The Health Care Reform Act

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The Health Care Reform Act

• What You Need To Know
• James P. Gelfand, Director of Health Policy

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Learning Objectives

• Identify key provisions of the legislation that
  will affect your organization
• Determine the course of action needed to comply
  with the new regulations
• Understand the implications of non-compliance
  with the regulations
• Determine the financial implications of the new
  law

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What the Chamber supported

• Bending the cost curve
• A focus on wellness and prevention
• Insurance market reforms coupled with individual
  responsibility
• Payment reforms (addressing cost-shifting P4P)
• Medical liability reform
• Health IT
• Improved affordability subsidies
• Comparative effectiveness research

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The Patient Protection and Affordable Care of
2010(H.R. 3590)

• Signed into law (P.L. 111-148) on Mar. 22, 2010
• Extends health insurance coverage to about 32
  million currently uninsured.
• Subsidies provides subsidies for up to 400 of
  FPL
• Medicaid Expansion Up to 133FPL (14,000
  ind./29,000 family)
• Individual Mandate Starting 2014, with penalty
  of 695 ind./2,915 family
• Employer Mandate (Free rider) Penalty for lack
  of affordable coverage if 50 or more employees
• Creates State Insurance Exchanges Available in
  2014, state marketplace for purchasing insurance

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The Patient Protection and Affordable Care of
2010(H.R. 3590) continued

• Insurance Reforms
• No rescissions (unless fraud 2010)
• Dependents covered until age 26 (2010)
• No pre-existing condition exclusions (2010 for
  children 2014 for everyone)
• No lifetime limits (2010) or annual limits (2014
  for group plans)
• Requires preventative coverage (2010)
• Guarantee Issue and rating limitations (2014)
• Small Employer Credits Up to 50 of employers
  contributions (up to 5 yrs.)
• Minimum Benefits Package All health plans
  offered through exchanges to provide the
  essential benefits

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Cost ....

• According to the Congressional Budget Office
  (CBO)
• Cost 938 billion/10 years
• Deficit reduction 124 billion/1st-10years,
  1.2 trillion/2nd-10 years
• Doc Fix will cost over 275 billion
• 569 billion in new taxes and tax increases
• 528 billion total cuts to Medicare
• Creates 16,500 new jobs for the IRS
• Billions more in spending authorized, but not
  appropriated.

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Pay Fors 569 billion/10 years

• 10 excise tax on tanning services 2.7
  billion/10 (2010)
• Modification of tax treatment in certain health
  organizations 400 million/10 (2010)
• Codify economic substance doctrine 4.5
  billion/10 (2010)
• Repeal of black liquor credit 23.6
  billion/10 (2011)
• Conforming definitions for medical expenses
  5.0 billion/10 (2011)
• Additional tax on distributions from HSAs and
  MSAs other expenses 1.4 billion/10 (2011)
• Excise tax on manufacturers and importers of
  drugs 27.0 billion/10 (2011)
• Corporate reporting requirements (1099
  issue) 17.1 billion/10 (2012)
• Limit flexible spending in cafeteria plans to
  2,500 13 billion/10 (2013)
• Excise tax on medical device manufacturers
  20 billion/10 (2013)
• Medicare tax on HI earners 210.2 billion/10
  (2013)
• Eliminate Part D subsidy deduction 4.5
  billion/10 (2013)
• Limitations on executive compensation 600
  million/10 (2013)
• 10 medical expense deduction 15.2
  billion/10 (2013)
• Excise tax on insurance providers 60.1
  billion/10 (2014)
• Free Rider penalties 52 billion/10 (2014)
• Individual Mandate penalties 17
  billion/10 (2014)
• 40 excise tax on Cadillac plans 32
  billion/10 (2018)
• Effects on coverage provisions in revenue 46
  billion/10 (Misc.)

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1099 reporting requirement

• Burdensome reporting requirement that increases
  the cost of doing business
• Section 9006 requirement Submit a separate 1099
  form for every single business-to-business
  transaction in aggregate of 600 each year
  GOODS and SERVICES
• Could affect over 40 million businesses
• House bill H.R. 5141 repeal Section 9006
  (Rep. Lungren) / Senate bill S. 3578 (Sen.
  Johanns)

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Implementation What happens and when?

• Implementation will be a 10 year process
• Immediate changes 2010-2011
• Longer term changes 2012-2013
• Most significant changes 2014-2018 and beyond
• Individual Mandate
• Employer Mandate
• Subsidies, Exchanges, Medicaid expansion

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Immediate changes

• Insurance Reforms 6 months after enactment
• Prohibits lifetime limits, rescissions, and
  excessive waiting periods
• Dependents covered until 26
• No preexisting conditions for under 19 yrs. old
• First dollar coverage for preventative care
• Grandfathered plans

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Small business tax credit

• Available to small companies and tax exempt
  organizations (2010-2015). 2 Phases.
• PHASE 1 (2010-2013)
• Employers with less than 25 full-time employees
  w/ avg. wage of 50,000 or less, and company pays
  min. of 50 of premiums are eligible for tax
  credit up to 35 of premiums.
• Maximum credit if you have 10 or less full-time
  employees w/ avg. wage of 25,000.
• Credit claimed on business tax return, not
  employment tax return.
• PHASE 2 (2014-2015)
• Same criteria above but only available to
  employers purchasing insurance through the
  exchange.
• Credit increases up to 50 of premiums but only
  good for 2 years.

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Important choices for businesses

• What is the Employer Free Rider Mandate?
• Offering vs. Non Offering firms
• Plan cost considerations for those who are
  offering
• Other issues impacting employers

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Employer Free Rider Mandate

• Employers with lt50 Full-Time Equivalents (FTE)
  are exempt from offering.
• Employers with 50 or more FTE, who do not offer,
  no fines levied if all employees incomes are
  over 400 of FPL (88 K/family of 4).
• For employers with 50 or more FTE who dont
  offer, if any employee receives tax credit
  through exchange, fine is equal to 2,000 times
  the of employees minus 30. These penalties are
  also incurred if the employer is not offering a
  Qualified health plan.
• If an employer with 50 or more FTE does offer
  health insurance, but it is not affordable
  (employees share is more than 9.5 of income),
  and the employee goes into exchange (and gets tax
  credit), the penalty is 3,000.

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Employer Mandate and Penalties
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Plan considerations for offering

• Whether you are a self-insured or fully insured,
  may trigger different requirements. Here are
  some items to think about
• Self-Insuring New requirements for self-insured
  plans Reporting value on W-2, will not need to
  cover essential benefits but will need to meet
  actuarial value (60), will be exempt from new
  tax on insurers, but may be subject to Cadillac
  Tax in 2018
• Sending Employees to the Exchange Starting
  2017, large employers (over 100) may be able to
  participate in the exchange
• Grandfathering of plans What changes to your
  plan will trigger loss of grandfather status?

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Grandfathering rule How it works

• Plans will lose their grandfather status if they
  choose to make significant changes that reduce
  benefits or increase costs to employees.
• Changing carriers
• Any changes in coinsurance that increases
  employee share of medical payments (i.e. Going
  from 80/20 to 70/30)
• Any increase in a fixed payment amount (except
  co-payments) of more than medical inflation plus
  15 applies to deductible, max out of pocket,
  etc. (since 3/23/10)
• Any increase in co-payment that exceeds the
  greater of medical inflation plus 15 or 5 plus
  medical inflation (since 3/23/10)
• Decrease employer contribution to premiums by
  more than 5 below the level (since 3/23/10)
• Eliminating any benefit for diagnosis or
  treatment or any part of treatment for a
  particular condition (since 3/23/10)

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Issues impacting employer plans

• Long-Term Care Starting 2011, employers
  permitted to automatically enroll employees into
  CLASS program
• Retiree Prescription Drug Plans In 2013,
  employers who receive 28 for RDPs will no
  longer be able to deduct subsidy
• Compensation Salary vs. Benefits Employers
  may prefer compensation through income rather
  than health benefits.
• Consumer-Directed Account Options Penalties for
  non-qualified purchases limits on contributions

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Whats next?

• Political 2 election cycles before 2014
• Legislative Ongoing fixes in future Congresses,
  opportunities to improve the law.
• Regulatory Guidance Rulemaking DOL, HHS,
  IRS
• Good Faith Compliance/Medical Loss Ratio
• Legal Legal challenge 21 states have filed
  suit on constitutionality

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Chamber resources

• Vote For Business
• www.voteforbusiness.com
• Health Care Toolkit
• www.uschamber.com/chambers/healthcare
• Primer Critical Employer Issues in the Patient
  Protection and Affordable Care Act
• http//www.uschamber.com/publications/reports/1004
  26_critical_employer_issues_ppaca.htm
• Health Reform Impacts
• www.healthreformimpacts.com

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• Questions?