Health Care Reform: Recent Guidance and Next Steps for Employers - PowerPoint PPT Presentation

Health Care Reform: Recent Guidance and Next Steps for Employers Presented by: Chase Cannon, JD, LLM Vice President ,Counsel, NFP Benefits Compliance

Reminders  Please place your phone on mute for the call.  If you would like to ask a question, please feel free to use the chat feature at any time during the call. You may direct your questions directly towards Chase Cannon.  We will also have a Q & A period at the end of the presentation. 2

Biography for Chase Cannon Summary of Experience Chase joined NFP in 2010. He currently works with firms, employers and brokers to help solve their employee benefits-related compliance, regulatory and legal issues. Prior to joining NFP, Chase worked as an attorney at the Internal Revenue Service (IRS), Office of Chief Counsel in Washington, D.C., where he advised IRS agents and attorney litigators and drafted taxpayer guidance, including federal income tax regulations and private letter rulings, on issues relating to health and welfare benefits plans. He also spent two years as a judicial clerk for the Honorable Stephen Swift of the United States Tax Court in Washington, D.C. Professional Affiliations and Credentials Chase holds a Bachelor of Science in political science from the University of Utah, a Juris Doctor from the University of San Diego School of Law and a Master of Laws in Taxation from Georgetown University Law Center. He is a member of the State Bar of Maryland. 3

PPACA Discussion: Agenda  Quick Review of Existing Obligations  Employer Mandate Proposed Regulations 4

5 PPACA Timeline

PPACA: Review of Existing Obligations  Health FSA Annual Limit  Summary of Benefits and Coverage (SBC)  Form W-2 Cost of Coverage Reporting  PPACA Fees, Contributions, and Taxes  Notice of Exchange  Premium Variations for Employer-sponsored Wellness Programs 6

2013: Health FSA Annual Limit • Effective for plan years beginning on or after Jan. 1, 2013, Health FSA participants will be limited to an annual contribution limit of $2,500. • Does not include employer contributions (contributions that cannot be cashed out or allocated to other purposes) • Will be adjusted for cost of living increases in subsequent years 7

Summary of Benefits (SBC): Delivery Four times SBC to Participants & Beneficiaries (Plan years after 9/23/12) • Plan Enrollment • As part of open enrollment materials; if none distributed, then by first day the participant or beneficiary is eligible to enroll in the coverage • Special Enrollment • Must be provided to HIPAA special enrollees no later than 90 days after enrollment • Renewal • Automatic Renewa ls: No later than 30 days prior to the first day of the new policy year • Non-Automatic Renewals : By the distribution date of renewal application or open enrollment materials • Upon Request • Within 7 business days of the request 8

SBC: Modifications and 60-day Advance Notice • Modifications Made at Renewal • No Advance notice required but new SBC required with Open Enrollment Materials • Modifications Made Outside of Renewal • 60 Day Advance Notice Required • May be done through updated SBC or through separate notice • Remember to consider ERISA’s SPD/SMM requirements 9

Summary of Benefits and Coverage How should an SBC be distributed? SBC may be provided in paper format or electronically The same rules apply as how to distribute SPD’s electronically  May email if access is an integral part of their job  May email a notification of where to find on the intranet  The email system results in actual receipt of transmitted information OR 10

11 2013 Form W-2 Reporting: What needs to be reported?

PPACA Fees, Contributions and Taxes  OVERALL IMPACT = 5-7% Increase in Premium Rates  Both Fully and Self-insured Plans  PCOR Fee  Reinsurance Contributions  Only Fully Insured Plans  Health Insurance Tax 12

Patient-Centered Outcomes Research Institute: PCOR Fee Purpose & Due Date  PCOR (aka Comparative Effectiveness Research Fee )  Will fund PCOR Institute (research the effectiveness of medical treatments, procedures, drugs, other strategies)  Applies for plan years ending after 9/30/12 until 9/30/19 Responsibility & Amount  Fully Insured: Insurer (pass through cost to customers)  Self-insured: Plan sponsor (usually the employer)  $2 times the average number of covered lives ($1 for plan years ending before Oct.1, 2013) 13

Reinsurance Contributions Purpose & Due Date  Fund reinsurance program for state exchanges  Essentially it’s insurance for insurers in the individual market  Report due Nov. 15, 2014; Payment due Jan. 15, 2015  Runs for 3 years (2014-2016) Responsibility & Amount  Fully Insured Plans: Insurer (pass through cost to customer)  Self-insured plans: Plan sponsor (usually the employer)  $63 per covered life per year  Tax deductible 14

PCOR Fee & Reinsurance Contributions: Counting Covered Lives Three methods of calculating the number of covered lives:  Actual count method - Calculate the sum of the lives covered for each day of the plan year and divide that sum by the number of days in the plan year.  Snapshot method - Add the totals of lives covered on one date in each quarter, or an equal number of dates for each quarter, and divide the total by the number of dates on which a count was made.  Form 5500 method - Utilize the number of participants reported on the Form 5500 for the plan year 15

Health Insurance Tax (HIT) Purpose & Due Date  Help fund cost of PPACA implementation and exchanges  Each calendar year beginning after Dec. 31, 2013 Responsibility & Amount  Applies ONLY TO Fully Insured Plans  Self-insured plans are exempt  Exact Amount Unknown: Carriers will split target amount  Target Amounts: 2014 = $8 billion; By 2017: $13.9 billion  Not tax deductible (increases impact) 16

Notice of Exchange  DELAYED!!! (Originally due March 1, 2013)  In Summer/Fall, employers must distribute to current employees and subsequent new hires  Applies to employers who are subject to the FLSA  DOL will produce a model notice  Content requirements:  Notifies of the existence of the Exchange  A description of the Exchange’s services  That they may be eligible for a premium tax credit or cost- sharing reduction  Contact information 17

2014: Premium Variations for Wellness Programs  Employers will be able to vary premiums by as much as 30% for employee participation in certain health promotion and disease prevention programs.  Recent guidance authorizes this to increase up to 50% for tobacco-related wellness rewards . 18

Proposed Regulations: Shared Responsibility for Employers Regarding Health Coverage 19

Breaking Down the Employer Mandate Beginning in 2014, applicable large employers that do not provide affordable and minimum essential coverage to substantially all full-time employees (and their dependents) pay a penalty if any full-time employee receives federal premium assistance from an exchange. 20

Transition Rule for Non-calendar Year Plans  For employers that sponsored a non-calendar year plan on Dec. 27, 2012:  No penalty due for the period prior to the first day of the 2014 plan year.  So if you have a non-calendar plan year, employer mandate penalty will not apply until 2014 plan year (assuming the employer sponsored a plan on Dec. 27, 2012). 21

Employer Mandate: Three Questions  Am I an “applicable large employer”?  Who are my full-time employees to whom I must offer coverage?  Is the offer and the coverage sufficient to avoid the employer mandate penalties? 22

23 Applicable Large Employers

Applicable Large Employers  Applicable large employer is an employer that:  Employed at least 50 full-time employees  those working 30 or more hours per week  Taking into account part-time employees (full-time equivalents)  During the previous year  Determination of applicable large employer relies on actual hours of service  Applies to all types of employers, including for profit, non- profit and government entity employers. 24

Full Time Equivalent Employee Count  All part time employees are included in employer size calculation by:  Aggregate number of hours of service in one month for all part-time employees (but no more than 120 hours / employee)  Divide the aggregate number by 120  Add the full-time equivalent count to the full-time employee count  Disregard all fractions 25

Example of Full-Time Equivalent Calculation A law firm employs 42 employees who work more than 30 hours / week.  The law firm also has 15 part time employees who average around 15  hours / week. The total number of part-time hours for the month of January is 900.  Divide the total number of part-time hours for the month by 120 (900 /  120 = 7.5). In this scenario we have 7.5 full-time equivalent employees. Add the number of full-time equivalent employees to full-time  employees to determine if the employer hits the 50-employee threshold. 42 + 7.5 = 49.5. Disregard the fractions. 49.5 full-time employees (including full-time  equivalents) would be rounded down to 49 total full-time employees. 26