Employers and Health Care Reform

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Employers and Health Care Reform

• Ruselle W. Robinson, Esquire
• Posternak Blankstein Lund, LLP
• Boston, MA
• [phone]
• RRobinson_at_pbl.com
• www.pbl.com

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Employers and Health Care Reform

• Contents
• Background 3
• Insurance ReformGroup Health Plans 9
• Small Business Tax Credit 17
• W-2 Reporting Changes 19
• Medicare Payroll Tax Increase 20
• Employer ResponsibilitiesJanuary 1, 2013 21
• Individual Mandate 22
• State Insurance Exchanges 23
• Employer ResponsibilitiesJanuary 1, 2014 26
• Cost Control Measures 30
• Quality Improvement Measures 31

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Employers and Health Care Reform

• Background
• Why Now For Health Care Reform?
• Implementation Rollout

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Employers and Health Care Reform

• Why Now?
• US has the most expensive health care system in
  the world, measured on a cost per capita basis.
  In 2007, the US spent an estimated 7,290 per
  person on health care. Australia was a distant
  second at 3,357 per person.
• US health care spending is projected to rise from
  16 of GDP in 2007 to 25 in 2025.
• The Federal Governments share of health care
  expenditures is projected to exceed 50 of all
  health care expenditures in 2012 as public
  expenditures are rising at a more rapid rate than
  the private health care market.
• The US economy cannot afford the current rate of
  growth in health care expenditures.

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Employers and Health Care Reform

• Other Problems With the U.S. System
• The number of uninsured Americans is estimated to
  be more than 50 million in 2010, or more than 16
  of the population. The uninsured have worse
  health outcomes because they lack regular access
  to the health care system.
• US trails other countries in measurable health
  care outcomes. CIA World Factbook (2009) placed
  the US 49th in overall life expectancy and 46th
  in infant mortality.
• Our large health care expenditures do not lead to
  overall better health outcomes. In other words,
  we dont get what we pay for.

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Employers and Health Care Reform

• Other Countries Have Met the Challenge of
  Providing
• Universal Coverage and Controlling Costs
• England Government Provides Direct Health Care
• Canada Single Payer System
• Germany Regulation of Health Insurance
• Each of these countries has developed a health
  care system with universal coverage and
  reasonable costs based upon its history and
  culture.

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Employers and Health Care Reform

• Goals of US Health Care Reform
• Retain Structure of Present Health Care Insurance
  and Delivery System
• Keep Present Players in the System Employers,
  Employees, Health Insurers, Government, Medical
  Providers
• Reduce Number of Uninsured Through Insurance
  Reform
• Increase Affordability of Health Insurance for
  Individuals
• Reduce Overall Costs
• Improve Quality of Care Within the Health Care
  Delivery System

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Employers and Health Care Reform

• Implementation
• Implemented in stages beginning January 1, 2010
  and continuing into 2018
• Major Dates are September 23, 2010 and January 1,
  2014

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Employers and Health Care Reform

• Primary Focus Insurance Reform
• Gives Incentives to Employers to Retain Health
  Insurance Benefit Penalizes those Employers That
  Dont Offer a Health Insurance Benefit
• Expands Government Programs to Include
  Individuals Who Meet New Income Guidelines
• Sets up Insurance Exchanges for People Who Either
  do not Have or Cannot Afford Employer-based
  Insurance and Are Not Eligible for
  Government-Sponsored Health Insurance. Premiums
  Set on A Sliding Scale Based on Income
• Individuals Required to Have Health Insurance
  (Individual Mandate)

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Employers and Health Care Reform

• Group Health Plans
• Many of the mandates imposed by health care
  reform are imposed through Group Health Plan
  coverage requirements. A Group Health Plan is a
  program maintained by an employer or employee
  organization (e.g., a union) established and
  maintained to provide medical care to employees
  and their dependents. Includes fully-insured and
  self-insured plans.
• The definition does not include stand-alone
  supplemental health insurance plans, such as
  dental or vision plans, and does not include
  retiree-only health insurance plans because
  retirees are not employees.
• Group health plans in effect on March 23, 2010
  grandfathered from many of health care reform
  mandates

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Employers and Health Care Reform

• Grandfathered Group Health Plans
• Group Health Plans in effect on March 23, 2010
  are grandfathered from some, but not all, health
  care reform mandates. A group health plan must
  stay basically unchanged in the benefits it
  offers in order to remain grandfathered.
• A grandfathered health plan must disclose its
  status in all plan materials describing plan
  benefits to participants and beneficiaries.
• All grandfathered health plans must maintain
  records that verify the plan complies with the
  rules to remain grandfathered.
• Special grandfather rules apply to fully-insured
  Group Health Plans maintained pursuant to
  collective bargaining agreements.

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Employers and Health Care Reform

• Grandfathered Group Health Plans, Continued
• Examples of changes a grandfathered group health
  plan can make and remain grandfathered
• Renew an insurance policy in effect on March 23,
  2010
• Change premium rates
• Change third-party administrator
• Add family members of an individual employee
• Enroll new employees
• Change insurance carriers (without substantial
  changes to the existing plan)
• Examples of changes that cause loss of
  grandfathered status
• Significantly increase costs or reduce benefits
  under the plan
• Eliminate substantially all of the benefits to
  treat a particular condition
• Increase percentage cost-sharing requirements
  (e.g., co-pays)
• Decrease the premium contribution rate of
  employer by more than 5
• Introduce or reduce an annual limit on benefits

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Employers and Health Care Reform

• September 23, 2010
• New Requirements Affecting All Group Health Plans
• Apply to both fully-insured and self-insured
  plans
• No lifetime limits on benefits
• No annual limits on benefits phased in 2010-2014
• Prohibition on denying coverage or enrollment
  because of pre-existing conditions now for
  under-19 for everyone January 1, 2014
• Dependent children must be covered until the
  child turns 26. Children under 26 not presently
  enrolled must be given opportunity to enroll

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Employers and Health Care Reform

• September 23, 2010
• New Requirements Affecting All Group Health
  Plans, continued
• No rescission of existing coverage unless due to
  fraud or misrepresentation of material fact
• Health insurance issuers must spend at least 85
  of premium revenue (large group market/employers
  with 100 or more employees) as reimbursement for
  clinical services or for activities that improve
  the quality of health care and (80 in small
  group market/employers with less than 100
  employees), or provide a rebate to each enrollee
  if the medical loss ratio is less (effective as
  of January 1, 2011)
• Limited benefit plans can apply for waivers
  through 2013

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Employers and Health Care Reform

• September 23, 2010
• New Requirements That Apply Only to
  Non-Grandfathered Plans
• Fully-insured plans cannot discriminate in favor
  of highly-paid employees when determining
  eligibility to participate or the level of
  benefits under the plan (self-insured plans
  already prohibited from discrimination by ERISA).
  Penalty for fully-insured plan is fine of 100
  per day per employee discriminated against.
  Maximum penalty is 500,000.
• Employee taxed on value of excess benefit
• Highly compensated includes 5 highest paid
  officers, holder of 10 or more of companys
  stock and highest paid 25 of all employees
• In general, the employer must offer the same
  benefits to all employees on the financial same
  terms (employee premium contribution, co-pays,
  deductibles)
• Some companies are considering charging higher
  premiums to highly compensated individuals
• NOTE IRS has postponed effective date of this
  requirement while it sorts out definition of
  discrimination.
• First Dollar coverage required for
  immunizations, evidence-based preventive care
  for children and adolescents and for preventive
  care and screenings for women (e.g., mammograms).
  First dollar means no deductibles or co-pays
  for the service. Intended to encourage the
  practice of preventive medicine.

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Employers and Health Care Reform

• September 23, 2010
• Non-Grandfathered Plans, continued
• Plans must establish internal claims and appeals
  process and have an external review process.
• Patients must have right to choose primary care
  physicians from within a network, to access
  obstetrical and gynecological services without a
  referral or authorization from another physician,
  and to access emergency services without prior
  authorization.

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Employers and Health Care Reform

• January 1, 2010
• Small Business Tax Credit
• Transitional credit effective beginning with 2010
  tax year. Phased out when State Insurance
  Exchanges come on line.
• Available to employers with fewer than 25
  full-time equivalent employees with average wages
  of less than 50,000. A full-time equivalent
  equals 2,080 payroll hours.
• The tax credit is on a sliding scale beginning
  with employers with 10 or fewer employees and
  average wages of less than 25,000.
• In 2010 through 2013, the employer can receive a
  tax credit of up to 35 of their premium
  contribution to the companys group health plan.
• Beginning in 2014, the employer may qualify for
  two years for a tax credit of up to 50 of their
  premium contribution to the companys group
  health plan.

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Employers and Health Care Reform

• January 1, 2010
• Small Business Tax Credit, continued
• To qualify in 2010-2013, Employer must offer
  qualified health plan (not defined as of yet)
  and contribute at least 50 of the premium cost
  of the plan. In 2014, a qualified health plan
  will be a plan offered through an Exchange.

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Employers and Health Care Reform

• January 1, 2011
• W-2 Reporting
• Affects Grandfathered and Non-Grandfathered Plans
• Beginning with 2011 tax year, every employer may
  voluntarily report the aggregate cost (employer
  plus employee share) of the employers health
  insurance benefits on employee Form W-2s.
  Reporting is required for most employers
  beginning January 1, 2012. Effective date for
  employers issuing fewer than 250 W-2s in 2011
  will be later.
• For fully-insured plans, total cost is total
  premium paid. For self-insured plans, total cost
  is determined using formula similar to rules used
  for calculating COBRA premiums. Includes medical
  insurance, dental and vision plans.

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Employers and Health Care Reform

• January 1, 2013
• Medicare Payroll Tax Increase
• Medicare Hospital Payroll tax increases by .9 on
  individuals that earn over 200,000 and joint
  filers that earn over 250,000 (no indexing for
  inflation).
• New Medicare tax of 3.8 on investment income for
  individuals that earn over 200,000 and joint
  filers that earn over 250,000 (no indexing for
  inflation)
• Flexible spending account limited to 2,500
  annually (indexed for inflation)

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Employers and Health Care Reform

• January 1, 2013
• Employer Responsibilities
• Employer must notify employee of existence of
  State Insurance Exchanges and federal premium
  subsidies (both take effect January 1, 2014)
• Open enrollment for State Insurance Exchanges

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Employers and Health Care Reform

• January 1, 2014
• Individual Mandate
• Individual must have minimum essential coverage
  for themselves and their dependents.
• Insurance can be obtained through Employer, an
  Exchange, or a government program such as
  Medicare and Medicaid.
• Individuals who dont have insurance will pay a
  penalty.

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Employers and Health Care Reform

• January 1, 2014
• State Insurance Exchanges
• Each state is required to establish an Exchange
  by this date. Federal government will set it up
  if a state fails to act.
• A health insurer seeking to participate in an
  Exchange must be approved by that state as
  meeting certain criteria, including providing a
  set of defined benefits and meeting cost-sharing
  requirements (i.e., deductibles and co-pays).
• The states generally will not regulate the
  premiums charged by insurers listed on their
  Exchanges.

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Employers and Health Care Reform

• January 1, 2014
• State Insurance Exchanges, continued
• Eligibility for the Exchanges will be limited to
• Employees of companies with fewer than 100
  employees
• Employees of companies that do not provide health
  insurance
• Self-employed
• Unemployed
• Retired, but not eligible for Medicare
• Small businesses
• All business eligible after January 1, 2017

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Employers and Health Care Reform

• January 1, 2014
• State Insurance Exchanges, continued
• Policies available on a sliding scale for
  individuals and families with subsidies available
  for households with income equal to 133-400 of
  federal poverty level (400 of federal poverty
  level88,000 for a family of 4)

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Employers and Health Care Reform

• January 1, 2014
• Employer Responsibilities
• No legal obligation to provide health insurance
• Large employer can be penalized for not
  offering health care insurance benefit for
  offering a health insurance benefit that does not
  include minimum essential coverage (still to be
  defined) or for offering a health insurance
  benefit that is not affordable to its employees.
• Large employer means 50 or more full-time
  equivalent employees
• Full-time is 30 hours or more per week on average

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Employers and Health Care Reform

• January 1, 2014
• Employer Responsibilities, continued
• Employers with more than 200 employees must
  automatically enroll their eligible employees in
  a health insurance coverage option when they
  become eligible. Employer must give employee a
  notice of enrollment and opportunity to opt-out.
  The effective date for this requirement may be
  delayed while the Department of Labor works on
  defining key terms (e.g., full-time employee).
• Health Insurance enrollment waiting period cannot
  exceed 90 days.
• Employers begin reporting of individual health
  insurance coverage to Internal Revenue Service.
  Purpose is for enforcement of individual mandate.

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Employers and Health Care Reform

• January 1, 2014
• Employer Penalty
• Employer liable for penalty if does not offer
  health insurance benefit, or if offered benefit
  does not meet certain standards.
• Penalty if no health insurance benefit or
  insurance benefit does not provide minimum
  essential coverage
• If one or more employees enrolls in an insurance
  exchange and qualifies for government subsidized
  policy
• Then, employer penalty equals 2,000 for each of
  its full-time employees (first 30 employees are
  exempt)
• Penalty if health insurance benefit is not
  affordable
• Employer offers health insurance benefit with
  minimum essential coverage, and
• If one or more employees enrolls in insurance
  exchange and qualifies for government subsidized
  policy because employees share of the premium
  for employers benefit exceeded 9.5 of household
  income, or
• the employers plan does not cover at
  least 60 of health care expenses
• Then, employer penalty equals 3,000 for each
  full-time employee who receives a government
  subsidy

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Employers and Health Care Reform

• January 1, 2014
• Employer Penalty, Continued
• Employer can avoid penalty if
• The Employer provides a health care benefit with
  minimum essential coverage
• The Employer pays 60 or more of the cost of
  health care under its health insurance plan, and
• The employee premium contribution does not exceed
  9.5 of the employees household income
• The Employer is not penalized unless an employee
  enrolls in an insurance exchange and qualifies
  for subsidized coverage

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Employers and Health Care Reform

• Cost Control Measures
• Reducing health care costs is a process that will
  take years to implement.
• Cost control elements of health care reform
  include the following
• Contains measures against Medicare Fraud and
  Abuse
• Promotes electronic health care records, which
  reduce medical errors and improve coordination of
  patient care
• Changes payment formulas for complex imaging
  studies to reduce payments
• Reduces subsidies for Medicare Advantage Plans
  (Part C)
• Imposes excise tax on Cadillac health insurance
  plans (2018)
• Promotes integrated, patient-centered care model
  to reduce excesses of fee-for-service payment
  system
• Funds research into evidence-based care so that
  patient care becomes more standardized goal is
  to reduce care that does not produce results

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Employers and Health Care Reform

• Quality Improvement Measures
• Modifies payment system for hospitals and
  physicians to reward quality
• Creates incentives to reduce hospital-acquired
  medical conditions
• Creates incentives for hospitals to reduce
  readmissions for the same condition
• Sets up reporting requirements for quality data,
  and offers financial incentives to cooperating
  providers
• Funds pilot program to create financial
  incentives to promote integrated patient care
  model with a bundled payment
• Orders creation of program offering shared
  savings for accountable care organizations with
  primary care physicians at the center