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™ HEALTH CARE REFORM B.O.S.S. Workshops (Business Owner Strategy Sessions) Healthcare Reform How does the recent Supreme Court Ruling affect your Business? Speaker: Bruce Davis, Principal Findley Davies September 13 www.BOSSworkshops.com

Health Care Reform: Impact on Your Business September 13, 2012

HEALTH CARE REFORM HEALTH CARE REFORM 3 Your Presenter  Bruce Davis: Principal, Leader of Findley Davies’ Health/Group Benefits Consulting Practice  419.327.4133  bdavis@findleydavies.com

HEALTH CARE REFORM HEALTH CARE REFORM 4 Agenda  Welcome  Recap of the Supreme Court decision  What It Means for Employers  2012 and 2013  2014 and Beyond  Communicating with Employees  Questions & Answers

HEALTH CARE REFORM HEALTH CARE REFORM 5 Decision of the United States Supreme Court  Addressed the constitutionality of two key provisions of the Patient Protection and Affordable Care Act (“ACA”)  The individual mandate to maintain minimum 5 essential health insurance; and  The expansion of the Medicaid program.

HEALTH CARE REFORM HEALTH CARE REFORM 6

HEALTH CARE REFORM HEALTH CARE REFORM 7 Decision of the United States Supreme Court  The Individual Mandate:  Constitutional under “Commerce Clause”? No  Constitutional under “Necessary and Proper” power? No  Constitutional as a tax? Yes

HEALTH CARE REFORM HEALTH CARE REFORM 8 Decision of the United States Supreme Court  The expansion of Medicaid is NOT constitutional under Congress’ spending power.  Spending power is Congress’ ability to grant Federal funds to the States. Congress may condition receipt of funds on States taking certain actions.

HEALTH CARE REFORM HEALTH CARE REFORM 9 What the Supreme Court Decision Means for Employers 2012 – 2014

HEALTH CARE REFORM HEALTH CARE REFORM 10 Significant Communication Obligations  A Uniform Summary of Benefits and Coverage (SBC) & Glossary must be provided for Open Enrollments beginning on or after 9/23/2012  If insured, carrier will provide SBC  If self-funded, check with your claims administrator as to whether they will provide SBC  If Rx benefits have been carved-out, the Pharmacy Benefits Manager may not provide SBC information  Instead of providing separate Medical and Rx SBCs, employer may need to merge Rx only information into the Medical SBC provided by the Medical claims administrator

HEALTH CARE REFORM HEALTH CARE REFORM 11 Significant Reporting Obligations  Employers > 250 employees must report value of aggregate cost of employer-sponsored health benefits on W-2s for 2012 (issued in January 2013)  This does not mean the value of health coverage will become taxable income  Does not apply to Health Care FSAs if contributions only occur through salary reduction (i.e. IRC 125 pre-tax elections);  Does not include Dental and/or Vision coverage that is considered limited scope or unbundled from Medical/Rx benefits

HEALTH CARE REFORM HEALTH CARE REFORM 12 Reporting Obligations, cont’d  Does not include any amounts contributed to a Health Savings Account (but continue reporting on HSAs in box 12 using code W); and  Does not include costs under an EAP, wellness program, or on-site medical clinic if the employer does not charge a premium for that coverage under COBRA

HEALTH CARE REFORM HEALTH CARE REFORM 13 Reporting Obligations, cont’d  W atch for guidance on filing a “Quality of Health Care Report”  Requirement was to have taken effect for plan years beginning after 3/23/2012, but guidance from HHS was delayed  Employers are required to report on “quality, safety, health promotion and case management activities”

HEALTH CARE REFORM HEALTH CARE REFORM 14 New Preventive Care Requirements  Non-grandfathered employers become subject to HHS women’s preventive care requirements for plan years beginning on or after 8/1/2012  No cost-sharing (either copays or coinsurance) may be imposed on:  Well woman visits;  Screening for gestational diabetes;  HPV DNA testing for women age 30 years and older;  Sexually-transmitted infection counseling;  HIV screening and counseling;  FDA-approved contraception methods and counseling;  Breastfeeding support, supplies, and counseling; and  Domestic violence screening and counseling

HEALTH CARE REFORM HEALTH CARE REFORM 15 Reduced Health Care FSA Limit  Effective 1/1/2013 Health Care Flexible Spending Accounts are limited to $2,500  This amount will be indexed for inflation  Include information about the limitation in this year’s Open Enrollment materials and update Benefit Toolkits  Remind employees about the ability to use their HSAs to help pay for orthodontia, etc.

HEALTH CARE REFORM HEALTH CARE REFORM 16 Non-Discrimination Rules for Insured Plans  Be ready to amend or terminate insured plans that discriminate in favor of highly compensated employees  PPACA non-discrimination rules were going to take effect in 2011, but guidance was delayed  We expect guidance soon, now that SCOTUS has ruled  We also expect the rules to be similar to those governing self-funded plans: Section 105(h) where the value of discriminatory benefits is taxable to the executive  Be mindful of IRC 125 non-discrimination rules, too

HEALTH CARE REFORM HEALTH CARE REFORM 17 Imposition of New Fees  First of the new Comparative Effectiveness Research fees due July 31, 2013  Requirement began with 1/1/2012-12/31/2012 plan year  Applies to insured and self-funded health plans  Does not apply to HIPAA-excepted benefits  Employers will use IRS Form 720 to remit the initial $1/member (i.e. employees & dependents) fee.  Fee increases to $2/member for 1/1/2013-12/31/2013 plan year

HEALTH CARE REFORM HEALTH CARE REFORM 18 Medicare Tax Increase - 2013  Tax on Employment Income  For employment income in excess of $250,000, if married, or $200,000, if single: - W- 2 employee’s share of Medicare withholding tax will increase from 1.45% to 2.35%. - Medicare tax on self-employment income will increase from 2.9% to 3.8%.  Tax on Investment Income  Medicare tax imposed at 3.8% on net investment income for taxpayers with modified adjusted gross income over $250,000, if married, or $200,000, if single.

HEALTH CARE REFORM HEALTH CARE REFORM 19 Medicare Tax Increase - 2013  Investment Income:  Interest  Dividends  Annuities  Royalties  Rents  Passive activity income  Income from trading in financial instruments and commodities  Gain from the sale of an interest that produces such income  Does not include amounts otherwise excluded from income.  Reduced by deductions allocable to such income.

HEALTH CARE REFORM HEALTH CARE REFORM 20 2014: The “Pay or Play” Penalty Scheme for Employers  Imposed only on “Applicable Large Employers.”  At least 50 full-time equivalent employees during the preceding calendar year.  A full-time employee works 30 or more hours per week.  Part-time employees are aggregated together on pro- rated basis to equal full-time equivalent employees.

HEALTH CARE REFORM HEALTH CARE REFORM 21 2014: The “Pay or Play” Penalty Scheme for Employers, cont’d  If an Applicable Large Employer does not offer minimum essential coverage to all of its full-time employees and their dependents, it may be subject to an excise tax.  The tax is: # of actual full-time employees (minus 30) and multiplied by 1/12 th of $2,000 for each month that such coverage is not offered.  Example : 60 actual full-time employees and the employer does not offer coverage for 6 months. 60 – 30 = 30 x $2,000 x 6/12 = $30,000 tax.

HEALTH CARE REFORM HEALTH CARE REFORM 22 2014: The “Pay or Play” Penalty Scheme for Employers, cont’d  An individual is eligible to receive a premium credit if:  Household income is between 138% and 400% of the federal poverty level;  The individual is not enrolled in the employer’s group health plan; and  The individual’s required premium cost for his or her employer group health plan exceeds 9.5% of the individual’s W -2 income, or the employer plan’s share of covered health expenses is less than 60%.

HEALTH CARE REFORM HEALTH CARE REFORM 23 2014: The “Pay or Play” Penalty Scheme for Employers, cont’d  If the employer’s sponsored group health plan meets either of the following criteria: The employee’s required premium cost exceeds 1. 9.5% of the employee’s W -2 income; or The employer plan’s share of covered expenses is 2. less than 60%.  Then an excise tax is imposed on the employer equal to the number of full-time employees who receive a premium credit x 1/12 of $3,000 for each month during the year that such coverage is “unaffordable.”

HEALTH CARE REFORM HEALTH CARE REFORM 24 The Individual Responsibility Tax  Failure to maintain minimum essential coverage results in the greater of two penalty calculations – the Flat Dollar Amount or the Percentage of Income test (not to exceed the cost of the national average premium for a plan that provides 60% of the actuarial value of benefits covered).  The Flat Dollar Amount is a fixed amount ($95 per person in 2014, $695 per person in 2016) x 1/12 th for each month that coverage is not maintained. Per person penalty is reduced by 50% for each person under age 18.  The Flat Dollar Amount may not exceed 300% of the annual flat dollar amount.