Getting Ready for 2014: The Big Year for Healthcare Reform Anne Arundel County SHRM David Johnson jdjohnson@rcmd.com November 15, 2012 0
Topics for Discussion 1. Recap of Supreme Court Decision on Affordable Care Act (ACA) 2. Overview of Changes Coming in 2014 3. Individual Mandate and Subsidies 4. Health Benefit Exchanges 5. Employer Pay or Play Provisions 6. Projecting Financial Impact of Pay or Play Provisions 7. Delivery System Changes including Accountable Care Organizations 8. Employer Readiness for 2014 1
Recap of Supreme Court Decision 2
Issues Supreme Court Agreed to Consider on ACA 1. Could the Court decide cases now or must it wait until 2015 after first penalty (tax) is imposed? 2. Is the “individual mandate” constitutional? 3. If the individual mandate is unconstitutional, could it be “severed” from the rest of the law, or must the entire law fall? 4. Is the expansion of Medicaid contained in the ACA constitutional? 3
Summary of Court’s Decision 1. Individual mandate ruled constitutional in 5-4 decision 2. Severability question irrelevant and remainder of ACA allowed to stand 3. Federal government cannot require states to expand Medicaid 4. Federal government cannot deny all Medicaid funds for a state that refuses Medicaid expansion contained in ACA 5. Creates the possibility that some states will opt out of ACA Medicaid expansion 4
Medicaid Expansion Ruling’s Impact on Employers 1. ACA expands Medicaid to any individual with income of < 138% of FPL 2. Federal government pays 100% of cost of new 138% of FPL by Medicaid eligibles through 2016 reducing to 90% by Household Size 1 $15,028 2020 2 $20,300 3 $25,571 3. Medicaid eligibility is based on where individual 4 $30,843 lives, not where the employer is located 5 $36,115 6 $41,386 4. A number of states have already adopted expanded eligibility 5
Health Insurance Premium Payment Program (HIPP) 1. State can enroll Medicaid recipient in his or her employer plan under HIPP 2. Medicaid expansion will result in more low income active employees qualifying for Medicaid, increasing possibility that state will enroll those recipients in employer plans 3. Impact on employers will vary from state to state a. Depending on how many low income employees the employer has and current participation rate b. Greatest possible impact = Employer with large number of low income employees eligible for insurance and low participation rate in states with expanded eligibility c. Least impact = Employer with few low income employees or in state with limited Medicaid eligibility 6
Overview of Changes Coming in 2014 7
Major Changes Coming in 2014 1. Individual health coverage mandate 2. Federal premium subsidies for low- and middle-income individuals 3. Health Benefit Exchanges and insurance market reforms 4. Employer “play or pay” penalties 5. Employer health coverage reporting 6. Automatic enrollment (implementation date unclear) 7. Various plan design changes • Elimination of annual limits • Cost-Sharing Limitations • No waiting period > 90 days • Wellness incentives increasing to 30% • Coverage for clinical trials 8
Individual Mandate and Subsidies 9
Individual Mandate – Beginning in 2014 individuals must have health insurance or pay an excise tax • Qualified plans must be “minimum essential coverage” and could be from a variety of sources: – Individual health insurance – Health plan offered by an employer – Medicare or Medicaid – Children’s Health Insurance Program (CHIP) – TRICARE or Veteran’s health plan 10
Individual Mandate – Annual excise tax = greater of: • 2014: $95/adult, $47.50/child (max $285/family) or 1% of income • 2015: $325/adult, $162.50/child (max $975/family) or 2% of income • 2016 and later: $695/adult, $347.50/child (max $2,085/family) or 2.5% of income • Tax is capped at the national average of the cost of a bronze level health insurance plan, for the applicable family size 11
Subsidies – Subsidies (premium tax credits & cost sharing reductions) for individuals purchasing health insurance through an exchange • Premium tax credit available to individuals with household income up to 400% of Federal Poverty Level (FPL) • No subsidy to individuals eligible for “affordable” employer coverage – Affordable = » Employee’s required contribution for employee only coverage is less than 9.5% of household income 12
Health Benefit Exchanges 13
Exchange Overview from Healthcare.gov – Affordable Insurance Exchanges are designed to make buying health coverage easier and more affordable. Starting in 2014, Exchanges will allow individuals and small businesses to compare health plans, get answers to questions, find out if they are eligible for tax credits for private insurance or health programs like the Children’s Health Insurance Program (CHIP), and enroll in a health plan that meets their needs. – An Exchange Can Help Individuals: • Look for and compare private health plans • Get answers to questions about health coverage options • Find out if individuals are eligible for health programs or tax credits that make coverage more affordable • Enroll in a health plan 14
Overview of Exchange Rules • If state does not set up an exchange the federal government will operate an exchange in that state • Subsidies for low and middle income individuals purchasing individual health insurance administered by the Exchange – Debate if subsidies will be provided through the federal exchange • IRS has taken position that subsidies are available through federal exchange • Each state Exchange is also required to create a Small Business Health Options Program (“SHOP”) 15
Maryland Health Connection – Maryland’s Benefit Exchange 16
Maryland Health Connection - History • Maryland General Assembly gave initial approval to the Health Benefit Exchange Act of 2012 on March 26, 2012 • The Exchange will allow individuals and small employers to compare rates, benefits, and quality among plans to help find an insurance product that best suits their needs • The Exchange will also be the entity that calculates and provides tax credits to eligible small employers and advances tax credits for individuals below 400 percent of the federal poverty level • Private insurers will compete in this open marketplace, with the goals of creating an even playing field and providing transparent and accurate information 17
Expected Enrollment Projections from the State of Maryland • Enrollment through Maryland Health Connection is scheduled to begin in October 2013, with insurance coverage beginning January 1, 2014 • As many as 150,000 individuals are expected to enroll in qualified health plans (QHPs) during the first year, increasing to approximately 275,000 by 2020 • Medicaid enrollment is expected to increase by 101,000 in the first year, growing to 187,275 by 2020 18
Employer Pay or Play Provisions 19
Employer Penalties (apply only to employers with 50+ FTE) #1: ER coverage is “unaffordable” • If employee contribution for single coverage exceeds 9.5% of employee’s wages, the employer will be liable for a $250/month penalty for each employee that purchases subsidized individual health insurance through an exchange #2: ER fails to offer minimum essential coverage to all full time EEs • ER will pay $166.67 per month times all full time employees 20
Unaffordable Coverage Penalty This penalty applies if the employer offers its FTEs (and their dependents) the opportunity to enroll in “Minimum Essential Coverage” under an eligible employer-sponsored plan, and at least one FTE enrolls in health coverage purchased through a state exchange and a premium tax credit or cost sharing reduction is allowed or paid to the employee because the employer’s coverage is considered to be “unaffordable”. 1. Monthly Penalty: # FTEs (who receive premium tax credit or cost sharing reduction) x 1/12th of $3000. 2. However, the penalty is capped and will never be more than the penalty imposed on an employer that does not offer coverage. Monthly Penalty: 1/12TH $2,000 X (FTE – 30). 3. Employer- provided coverage is deemed “unaffordable” if an employee’s contribution for the lowest cost, self-only coverage exceeds 9.5% of the employee’s income. 21
No Coverage Penalty This penalty is imposed if a covered employer fails to offer its FTEs and their dependents the opportunity to enroll in “Minimum Essential Coverage” and at least one of its FTEs enrolls in health coverage purchased through a state exchange with respect to which a premium tax credit or cost sharing reduction is allowed or paid to the employee. 1. Monthly Penalty: Employed FTEs during the month x 1/12th of $2000. 2. However, the number of FTEs is first reduced by 30. 3. Monthly Penalty: 1/12TH $2,000 X (FTE – 30). In addition, for purpose of the penalty calculation, FTEs include only employees employed on average at least 30 hours per week and does not include any FTE equivalent employees. As a general rule, employees qualify for a premium subsidy or reduced cost sharing if they meet certain income requirements for assistance (generally, they must have household income between 133-400% of the Federal Poverty Level). 22
Projecting Financial Impact of Pay or Play Provisions 23
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