Health Care Reform Comparison In Brief

Health care reform at-a-glance December 2013

Health care reform at-a-glance

Provision

Effective date

Considerations for large employers

Play or pay penalty for failing to offer coverage to at least 95% of all full-time employees (FTE) and children if any FTE gets subsidy in exchange

 $2,000 (indexed) times the number of full-time employees (FTEs) (excludes first 30 FTEs).  FTE defined as working 30 or more hours per week.  Not required to offer coverage to part-time employees, retirees or spouses but must offer to broader category of children (stepchildren and foster children).  No minimum employer subsidy required.

Penalties first imposed in 2016 for failure to satisfy mandate in 2015

 Low penalty may encourage some employers to drop coverage.  Analysis and determination of FTE required.  Complicated “measurement” rules ─ administrative burden of determining FTE status.  Adjust eligibility terms of plan.

Play and pay penalty for full-time employees who opt out of employer plan and get subsidy in exchange

 $3,000 (indexed) for each FTE who enrolls in exchange and receives low income subsidy if: (1) employee’s contribution for single coverage under employer plan exceeds 9.5% of his or her W-2 income, rate of pay or the Federal Poverty Level for individual, or (2) employer plan fails to provide “minimum value,” i.e., the actuarial value of plan is below 60%.  See Public marketplace/exchanges below for more information on low income subsidy eligibility.

Reporting of employersponsored coverage

 Must report to both IRS and employees information regarding cost and value of coverage.  2014 reporting voluntary.

Reporting first required in 2016 for coverage provided in 2015

 Administrative burden; but costs and plan value are easily determined.

Penalty for failure to have minimum essential coverage

 Greater of 1.0% of MAGI or $95/person in 2014, 2.0% or $325/person in 2015, 2.5% or $695/person in 2016; indexed for individuals who fail to maintain minimum essential coverage.  Family dollar amount capped at 300% of individual penalty.

Penalties first imposed in 2015 for failure to satisfy mandate in 2014

 Plan cost may change if more employees enroll to avoid penalty.

Reporting of minimum essential coverage

 Insurers and sponsors of self-funded plans must report to both IRS and employee that employee and dependents had minimum essential coverage in preceding year.  2014 reporting voluntary.


 Administrative burden; will require efforts to collect dependent tax ID numbers.

Employer mandate

 Employer not required to offer coverage that satisfies the affordability or minimum value requirements, but risk penalty if coverage not offered.  Analysis of coverage and plan costs required.

Individual mandate

Provisions applying to both grandfathered and non-grandfathered employer plans Annual and lifetime dollar limits

 No lifetime or annual dollar limits on essential health benefits.  Not applicable to FSAs, HSAs, and integrated HRAs.  Self-funded and large group plans must use “authorized” definition of “essential health benefit” (“benchmark plan”) beginning in 2014.

Plan years beginning on/ after January 1, 2014 (annual limits phased in for 2010-2013)

 Analysis of benchmark plans required.  To maintain dollar limits on benefits in 2014, selffunded plan must select appropriate benchmark plan.

Extension of child coverage to age 26

 Up to age 26 for medical coverage regardless of marital or student status, residence or support. Excludes stand-alone dental and vision coverage.  Cannot charge more than for other similarly situated individuals.  Beginning January 1, 2014, grandfathered plans cannot exclude children eligible for other employer coverage.

Plan years beginning on/after September 23, 2010

 Plan costs may change if more dependents are covered.

No pre-existing condition exclusion for enrollees

 No pre-existing condition exclusions for enrollees.

Plan years beginning on/after January 1, 2014

 Limited impact on most employer plans.  Reduce job lock.

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Provision

Effective date


Income tax exclusion for adult child health benefits

 Exclusion through end of calendar year in which child reaches age 26.  Includes dental, vision, health FSA, and HRA (different rule for HSA).

March 30, 2010

 Simplifies payroll administration.  Plan may terminate coverage when the child turns 26, prior to the end of the tax year.

Treatment of OTC drugs as medical expense

 Health FSAs, HRAs, and HSAs prohibited from reimbursing cost of OTC drugs (other than insulin) unless prescribed by a physician.

January 1, 2011

 OTC medical supplies still eligible for reimbursement.  Administrative costs may increase.

Medical loss ratio reporting and rebates

 Insurers to submit MLR reports to HHS and issue rebates to enrollees in insured plans in large group market (more than 50 employees) where loss ratio (ratio of claims to premium) is less than 85%. Note that this provision applies on a calendar year, not plan year basis.

January 1, 2011.  Applies only to insured plans. Rebates payable by  Plans must apply portion of rebate attributable to August 1 of following year employee contributions appropriately.

Reporting plan value on W-2

 Total value of medical coverage on an employee-specific basis reported on Form W-2 issued in January for preceding calendar year.  Some exemptions, such as coverage provided under certain church or multiemployer plans.


 Informational only; value of coverage not subject to tax.

Summary of benefits and coverage (SBC)

 4-page, double-sided summary of benefits with a prescribed format, content, language, and timing must be provided to new enrollees and at open enrollment.

Open enrollment periods beginning on/after September 23, 2012

 ”Good faith” compliance until December 31, 2014.  Greater coordination among vendors required.  Decisions regarding timing and coordination with marketplace/exchange notices (see below).

Health FSA cap

 Salary reductions capped at $2,500; indexed.


 Cafeteria plan document must be amended by December 31, 2014, but plan compliance required starting January 1, 2013.  Carryover amount of up to $500 permitted if health FSA does not have a grace period.

Marketplace/exchange notice

 Notice to current employees concerning availability of the health insurance marketplace/exchanges must be provided by October 1, 2013, and to all new employees hired on and after that date.  Model notices include one for employers that offer coverage and one for employers that do not.

October 1, 2013

 Must be provided to all employees regardless of benefit eligibility.  Statutory requirement, but no penalty if notice is not provided.

Waiting periods

 Waiting periods over 90 days prohibited.


 Most cost implications are for organizations with high turnover.

Automatic enrollment

 Auto enrollment required for employee with option to opt out of coverage.  Not effective until after regulations released. Regulations will not be issued before 2014.

Unknown

 May result in increased costs due to higher enrollment and more complex administration.

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Provision

Effective date


Plan years beginning on/after September 23, 2010

 Increased coverage may cause plan costs to change.  Plan sponsor may delegate IRO contracting to claims administrator.

Provisions applying only to non-grandfathered employer plans Preventive care

 Preventive care services must be covered at 100% when provided in-network.

Non-discrimination requirements for insured plans

 Prohibits insured plans from discriminating in favor of highly compensated. Enforcement delayed until guidance released.

OB/GYN, pediatrician, ER services

 Preauthorization or referral requirements prohibited.

Appeals process

 Mandatory internal and external appeals process.  Self-funded plans must contract with at least three independent review organizations (IROs) by July 1, 2012.

Plan reporting requirements

 Plan data and quality of care reporting requirements to HHS and enrollees.

After guidance issued

 Guidance yet to be issued.

Women’s preventive services

 Additional preventive services for women covered at 100%.

Plan years beginning on/after August 1, 2012

 Increased costs due to removal of cost-sharing and requirement to cover items not generally covered before.

Clinical trials

 Must cover routine patient costs in connection with participation in approved trials.

 Some increased claims costs. Plan years beginning on/after January 1, 2014

Maximum deductibles and out-of-pocket (OOP) limits

 In-network OOP maximum for EHB same as for HSA-compatible HDHP in 2014 ($6,350/$12,700 for 2014).  Transition rule for 2014 for carve-out vendors such as prescription drug.  Maximum deductible limit only applies to insured, small group plans.

Provider nondiscrimination

 No discrimination against a provider who is acting within the scope of license.

 May vary rates based on quality or performance measures; good faith compliance until regulations issued.

HIPAA wellness incentives

 No discrimination regarding eligibility or coverage on the basis of a health status-related factor. Incentives increased to 30% (and additional 20% (up to 50%) for tobacco use) of cost of coverage.

 Non-tobacco use incentives may affect affordability and minimum value determinations for purpose of employer penalty.  New regulations affect design of current wellness programs. Employers must review programs to ensure compliance.  Increased costs.

 OOP maximum must take into account deductibles, coinsurance and copayments; requires coordination with “carve-out” vendors. Emphasis on EHB and benchmark plan.

Retiree health Reinsurance program for early retirees (55-64) and dependents

 $5B to subsidize 80% of costs between $15K and $90K (indexed).  Terminates December 31, 2013 or when funds exhausted, if earlier.

June 1, 2010

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 Funds exhausted in 2012; plan sponsors must use ERRP funds promptly, but no later than December 31, 2014.


Provision

Effective date


Phase-out of donut hole

 $250 rebate in 2010 for beneficiaries who reach donut hole.  Phases out donut hole by 2020 in combination with brand drug discount.

2010

 EGWP+Wrap employer-sponsored plan can provide equivalent benefits at significant savings.

Brand drug coverage in Part D Donut Hole

 Drug manufacturers required to discount brand drugs in donut hole by 50%.

2011

Loss of deduction for expenses related to RDS payments

 Deduction of expenses for which RDS payment received eliminated in 2013.

2013

 EGWP plans more attractive.

2014

 Exchange plans could become available to employers in 2017.

Insurance market reform for individuals and small groups Minimum benefit package

 Bronze, Silver, Gold and Platinum with actuarial values of 60% - 90%.  Catastrophic plan for individuals under 30.  Plans must cover EHB.

Guaranteed issue and renewability

 Health insurance issuers offering coverage in the individual or group markets must accept every employer and individual in the state that applies for such coverage and must renew coverage at the option of the plan sponsor.  Also includes interim high-risk pool for currently uninsured (starting 90 days after enactment).

 More robust individual market for former employees and retirees.

Maximum deductibles and OOP limits

 Deductibles generally limited to $2,000/$4,000 (indexed) for nongrandfathered small groups; OOP maximum on EHB in 2014 same as for HSA-compatible HDHP.

 Applies to individual and small group plans offered both in and out of exchange.

Fair health insurance premiums

 Health insurance issuers may vary the premium rate charged to a nongrandfathered individual or small group from the rate established for that particular plan based only on the following factors: family size (individual or family), geography (rating area), age (within a ratio of 3:1 for adults), and tobacco use (within a ratio of 1.5:1).

 If cost of coverage in individual and small group market stabilizes, the need for COBRA and employer-sponsored early retiree coverage declines.

Medical loss ratios minimum standards for insured plans

 80% minimum loss ratio (ratio of claims to premium) for individual market and small groups (85% minimum for large employers).

Plan years beginning on/after March 23, 2010

 More robust individual market is especially valuable to former employees, particularly early retirees.

Small employer subsidies

 Tax credits of up to 35% available to certain small employers (up to 25 employees) that offer health insurance coverage to their employees.

2010

 May be of value for multiemployer funds.

2014

 Availability of subsidies and community rating may reduce need for pre-65 retiree programs.

Public marketplaces/exchanges Marketplaces/exchanges

 State-based marketplaces/exchanges available for individuals and small employers (under 101 employees).  In 2017 states can make available to large employers.

Low-income subsidies for coverage in the exchange

 Subsidies available to individuals between 133% and 400% of FPL.  Employees eligible for employer coverage may receive subsidies only if employer coverage fails to provide minimum value or if employee contributions exceed 9.5% of household modified adjusted gross income.

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 Consider availability of subsidies in designing strategy for 2014 and beyond.


Provision

Effective date


 Penalty tax increased from 10% to 20%.

January 1, 2011

 Communicate to employees.

2011

 Cost likely will be shifted to employers.

Taxes and fees HSA nonqualified withdrawals

Pharmacy manufacturer tax  Annual fee on manufacturers of branded prescription drugs based on market share.  Aggregate fee of $2.5B in 2011 increasing to $4.2B in 2018; $2.8B in 2019+. Comparative effectiveness research (PCORI) fee

 Tax on insured and self-funded plans of $2/covered life/year for plan years ending after October 1, 2013; indexed thereafter.  Payment due by July 31, of each year.

Plan years ending after September 30, 2012 and before October 1, 2019

 Affects cost of providing group health plan coverage.  Determine which prescribed method results in lowest number of covered lives.

Income tax provisions

 Itemized medical deduction threshold increased from 7.5% to 10%.

2013

Medicare hospital insurance tax

 Tax rate increased from 1.45% to 2.35% for income in excess of $200K/$250K for joint filers. 3.8% tax on net investment income. (Income in excess of $250K joint filers; $200K others.)  Employer required to collect tax only for employees earning $200K or more from employer.

 Individual income tax provisions that could increase pressure to offer tax-advantaged benefits.  Additional administrative burden for employers.

Medical device excise tax

 2.3% excise tax on the manufacturer or importer for the sale of certain medical devices.

Health insurance industry tax

 Annual tax on entities that provide health insurance (self-insured employers specifically excluded). Aggregate fee of $8B in 2014 increasing to $14.3B in 2018; trended after 2018 apportioned among covered entities based on relative market share of US health insurance business.

Transitional reinsurance fee

 Fee paid by insurers and self-funded plans (major medical coverage) from 2014 to 2016 to help fund reinsurance program.  For 2014, contribution rate $63 per covered life per year ($5.25 per month).

"Cadillac plan" excise tax

 40% tax on value of coverage above $10,200/individual and $27,500/family (Indexed at CPIU+1% for 2019, CPI-U only after 2019). $11,850/$30,950 for pre-Medicare retirees.  Adjusted for high risk industries, age and gender.  Excludes dental and vision. For multiemployer plans, all coverage is considered family coverage.

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 Cost will likely be shifted to employers. 2014

 May impact stop-loss premiums.

 Affects cost of providing health plan coverage.

2018

 Affects cost of providing health plan coverage.  May result in the elimination of health FSAs and executive programs and reduction in total health benefit package.