
eligible for a group coverage participation
UNLESS they enroll in a smoking / tobacco
cessation program.
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How Might Tobacco Use Impact Your Health
Insurance Premiums and Potential Subsidy in 2014
and Beyond?
- Consider this possibility (assuming Nat Avg
Prem - _at_14,000) - Husband wife (no
dependants) / 100,000 annual income thus,
NOT eligible for a premium subsidy - Both are
tobacco users and their health insurance
carrier uses the maximum allowable surcharge
(1.5) - 14,000 x 1.5 21,000 - Options 1)
Pay the premium 2) Shop the Marketplace for a
better deal 3) forgo the insurance and pay the
annual penalty (1,000) But They Risk
Bankruptcy!
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The ACA and Tobacco Rating
? The tobacco surcharge rating can be
state-specific (Meaning YES NO Percentage
less than 1.5) ? A carrier may charge less than
1.5 some have announced there will be no
tobacco rating ? Tobacco usage is defined in
terms of regular usage and time last used
average of 4 in a week / within the last 6
months ? An interesting fact there are no
provisions, questions nor surcharge regarding
the usage of marijuana, cocaine, etc.
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Coverage Requirements (2014)

• ? will be included in ALL PLANS
• various government-sponsored programs
• eligible employer-sponsored plans
• plans in the individual market
• grandfathered group health plans
• others (as recognized by HHS)

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Coverage Requirements (2014)

• ? Coverage must include benefits for
• Ambulatory patient services
• emergency services
• hospitalization
• maternity and newborn care
• mental health and substance use disorder
  services, including behavioral health treatment
• prescription drugs
• rehabilitative services and devices
• laboratory services
• preventive/ wellness/ disease management
• pediatric services, including oral and vision
  care.

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Coverage Requirements (2014)

• Coverage will be required to be maintained by
  all individuals, with EXCEPTION
• - religious objections,
• - financial hardships,
• - undocumented immigrants,
• - American Indians,
• - those incarcerated,
• - citizens not residing in the U.S.,
• - people earning under the tax-filing threshold,
  and,-- those with short gaps in coverage

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Coverage Requirements (2014)
? Recently announced by HHS If an Employer
provides a QHP for its employees, it must also
make available
- Mandatory Dependent Coverage
but the employer is NOT required to make any
contribution toward the dependant coverage
- But there is NO Mandatory Spouse Coverage
Requirement
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Health Reform Implementation Timeline
2014
? Individual and Employer Requirements ? Insurance
Reforms ? Premium Subsidies
NOTE As of January 1, 2014 an individual /
family that receive an ACA subsidy (Exchange)
will have a 90 DAY grace period for premium
payments! For non-subsidy contracts, it will be
30 days.
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Insurer Requirements from Day 1 - 90

• Continue coverage Insurer covers for 1st 30
• Notify HHS of non-payment
• Notify providers of the possibility of denied
  claims during 2nd and 3rd months (providers on
  the hook!)
• Notify the insured he / she is delinquent
• Continue to collect the advanced tax credit on
  behalf of the policyholder (in case they
  catch-up premiums!)
• Return the tax credit for the 2nd and 3rd month
  to the Treasury Department (if insured fails to
  pay)
• Issue a termination notice at end of grace period

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Insurer Requirements from Day 1 - 90

• AND the insurance carrier must also
  determine whether the insured has a disability
  as defined by the Americans With Disability Act
  and if so, then make reasonable
  accommodations for such individuals.

All these mandated provisions could have a
profound impact on the carriers MLR calculation
and ultimate profitability.
http//healthblog.ncpa.org/obamacares-biggest-wron
g-collecting-the-premiums/
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Controlled Groups
? Mom Dad, Inc. 60 EEs in 2013 ? Mom, Inc
30 EEs in 2014 ? Dad, Inc 30 EEs in 2014 ? Be
VERY Careful! Potential HEAVY penalties under
ACA!!
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Employer Responsibility / Penalties (2014)
So Lets Review Potential Employer Penalty
Under 50 FTEs 50 FTEs - No QHP 50 FTEs Provides QHP
No chance of ANY penalty - Chance of a tax credit for certain size groups One FTE receives FPL subsidy through the Marketplace and ER will have a 2,000 annual penalty on ALL FTEs, excluding the first 30 EEs. Penalty pro-rated monthly. - Same rule as to the left, but penalty is the lesser of
No chance of ANY penalty - Chance of a tax credit for certain size groups One FTE receives FPL subsidy through the Marketplace and ER will have a 2,000 annual penalty on ALL FTEs, excluding the first 30 EEs. Penalty pro-rated monthly. 1) Did EE receive FPL subsidy? 2) Is the plan broad enough (60)? 3) Is EEs required portion of premium for QHP deemed unafford-able? If fail on any, 3,000 for EACH qualifying EE. EXAMPLE 100 EEs. 30 qualifies. 30 x 3,000 90,000 (or lesser of table to left). - Exceptions apply
No chance of ANY penalty - Chance of a tax credit for certain size groups EXAMPLE 100 EEs. One EE receives a subsidy. 100 30 70 x 2,000 140,000 (Shared Responsibility Payment which is not deductible) 1) Did EE receive FPL subsidy? 2) Is the plan broad enough (60)? 3) Is EEs required portion of premium for QHP deemed unafford-able? If fail on any, 3,000 for EACH qualifying EE. EXAMPLE 100 EEs. 30 qualifies. 30 x 3,000 90,000 (or lesser of table to left). - Exceptions apply
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Employer Incentives / Penalties (2014)
? In 2014 will be a critical year for Employers
as it relates to National Health Care
Reform - Certain tax incentives will be in
place for a business that has 25 or fewer
FTEs (tax incentives will vary depending on
average income) - Potential penalties will
exist for a business that has 50 or more
FTEs - At present there are no tax incentives
nor potential penalties for a business that
has 26 to 49 FTEs
Premiums Will Still Be Deductible by the ER
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Are Changes Ahead for the ACA?
Various components of the ACA has been challenged
in several courts. SCOTUS ruled (June 28, 2012)
that the individual mandate is constitutional.
There are still a few challenges in the courts
regarding various components of the law. But the
Presidential election has settled the issue
regarding the laws implementation.
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- Affordable Care Act Update- THANK YOU FOR
YOUR ATTENDANCE Jerry Rhinehart, CIC, CLU, ChFC,
RHU Panama City, FL jerhinehart_at_comcast.net