1. Health Care Reform
How to Get from Here to There

2. Major Plan Design Changes
For plans years beginning after
September 23, 2010
(2011 Calendar Year Plans)

3. Advance Notice of Benefit Changes
2011
• 60‐day notice required
• Includes changes in covered benefits, co‐
pays, deductibles, coinsurance
• Applies to both insured and self‐insured
plans
• Penalty for non‐compliance up to $1000 a
day per incidence

4. Pre‐Existing Limitations
October 2010
• No pre‐ex limitations on dependents < age 19
2011
• Cannot rescind group coverage except for case
of fraud or misrepresentation
– Advance notice required
2014
• No pre‐ex limits for adults either
• Applies to grandfathered plans too

5. Annual/Lifetime Maximums
2011
• No group health plan may impose a maximum lifetime
value dollar limit on “essential benefits”
• Only “restricted” annual limits
– Plan years beginning:
9/23/10 ‐ 9/22/11 $750,000
9/23/11 – 9/22/12 $1.25 million
9/23/13 – 1/1/14 $2 million
2014
• No annual limits

6. Coverage for Adult Dependents
2011
• Must allow dependent coverage till age 26
– Even if married
– Even if they do not meet tax definition of dependent
• Penalty for non‐compliance $100 a day per incident

7. Other Plan Design Changes
2011
• Emergency Services
– Must be covered without pre‐authorization
– Must be covered in or out‐of‐network
• OB/GYN may be designated as PCP
• Preventive Care must be fully covered
– No cost sharing

8. Consumer Driven Plan Changes
• January 2011
– OTC meds no longer qualified expenses
• FSA, HRA, HSA
– Can get doctor’s order
– OTC supplies still eligible
– Switchover will vary by merchant (IIAS)
– Penalty for non-qualified use of HSA funds
increased from 10% to 20%
• January 2013
– FSA plan year contributions capped at $2500

9. Wellness Incentives
2011
• $200 billion in grants available over 5 years for
employers who
• Have fewer than 100 employers who work more than 25 hours a
week and did not have a workplace wellness program as of
3/23/2010
• Employers may create up to 20% incentive for completion of
wellness program
– Programs must meet minimum criteria established by
HHS.
2014
• Incentives of 30% (or up to 50% with HHS approval)

10. W–2 Reporting
2011
• Beginning in 2011 tax year, employers must report
value of health benefits on employees W‐2.
– Report aggregate cost of employer sponsored coverage
including both employer and employee contributions
(COBRA rate)
– Informational only. Not counted as income

11. Small Employer Tax Credits
2010 – 2013
• Up to 35% tax credit for employer contribution
– Small businesses with 25 or fewer EEs and avg. wages of
$50,000 or less (full credit for 10 EE s and less)
– Who pay at least 50% of health insurance costs
2014
• Increase to 50% for businesses who buy through
Exchange (for up to two years.)
• CBO estimates 12% of small business will qualify

12. 2014
When Things Really Get Serious

13. Small Group Redefined
Beginning 2014
• Defined as 1 – 100
– States can delay 51‐100 until January 2016
• Below 50 exempt from many provisions

14. Rate Compression
• 3:1 ratio
• Rating only on age, geographic location,
coverage tier and tobacco use
– 1.5 to 1
• Applies to small group market inside and
outside of the Exchange
• 2014 – Risk adjustment inside and outside
Exchange

15. Minimum Benefit Package
• 90 day max waiting period
• Covers comprehensive set of services
• 60% of the actuarial value of covered
benefits
• OOP limited to HSA levels $5,950 and
$11,900
• Applies to individual and small group market
– Except grandfathered plans

16. Health Insurance Exchange
Choice Portal

17. Subsidy Payment & Reconciliation
Carrier A Carrier B Carrier C Carrier D
S P E
Individual Exchange The
Exchange Reporting
Preferred Model
(Carriers could bill and collect.)
S
E (S) Determine Subsidy
I Eligibility/Amount
P
(E) Plan Selection, Enrollment
( I) Premium Invoice
(P) Non-Subsidy Premium Payment

18. Carrier A Carrier B Carrier C Carrier D Carrier E
E E E
E
P E P P
P P
ti on
The
on cilia
Exchange r Rec
Carrie
(P) Group Premium Payment
(E) Plan Selection, Enrollment
E I P
( I) Premium Invoice
Tax Credit Mechanism
Employer

19. Precious Metal Plans
• All plans must meet HSA OOP limits
• Bronze – covers 60% of benefit costs
• Silver – 70%
• Gold – 80%
• Platinum – 90%
• Catastrophic Plan for Young Invincibles
– Up to age 30
– Or exempted from mandates
• Carriers only have to offer silver and gold

20. Two Levels of Subsidy
Subsidize Premium through Tax Credits
• Contributions for silver plan limited to:
133 – 150% of FPL: 3 to 4% of income
150 – 200% of FPL: 4 to 6.3% of income
200 – 250% of FPL: 6.3 to 8.05% of income
250 – 400% of FPL: 8.05 to 9.5% of income
300 – 400% of FPL: 9.5% of income
• Adjusted annually

21. Two Levels of Subsidy
Reduce Out‐of‐Pocket Maximums
• Out of pocket cost reductions
– 100‐200% – one‐third of the HSA limits
– 200‐300% ‐ one‐half of the HSA limits
– 300‐400% ‐ two‐thirds of the HSA limits
• 2010 HSA OOP Limits
– $5,950 individuals, $11,900 families

22. Employer Penalty – No Plan
• Effective January 2014
• 50 or more EEs
• If you do not offer “minimum essential
coverage” AND
• At least one full‐time employee receives
subsidy through the Exchange
– $2000 penalty per employee
– Excluding first 30 EEs

23. Real Cost of Dropping Coverage
Number of Employees 10,000
Less 30 exempted 9,970
Premium $ 8,863
EE Contribution (25%) $ 2,216
Employer Contribution (75%) $ 6,647
Penalty (non-deductible)
($2000 per EE less 30 Ees) $ 1,994
Loss of Deduction $ 798
Net Cost $ 2,792
Employee Compensation Increase
(90% of employer contribution) $ 3,324
Tax Gross Up (30%) $ 997
Total Comp Expense $ 4,321
Total Employer Cost $ 7,112

24. Free Rider Penalty
Effective 2014
• 50 or more EEs
• Even if you offer coverage, subject to penalty if:
• Coverage is unaffordable because EE must contribute
more than 9.5% of household income
• Or if plan covers less than 60% of covered health expenses
• And one or more full‐time EEs receives a subsidy.
• Lesser of:
• Penalty of $250 per month ($3,000) annually per subsidized EE
– $2.000 multiplied by all full‐time employees, less 30 EEs

25. Free Choice Voucher
• Applies to employees within 400% of the
FPL
– If their contribution cost is between 8% and 9.8
of their income
– And they want to buy coverage through the
Exchange
• Employer must provide EE with a voucher
equal to employer contribution to buy
insurance through Exchange
• No penalty to employer who offers voucher

26. Bridge to Reform Checklist
• Develop wellness program. Apply for grant.
• Employee education
– Online tools
• Couple high‐deductible with tax‐advantaged
plans
• Consider automation tools, outsourcing
• Pay attention. Things will change.

27. Creative Design Mix
Wellness Education Leave
Incentives Management
$3050 deductible Fixed
POP Plan
HSA-qualified insurance plan Cost
$1850 HRA for Employees Variable
$3050 (Buy down deductible to $1200)
Cost
1040
Deduction HSA
FSA for Employees
for Owners (Covers 1st $1200)
Voluntary
Dependent Care - $5000

28. Timeline & Checklist

29. Questions?