1. Health Care Reform
Patient Protection and
Affordable Care Act (PPACA)
Chris Harrison, President
EBENCONCEPTS
David Smith, Vice President
EBENCONCEPTS
Version 32
July 22, 2012

2. Deadlines & Regulations
 Deadlines vary based on the way law was written
 All plans after 9/1/11 will have complied with the initial deadline (for
plans renewing after 9/23/10) and its provisions.
 A number of changes effective January 1, or at renewal, for the next few
years are to come
 Regulatory “Clarifications” continue to be issued
 HHS, DOL issuing regulations, FAQs answer many questions
 Ongoing efforts to revise have moved forward
 For instance, 1099 requirement repealed
 W-2 requirements postponed
“But isn’t this law going away?”

3. Deadlines & Regulations
 “2012 Elections have potential to affect implementation”
 Political Reality: Efforts to repeal vs. realities of trying to repeal
 House’s multiple attempts to stop health care reform through defunding
or policy statements have failed; although changes to the regulations have
occurred
 Senate would require 60 votes to completely repeal the bill
 Outcome of 2012 elections are uncertain
 Carrier investments in PPACA compliance are significant
 Lots of quiet support for health care reform by carriers
 Their perspective is important in terms of how the courts are
considering this question and may answer it…

4. Deadlines & Regulations
 “The courts will strike this down”
 Supreme Court ruled on June 28, 2012 that the individual mandate
was constitutional as a tax and therefore this law is going forward
toward full implementation
 Only complication is about states being required to expand Medicaid
eligibility and to be responsible for a portion of the funding, which
has no impact on employers and individuals buying health insurance
 Post-decision polls are showing a majority of Americans say it’s time
to move on and that fewer numbers of businesses will drop coverage
 So… we’re moving forward!

5. Grandfathered Plans 2010
Grandfathered Plans:
 Individuals and employer group plans can keep their current
“grandfathered” policy if the only plan changes made are to
add or delete new employee/dependents or part of a collective
bargaining agreement.
 Starting point: What were the benefits as of March 23, 2010
 New regulations define what changes are permissible to retain
grandfathered status

6. Grandfathered Plans 2010
 Grandfathered plans are permanently exempt from the
following reforms:
 Preventive services mandates
 Annual cost sharing, deductible requirements & essential benefits
 105(h) Nondiscrimination rules apply to fully-insured plans
 Certain reporting & rating requirements
 Appeals process
 Designation Rules for Primary Care Providers
 Coverage of clinical trials
 No discrimination against providers
 Main reasons to maintain status
 Savings of 3-5% in additional health care costs
 Non-discrimination rules

7. Grandfathered Plans 2010
Grandfathered plans are subject to the following
requirements:
 Changes in tax rules relating to health plans
 Uniform explanation of coverage
 Cost reporting and rebates
 Automatic enrollment
 Notification of availability of the exchange and subsidies
 Notices regarding the exchange

8. Grandfathered Plans 2010
Grandfathered plans are subject to the following
requirements (continued):
 Six months after enactment
 Limitation on lifetime and annual limits
 Limitation on pre-existing condition exclusions
 Limitation on waiting periods
 Coverage of adult children (only if adult child is NOT eligible to
enroll in another eligible employer plan)
 2014 for employees
 Prohibition on rescissions

9. Grandfathered Plans 2010
Cannot retain grandfathered status if:
 Increase of 5%* or more of employee contribution amount for any
tier of coverage (EE only, ES, EC, Family)
 Change of 15%* or more of deductible or out-of-pocket max
 Any increase in employee’s coinsurance % (e.g. 20% to 30%)
 Increase copayments by more than $5 or 15%
 Eliminate coverage to diagnose or treat a particular condition
 Obtain new policy, certificate or contract of insurance
These are lifetime exceptions
 one and done: cannot use annually
 Exception: medical inflation increases

10. Grandfathered Plans 2010
 What can you do?
 Add family members or new employees
 Disenroll employees
 Make changes as a result of state or federal regulations
 Make changes to voluntarily adopt some or all of the law’s
requirements
 Change third party administrator if you are self-funded
 Increase premiums

11. Grandfathered Plans 2010
October 2010 guidance
 Multiple plans?
 Each plan would have be evaluated separately
 Implementing wellness discounts?
 Creates lower contribution levels may affect grandfathered status
 Do these rules apply to dental or vision plans? No…
 If they are separate policies, certificates or contracts of insurance
 or
 If not separate, employees must have right to choose not to have
dental or vision benefits, and if they choose to have them, must
pay premium to cover it

12. Grandfathered Plans 2010
 Most carriers have announced that all of their post-10/1
plans will be compliant with mandates
 Higher costs, but not necessarily affecting group’s grandfathered
status
 Notice mandate
 Employers are required to provide annual notice to employees of
grandfathered plan status
 Three forms: grandfathered, non-grandfathered, “gray”
grandfathered
 Can layer plans to maintain grandfathered status
 Using HRA with group health plan to maintain current
benefits is one innovative way to build GF plan

13. Grandfathered Plans 2010
Other recent guidance
 Changes mid-year change grandfathered status at time of
change, not time of contract
 Example: 1/1 plan year, but make benefit change eff 7/1
 Lose grandfathered status as of 7/1
 Change in formulary does not change grandfathered status
 Drug move from tier to tier because of availability of generic
 Change in carriers that results in a drug change of tier
 Defined Contribution Plan and Grandfathered
 Must maintain percentage of actual cost levels to maintain
grandfathered status
 Example: $300 per employee per month

14. Grandfathered Plans 2010
What are we doing?
 Providing our clients the “correct” employee notice of their
grandfathered status at renewal
 Grandfathered
 Non-grandfathered
 Benefits are compliant but plan still grandfathered
 Our notices are continually updated; for instance in
2011 to included required information regarding
Medicaid and CHIP programs.
 Carriers are not providing any guidance on this issue

15. (Very) Small Business Tax Credit 2010
Eligible small businesses are eligible for phase one of
the small business premium tax credit.
 Requirements:
 Less than 25 employees
 Must pay up to 50% of premiums
 Average salary must be $50,000 or less.
 Sliding scale based on # of employees and average payroll
 Businesses and non-profits are eligible for the credit.
 Credit for amounts paid for dental and vision eligible

16. (Very) Small Business Tax Credit 2010
Must have taxable income for the tax credit:
 Carry back 1 year / Carry forward 20 years
Controlled Groups / Common Ownership are treated
as a single employer
How subsidy claimed varies based on how taxes paid
by employer
 “C” Corporations - reflected on tax return
 “S” Corps or other disregarded entities – distributed to owners
via K-1
 Nonprofits – used to pay employment taxes
(but not more than annual amounts)

17. (Very) Small Business Tax Credit 2010
 How will it work?
 Take all employee hours from the prior year
 Example: 10 FT employees, 20 PT employees
 Determine # of employees
 20 PT employees work, on average, 1,000 hours annually
 Add full-time employees hours (10 x 2080) and part-time EE hours (20
x 1000) = 40,800 then divide by 2,080 = 19.6
 Determine average salary
 Total salaries for all employees (except for owners)
 Average salary for FT workers: $26,000
 PT employees paid an average of $12/hr
 Add FT employees salaries ($260,000) + PT ee’s income ($240,000) =
$500,000 then divide by # employees above (19.6) = $25,510.20

18. 2010
(Very) Small Business Tax Credit

19. (Very) Small Business Tax Credit 2010
How will it work?
 What is the max tax credit?
 For Profit Business: No more than 35% of employer portion
• Tax CREDIT (not deduction) of $8,400
• Reduces tax deduction under Section 152 by the amount of tax credit
 Non-profit Organization: No more than 25% of employer costs
• Tax CREDIT (not deduction) of $6,000
However… the tax credit will be reduced if your average group
size is greater than 10 and/or average salary is greater than
$25,000

20. (Very) Small Business Tax Credit 2010
Phase-out for amounts above certain limits
 These formulas will calculate the REDUCTION in subsidy to a
small employer
 More than 10 FTE’s
• (number FTE’s – 10) / 15 * Max Tax Credit Amount
• (19.6-10) / 15 = 0.64 * 8,400 = $5,376
 More than $25,000 average wage
• (average wage - $25,000) / $25,000
• (25,510-$25,000) / $25,000 = 0.0204 * 8,400 = $171.36
 REVISED TAX CREDIT AMOUNT
• $8,400 - $5,376 - $171.36 = $2,852.64
• Still able to deduct $21,147.36 under §152

21. (Very) Small Business Tax Credit 2010
New guidance as of December 5, 2010
 IRS Notice 2010-82 now available
 Who gets counted as an employee?
 Includes those who have terminated, or who waived coverage
 Determining hours of service
 Can use any of the common methods (count actual hours, days-
worked or weeks-work equivalencies)
 Could use different methods for different employees within same
employer
Form for filing for tax credit issued
 IRS Form 8941 (available on IRS website)

22. ★ (Very) Small Business Tax Credit 2010
How has it gone?
 Original estimate: $2B annually in tax credits
 Latest data from IRS: $278M claimed in 2010
Less than 10 FTEs 10-25 FTEs
$25-50,000 Partial Credit Partial Credit
115,800 20,800
Less than $25,000 Full Credit Partial Credit
28,100 6,000

23. (Very) Small Business Tax Credit 2010
What are we doing?
 Developed an excel spreadsheet to assist employer-clients with
determining their eligibility and estimated amount of tax credit
for 2010 and 2011
 Available for our clients through our sales team

24. “Older” Dependent Children Coverage 2010
 Mandate for all groups
 Employee’s children who are up to 26 years of age are eligible to be on
parents’ insurance
 Includes up to the date before the child turns 26
 Regardless of whether full-time student or a tax dependent of employee (amount
deductible through child turning 27 per IRS)
 Still have COBRA eligibility for 36 months following loss of eligibility (so covered
until day before they turn 29 years old)
 Amount paid by employee is not taxable income (new change)
 Prohibited from vary premium contributions based on child’s age
 Does not apply to spouse of child, nor to the child’s child(ren)
 Other benefit restrictions still apply
 Per regs, creates new eligibility period employee and dependent
 Grandfathered plans do not have to extend eligibility if the child is eligible
for other employer coverage

25. “Older” Dependent Children Coverage 2010
New guidance – 9-23-2010
 “Child” means:
 Biological child
 Step-child
 Adopted child
 Foster child
 Does not require the coverage of employee’s grandchildren,
custody arrangements or children of domestic partner
 Could still extend to these “other” children, and could also place
restrictions on their inclusion (such as student status, etc.)

26. “Older” Dependent Children Coverage 2010
State Income Tax Issues
 Even though federal law says that contributions for non-
dependent children, a number of states do not follow federal
law when it comes to that state’s tax laws

27. “Older” Dependent Children Coverage 2010
How is it working?
 According to May 2012 survey of largest health insurers, at
least 3.1 million new young adults are now covered because of
this provision

28. “Older” Dependent Children Coverage 2010
What are we doing?
 Providing our clients the correct notice for the open enrollment
which is mandated under this provision
 Two different notices – grandfathered and non-grandfathered
 Recommending this notice be given out 30 days prior to
renewal to avoid retro adding dependent children
 Assisting our clients in communicating this information to
their employees and answering the “complex” questions that
will undoubtedly come

29. Preventative Service Mandates 2010
 Applies to Non-grandfathered Plans (mostly)
 New regulations issued July 12, 2010
 A part of the 2010 implementation mandates
 Outline list of tests/procedures to be covered with no cost sharing to
the plan participant
 Three page list of procedures to be covered includes STD testing, pregnancy
tests, mammograms, vision exams for children, and colonoscopies
 http://www.healthcare.gov/law/about/provisions/services/lists.html
 Also includes covering costs of immunizations and other well-child and well-
baby care
 Likely to be the most expensive aspect of first phase of
HCR implementation
 Much higher levels of preventative care received per HHS reports
 54M Americans received at least one free preventative service
in past year

30. ★ Preventative Service Mandates 2010
 The creeping expansion of preventative service mandates
 August 2011: HHS adopted additional Guidelines for Women’s Preventive
Services
 Requires the following services to be provided at no additional cost (no copay,
deductible or other cost-sharing):
 Annual well-woman preventive care visit
 Gestational diabetes screening for women 24 to 28 weeks pregnant, and those at
high risk of developing gestational diabetes
 High-risk human papillomavirus (HPV) DNA testing for women who are 30 or
older every three years, regardless of pap smear results
 STI counseling, and HIV screening and counseling
 Contraception (including all FDA-approved contraceptive methods) and
contraceptive counseling
 Breastfeeding support, supplies, and counseling
 Domestic violence screening
 Applies to new health plans starting in August 2012

31. ★ Preventative Service Mandates 2010
The creeping expansion of preventative service
mandates
 Guidelines for Women’s Preventive Services
 Lots of reactions against contraceptive requirements
 Two “compromises” for religious nonprofits only
• Delayed requirements to be in compliance until August 1, 2013
• Allow religious nonprofit to not pay for contraception for their
employees, but require that the insurance company pay for it instead
 No exceptions for other employers who may object on moral
grounds
 Stay Tuned: This battle is not over yet

32. Guidance on Notices 2010
USDOL/HHS announced early November 2010
 Employers must provide the grandfathered notice whenever
they provide a participant or potential participant a copy of
their benefits
 May be given or delivered in paper or electronically

33. Mini-Med Policies 2010
 Affects plans that do not provide “comprehensive” medical
benefits
 Lower annual caps (e.g. $25,000)
 Limited benefits for office visits, etc.
 Carriers could obtain waiver for mini-med to continue to
offer benefits, but must establish that failure to obtain
waiver will result in a:
 Significant decrease in access to benefits OR
 Significant increase in premiums
 Waiver only applies to EXISTING plans and does not
permit the sale of new policies
 Limited exception – existing mini-med customers
buying a replacement policy from a different carrier

34. Mini-Med Policies 2010
If Plan is approved (HHS determination), employer
must provide a notice to mini-med participants
 Notice must:
 Clearly indicate the dollar amount of the annual limit and the
benefits affected by the lower annual limit
 Be prominently displayed in 14 point bold type
 State waiver is good for only one year
 Model language is available
 Obligation to provide notice is an EMPLOYER responsibility
and not one for the CARRIER

35. ★ High Risk Pools 2010
 Creates high-risk pool coverage for people who cannot
obtain current individual coverage due to preexisting
conditions and have been uninsured for 6+ months.
 Many states have implemented new pool, and federal pool have
opened to mixed enrollment
 Must be uninsured by more than six months
 Employers and Insurers cannot put people in the pool—would pay
penalty.
 Ends January 1, 2014, when Exchanges are operational
 Financed by a $5 billion appropriation.
 Enrollment to date: over 73,333 through June 2012
 4,124 in North Carolina

36. Reinsurance for Early Retirees 2010
Federal gov’t will assume partial risk for early retiree
health costs
 Only for early retirees who are 55 or older
 Plans would pay first $15,000 in claims
 Share risk on the next $75,000 on an 80/20 basis
 Plan assumes liability for costs in excess of $90,000
Plan paid stop-
Federal Reinsurance loss coverage
$15,000 $90,000

37. Reinsurance for Early Retirees 2010
 Federal gov’t assumes some risk for early retirees’ health
care costs
 Effective June 23, 2010
 Impact: dramatically reduce costs for early retirees on group health
plans
 Health care costs for 55-64 populations are significantly higher (estimated
to be more than 30%) than younger workers
 Health care costs for early retirees are higher than those working
 Caveat:
 Must invest the difference in wellness and chronic care management
programs
 Ends January 1, 2014, when Exchanges are operational

38. Reinsurance for Early Retirees 2010
 The following are not eligible for reimbursement
 Custodial care
 Routine foot care (e.g., orthopedic shoes)
 Personal comfort items (e.g., TV in a hospital room)
 Routine services and appliances for vision (e.g., glasses, contact lenses)
 Hearing aids and auditory implants
 Cosmetic surgery
 Routine dental services
 Assisted suicide
 In-vitro fertilization, artificial insemination, sperm and embryo procurement
 Abortion services, except if the pregnancy resulted from rape or incest or
endangers the life of the woman
 Drugs that are not covered by a standard Part D plan (unless covered under
Parts A or B)
 Items or services not furnished in the United States

39. Reinsurance for Early Retirees 2010
Latest update:
 Spent approximately $3.6B (of $5B) of the available pool
money through the end of FY2011 (ending 9/30/2011)
 Approximately $1.4B left for the remaining two years;
funds expected to run-out prior to 2014.
 No new employers may participate after May 5, 2011

40. Rescission of Coverage 2010
Regulation defines “rescission” as a cancellation or
discontinuance of coverage that has a retroactive
effect.
Plan may not rescind coverage unless:
 individual or person seeking coverage on behalf of individual
performs act, practice, or omission that constitutes fraud or
intentional misrepresentation of material fact.
 “Inadvertent” failures to provide health information not
considered intentional misrepresentation.
 Example: premium deducted but not eligible for coverage
 Regs say that the individual “relied” on coverage and
employer may not retro-term the individual’s
coverage on the health plan

41. Rescission of Coverage 2010
Not considered “rescission” if cancellation is
prospective or only is effective retroactively to extent
attributable to a failure to timely pay required
premiums or contributions.
 Plan must provide 30-days advance written notice to each
participant affected (regardless whether individual or group
coverage).
 No guidance yet on cancellations (Preamble says will be issued
in future). Statute requires advance notice.
Guidance: be very careful if you want to revoke
someone’s participation on plan

42. Benefit Changes 2010
 No Lifetime limits on benefits
 Some annual limits allowed for now
 prohibited completely by January 1, 2014
 Cover preexisting conditions for children 0-19
 Emergency services covered in-network
 Includes new limitations on copayments for going to ER
 Enrollees may designate any in-network doctor as their
primary care physician.
 New coverage appeal process.
 Federal grant program for small employers providing
wellness programs to their employees

43. Other Provisions 2010
 All group plans will be required to comply with the Internal
Revenue Section 105(h) rules that prohibit discrimination
in favor of highly compensated individuals
 Delayed until regulations are implemented
 Medicare Part D changes
 Deductibility for Part D subsidies is eliminated in 2013, but this
results in an immediate accounting impact.
 Provides a $250 rebate to seniors who hit the “donut hole in 2010
(and closes the donut hole over time)
 Nursing mothers must be given breaks/location
 Employers with less than 50 employees may
not have to comply if there is “undue hardship”

44. Other Provisions 2010
 Expanded claims appeals process
 Six major changes include:
 Reducing urgent care claims from 72 to 24 hours
 Expanded notice requirements for denials
 Mandated use of state-based external review of claims
 Delayed enforcement until 7/1/2011

45. ★ Changes Effective in 2011 2011
 Penalty for use of HSA for nonqualified medical expenses increases to
20%.
 OTC drugs no longer be reimbursable unless prescribed by a doctor.
 Small employers (less than 100 lives) will be allowed to adopt new
“simple cafeteria plans.”
 Easier eligibility requirements
 Employees who work more than 1,000 hours a year
 Could exclude employees under 21 or those who have been employed less than
one year
 Minimum contribution requirements based on non-elective or matching
methods
 A uniform percentage (2%+) or less of 6% of salary or 2x
employee’s salary reductions
 Cannot favor HCE or key employees

46. ★ Changes Effective in 2011 2011
 MINIMUM MEDICAL LOSS RATIOS:
 Rebates must be provided to consumers if health plans spend below
minimum loss ratios based on percentage of premium spent for HC expenses
 85% for large group plans
 80% for small group and individual
 Remember: it’s not how your group does… it’s how that carrier’s entire market
segment performs
 Also, self-funded plans are not subject to these rules
 What counts toward HC Expenses?
 Reimbursement of clinical services
 Activities that improve health care quality
 All other non-claims expenses excluding state and federal taxes, licensing or
regulatory fees
 Standard for what is administrative expenses has been approved for 2011
 Ongoing efforts among numerous groups to have their
expenses excluded from “admin cost”

47. ★ Changes Effective in 2011 2011
 MINIMUM MEDICAL LOSS RATIOS:
 Beginning January 2011, This will result in some carriers sending
rebates to payers
 Estimated rebates for 2011: $1.3-2.0B
 Carriers are required to report MLR results annually
 Notices have been mailed to both groups affected and those who are not
going to receive a rebate

48. ★ Changes Effective in 2011 2011
 MINIMUM MEDICAL LOSS RATIOS:
 What happens if you receive a rebate?
 What is the source of funds used to pay the premiums?
 All employer money: money stays with employer
 Part employer and part employee money: percentage paid by participants/
employees is considered a plan asset
 Distribute to former plan participants?
 If the cost of calculating and distributing to former participants is approximately
to amount of proceeds
• Yes: may limit allocation to current plan participants
• No: must distribute to former plan participants
 Distribute to current plan participants?
 No if not cost effective (amount is de minimis) or taxable consequences
• If participant’s portion was paid with pre-tax dollars, then the return of those premiums
– whether received in cash or as a credit against future premiums – will be subject to
both income and employment taxes
 Deadline: 90 days from receipt of rebate to return or apply

49. ★ Changes Effective in 2011 2011
 MINIMUM MEDICAL LOSS RATIOS:
 What are we doing?
 We have prepared an Excel spreadsheet to assist employers with determining what
portion of the rebate could be owed to participants and to assess the economic cost
of doing so
 Further, we developed a corporate resolution form so that the employer can, on
behalf of the Plan, show how the funds are being handled:
 Returned to current and/or former participants
 Rebates kept in the Plan and applied toward future participant premium
payments and/or benefit enhancements

51. ★ Changes Effective in 2011 2011
Regulating “unreasonable” premium hikes
 Any premium rate increase of 10% or more on carrier’s entire
block (trend increases) are subject to review by the states and
HHS for renewals on or after 9/1/11
 individual or small employer group insurance markets
 does not apply to grandfathered plans or the large group market
 10 percent threshold based on nationwide cost trends
 exceeds both the average rate of growth in the medical
component of the consumer price index (3.7%–4.4%) and the
average annual rate of growth in national health care
expenditures over the last five years (4.4%–6.9%)
 Developing state-level thresholds for 2012

52. ★ Changes Effective in 2011 2011
 Regulating “unreasonable” premium hikes
 Carriers must submit public disclosure to justify the increase that “allow
consumers to understand the factors driving rate increases”
 Review to be done by States (if rate review process in place) or by HHS if the
state does not complete rate review or no process
 The following ten states are likely to be regulated by HHS: Alabama, Arizona,
Idaho, Iowa, Louisiana, Missouri, Montana, Pennsylvania, Virginia and Wyoming
 Review will carry with it one of three labels:
 "excessive"
 unreasonably high in relation to the benefits provided
 "unjustified"
 lacking adequate data to determine whether it is reasonable
 "unfairly discriminatory"
 resulting in premium differences for enrollees that are
not permissible under state law or unjustified based
on expected cost differences.

53. ★ Changes effective in 2012 2012
Employers report on W2s the aggregate cost of
employer-sponsored health benefits.
 Amounts continue to be not taxable, and is informational only
 Applies to benefits provided during taxable years after
December 31, 2011
 Mandatory for businesses that issue 250 or more W-
2s in a calendar year
 Optional for smaller businesses… for now.
 2011 W-2 already allows reporting in Box 12 via Code DD

54. Changes effective in 2012 2012
 All employers must include on their W2s the aggregate cost of
employer-sponsored health benefits.
 If employee receives health insurance coverage under multiple plans, the
employer must disclose the aggregate value of all such health coverage
 Health Insurance Premium Amount (portion paid by EE and ER)
 Employer Contributions to FSA (but not HRA, HSA or Archer MSAs)
 Wellness Programs and/or Onsite Medical Clinics that are COBRA-eligible
 Governmental Plans (except for military)
 Not required to include HRA spending, separate dental and vision plans
 Will not report costs when two employees are married and covered on health
plan
 How determined? Premium charged or core COBRA rates, and reflect cost
changes during the year — amounts could be composite for all employees

55. ★ Changes effective in 2012 2012
 New Fee to pay for comparative clinical effectiveness
research will be charged to all insured and self-funded
groups beginning 10/1/2012
 To provide information regarding the effectiveness, risks and benefits of
various medical treatments
 Costs
 First year: $1 x average number of covered lives
 Second and subsequent years: $2 x average number of covered lives
 Who pays?
 Insured: carrier
 Self-funded: employer
 If separate HRA – must collect double-fee

56. Changes effective in 2012 2012
Group plans (including self-insured) must report
whether benefits provided to employees:
 meet criteria (to be established) on improving health
outcomes, reducing medical errors, and wellness and health
promotion activities.
 This report must also be provided to plan participants.
 No guidance YET on what this report will look like…
The Department of Labor will begin annual studies
on self-insured plans using data collected
from Form 5500.

57. ★ Changes effective in 2012 2012
 Notice of changes in benefit plans
 Under current guidance, notice of any material modification of
benefits must be given 60 days prior to the change
 Would include any enhancement or reduction in coverage services or
benefits (including copay, deductible and other changes) or changes in
premium or employee contribution amounts
 This presents a number of complications…
 Resolution of this issue is somewhat related to the Summary of
Benefits and Coverages (next slides) and related regulations
 Federal agencies are soliciting comments on this notice requirement,
including whether there are any circumstances where 60-day advance
notice might be difficult
 Also soliciting comments on the format of the notice
 No requirement… YET.

58. ★ Changes effective in 2012 2012
 Summary of Benefits and Coverage (SBC)
 When: Renewals or start of open enrollment after September 23, 2012
 Limited on size
 No more than four doubled-sided pages (but flexible)
 Must be delivered more quickly
 Renewals: Must be delivered 30 days prior to renewal date (NLT seven business days after
issuance of new policy or written confirmation of intent to renew)
 Mid-Year: If there are changes to plan mid-year, must be communicated at least 60 days prior
to the effective date of the change
 Must delivered:
 when shopping for coverage, when coverage is renewed before each policy year, at least 60 days
before any change to coverage and within seven business days of request
 Who is responsible for producing the SBC?
 Insured: insurance company and the employer
 Self-funded: employer
 Who is it delivered to:
 Anyone eligible to enroll on the plan:
 EE and beneficiaries have same address: one
 Separate addresses: to each address

59. ★ Changes effective in 2012 2012
 Summary of Benefits and Coverage (SBC)
 Notice must include certain information
 Uniform definitions of standard insurance and medical terms
 List of 44 terms (e.g. “allowed amount,” “urgent care”)
 Description of coverage including cost-sharing for each benefit
 Eliminated mandate to include cost of coverage within SBC
 Exceptions, reductions, and limitations of the coverage, along with cost-sharing
provisions including deductibles, co-payments and coinsurance
 Statement that SBC is only a summary and that the plan document, policy or
certificate of insurance should be consulted to determine the governing
provisions.
 Internet addresses for obtaining the uniform glossary and for obtaining any formulary
or provider network that a plan uses.

60. ★ Changes effective in 2012
_______________________: _________________
Coverage Examples
Coverage Period: [See instructions]
Coverage for: _____________ | Plan Type: _____
2012
About these Coverage Having a baby Managing type 2 diabetes
(normal delivery) (routine maintenance of
Examples: a well-controlled condition)
These examples show how this plan might cover  Amount owed to providers: $7,540  Amount owed to providers: $4,100
medical care in given situations. Use these  Plan pays $  Plan pays $
examples to see, in general, how much financial  Patient pays $  Patient pays $
protection a sample patient might get if they are
covered under different plans. Sample care costs: Sample care costs:
Hospital charges (mother) $2,700 Prescriptions $1,500
Routine obstetric care $2,100 Medical Equipment and Supplies $1,300
Hospital charges (baby) $900 Office Visits and Procedures $730
This is Anesthesia $900 Education $290
not a cost Laboratory tests $500 Laboratory tests $140
estimator. Prescriptions $200 Vaccines, other preventive $140
Don’t use these examples to Radiology $200 Total $4,100
estimate your actual costs Vaccines, other preventive $40
under this plan. The actual Total $7,540 Patient pays:
care you receive will be Deductibles $
different from these Patient pays: Co-pays $
examples, and the cost of Deductibles $ Co-insurance $
that care will also be Co-pays $ Limits or exclusions $
different. Co-insurance $ Total $
See the next page for Limits or exclusions $
important information about Total $
these examples.!
Questions: Call 1-800-[insert] or visit us at www.[insert].com.
If you aren’t clear about any of the bolded terms used in this form, see the Glossary. You can view the Glossary 5 of 6!
at www.[insert] or call 1-800-[insert] to request a copy.

61. ★ Changes effective in 2012 2012
Summary of Benefits and Coverage (SBC)
 How Distributed?
 Electronically or paper – if electronic, must deliver paper if
requested by an enrollee
 “Culturally and linguistically appropriate”
 If more than 10% of employer’s population speaks one
of the following languages must have translation available:
Chinese (1), Spanish (100+), Tagalog (2) or Navaho (3)
 Limited number of counties require SBC available in language always
 Penalty for non-compliance: $1,000 for each failure to provide
 Mandate applies to health insurers for fully-insured plans and employers
for self-funded plans
 Penalties delayed for first year with “an emphasis on
assisting with compliance rather than enforcement”

62. ★ Changes effective in 2012 2012
Summary of Benefits and Coverage (SBC)
 Final(?) Answers
 How SBC coordinates with existing ERISA-required SPDs, and other
communications, such as open enrollment materials
 Can be incorporated into SPD – but must be first
 What are the specific coverage examples (birth of a child, cancer
treatment and managing diabetes) that might be included
 Limited to just childbirth and diabetes, for now…
 Expected to include other coverage examples in the future
 May combine multiple coordinated plans into single SBC
 Example: When there is an outside administered HRA

63. Changes effective in 2012 2012
 CLASS Act
 What? A government program to pay for long-term care expenses,
but with a smaller benefit and mandatory “taxes” to pay for this
benefit
 Very similar to Social Security Disability
 Designed to reduce the government’s obligations under Medicaid to pay
for long-term care expenses
 Requirements?
 Monthly payment of $180-240 for a period of at least five years to receive
a small daily benefit for long-term care expenses (rest home, etc.)
 Benefit estimated to be $50-75 per day depending on ADL loss
 Must opt out – either employer or employee or will automatically be
required to take out amount from paycheck

64. Changes effective in 2012 2012
 CLASS Act
 FAQs from HHS released 4-2011
 Outlined general information about the program
 Mentioned that HHS has until 10/2012 to announce “details of the CLASS
program” and that implementation would start thereafter
 COULD BE REPEALED BY CONGRESS
 Two bills introduced in current session to repeal CLASS provisions
 Main concerns are about cost and viability
 HHS has said that, consistent with the law’s requirement, it will not move
forward with the program until it is clear that it will be sustainable.
 An excellent opportunity to discuss Long-Term Care Insurance
options with employers
 A number of states have adopted LTC Partnership
plans which are designed to assist with these costs

65. Changes effective in 2013 2013
Higher taxes:
 Additional 0.9% Medicare Hospital Insurance tax on self-
employed individuals and employees with respect to earnings
and wages above $200,000 individuals/$250,000 joint filers
(not indexed).
 Self-employed individuals are not permitted to deduct any
portion of the additional tax.
 New 3.8% Medicare contribution on certain unearned income
(e.g. rental income) from individuals with AGI over
$200,000/$250,000 joint filers
 Why important: payroll impact – talk to your payroll providers
ASAP to make sure you’re ready

66. Changes effective in 2013 2013
The threshold for the itemized deduction for
unreimbursed medical expenses would be increased
from 7.5% of AGI to 10% of AGI for regular tax
purposes.
 The increase would be waived for individuals age 65 and older
for tax years 2013 through 2016.

67. ★ Changes effective in 2013 2013
$2,500 Cap on Medical FSA contributions annually
indexed for inflation begins.
 Only applies to employee contributions to FSA
 No cap on employer contributions
 No impact on use-it-or-lose-it rules
 There is active discussion of repealing cap
 Effective when plan renews on or after 1/1/13
All employers must provide notice to employees of
the existence of state-based exchanges.

68. Taxes and Fees 2014
Imposes annual taxes on private health insurers
based on net premiums. Coverage must be offered on
a guarantee issue basis in all markets and be
guarantee renewable.
Also a fee will be charged to cover reinsurance for
the individual market for 2014-16
 A federally-established amount (per-capita instead of % of
premium) will be collected during first three years
 Amount will gradually be reduced over the three years

69. Rating Changes 2014
Redefine small group coverage as 1-100 employees.
Strict modified community rating standards for
pricing all small group products
 Premium variations only allowed for age (3:1), tobacco use
(1.5:1), family composition and geography
 Geographic regions to be defined by the states and experience
rating would be prohibited.
 Wellness discounts are allowed for group plans under specific
circumstances.

70. ★ Exchanges 2014
Two types of Exchanges
AHB Exchanges for SHOP Exchanges for
Individual Purchasers Small Employers
•Open to individuals whose: •Open to individuals who are
- employers do not offer employed by employers with less
coverage than 50 FTEs
- employer-sponsored
coverage is deemed •No premium subsidies – employer
inadequate or unaffordable receives 50% tax credit for the
- are ineligible for Medicaid non-elective costs of coverage
•The only place where premium
subsidies can be received

71. ★ Exchanges 2014
Main job: a marketplace where individuals and small
employers will be able to shop for insurance
coverage.
 Must be “fully operational” by October 1, 2013
 Will also direct people to Medicaid if they're eligible
 Facilitate the sale of qualified benefit plans to
individuals, including new federally administered
multi-state plans and non-profit “CO-OP” plans

72. ★ Exchanges 2014
Certain individuals will get premium credit based on
a sliding scale (non-Medicaid eligible individuals)
 Incomes up to 400% of FPL to buy coverage through the
exchange.
 Slight increases to the subsidy amounts for all subsidy-eligible
individuals and increases the cost-sharing subsidies for those
making 250% FPL or less.
Each Exchange must approve the carriers who will
participate (called Qualified Health Plans “QHP”)
 This process will be better defined in coming regs

73. ★ Exchanges 2014
 Other important information:
 Only applies to individuals and those working for employers with
less than 100 employees
 Every state is different – some have adopted laws, others are doing it
by Executive Order, make-up of boards may vary
 “Interested parties” may not make up a majority of the Board
 Majority of Board must have relevant experience
 Every Exchange must have a website for comparative data about
health plan options and create a common enrollment form
 States that do not create an Exchange will fall under the
applicable federal exchanges (just like has occurred with
the high-risk pools)

74. ★ How Premium/Tax Credit Will Work? 2014
 AHB Exchanges will make advance determinations of
eligibility for individuals who:
 Enroll in coverage through an exchange
 Seek financial assistance
 Exchanges will determine:
 Whether the individual satisfies the income and other requirements for
advance credit payments.
 The amount of the advance payments, which are made: on a monthly
basis;
 to the insurer of the QHP in which the individual enrolls.

75. ★ How Premium/Tax Credit Will Work? 2014
 Guidelines for determining who is an "applicable taxpayer"
eligible for the premium tax credit who must be:
 Enrolled in one or more QHPs through an exchange.
 Not eligible for "minimum essential coverage," other than coverage in the
individual market, defined to include:
 government-sponsored programs; eligible employer-sponsored programs;
grandfathered health plans; and certain other health benefits coverage.
 The regulations include detailed guidelines, including
numerous examples, for calculating the premium assistance
credit amount, defined as the sum of the premium
assistance amounts for all coverage months in the tax year
for individuals in the taxpayer's family.

76. ★ How Premium/Tax Credit Will Work? 2014
 Actual credit for the tax year computed on a taxpayer's tax
return with the amount of advance payments must be
reconciled with their annual taxes.
 if a taxpayer's credit amount is greater than the amount of the taxpayer's
advance payments for a tax year, the taxpayer may receive the excess as
an income tax refund;
 if a taxpayer's advance payments are greater than the taxpayer's credit
amount, the taxpayer owes the excess as an additional income tax
liability.

77. Recent Premium Tax Credit Guidance 2014
Larger tax credit for older Americans
 Since they have higher premiums
Credit is refundable
 Families with moderate incomes will be able to receive the full
benefit of the credit
Covers Premiums Upfront
 Will be paid directly to the insurance company by Treasury
Amount to be paid toward the cost of coverage by
individual varies based on Federal Poverty Level
 100% FPL: 2% of income
 400% FPL: 9.5% of income

78. Who falls where?
Family size Medicaid Health-care exchange
1 $0 to $14,856 $14,857 to $44,680
2 $0 to $20,123 $20,123 to $60,520
3 $0 to $25,390 $25,390 to $76,360
4 $0 to $30,657 $30,657 to $92,200
5 $0 to $35,923 $35,923 to $108,040
6 $0 to $41,190 $41,190 to $123,880
7 $0 to $46,457 $46,457 to $139,720
8 $0 to $51,724 $51,724 to $155,560
To see what the subsidy amounts look like:
http://healthreform.kff.org/SubsidyCalculator.aspx

79. Individual Mandate 2014
All American citizens and legal residents to purchase
qualified health insurance coverage. Exceptions:
 religious objectors,
 individuals not lawfully present
 incarcerated individuals,
 taxpayers with income under 100 percent of poverty, and those
who have a hardship waiver
 members of Indian tribes,
 those who were not covered for a period of less than three
months during the year
 People with no income tax liability

80. Individual Mandate 2014
 Penalty for non compliance
 flat dollar amount per person or
 The alternative is a fixed dollar
amount that phases in beginning
with $325 per person in 2015
to $695 in 2016.
 a percentage of the
individual’s income
 In 2014 the percentage of income
determining the fine amount will be
1%, then 2% in 2015, with the
maximum fine of 2.5% of taxable
(gross) household income capped at the average bronze-level insurance premium
(60% actuarial) rate for the person’s family beginning in 2016.
 whichever is higher

81. ★ Employer Mandate 2014
There is no true requirement to buy:
 “Pay or Play”
 If an employer does not offer health benefits to their employees,
then they will pay a penalty
 Quality or Pay
 If the plan doesn’t meet the coverage levels required, then the
employer pays a penalty
 Limit contributions or pay
 If the amount that an employee pays is more than a certain
threshold, the employer pays a penalty

82. ★ Employer Mandate 2014
Does not mandate coverage for those who are
working less than 30 hours a week
 No requirement to cover part-time employees
 They should be covered through Exchanges
When is this effective?
 Tax years beginning January 1, 2014

83. ★ What does “employer” mean? 2014
“Applicable large employer”
 An employer that had an average of 50 or more full-time
employees during the preceding year
 based on the sum of full-time employees and full-time equivalent
employees (FTEs)
 But there are complications…

84. ★ Common Ownership 2014
What if there are multiple employers which are
commonly owned?
 Common Law Test
 Control Group rules apply (IRC §414(c))
 Look at percentage of ownership

85. ★ Common Ownership 2014
Multiple owners at different shares of different
businesses
 Look at the common percentage of ownership among the
various businesses
 Examples

86. ★ Common Ownership 2014
Why does this matter?
 Business 1: 20 employees
 Business 2: 40 employees
 Business 3: 5 employees
 On their own, none have the mandate
 Under common ownership, all three must offer coverage to
their respective employees

87. ★ What are “full-time equivalents” 2014
Full-time employees
 Each employee who works an average of 30 hours of service
per week or 130 hours per month with the employer
 Each employee who works more than 30 hours/week or 130
hours/calendar month would count as ONE FTE
 Note: even if they are considered “part-time” (meaning that they
work less than 40 hours a week but 30 or more hours), they could
be considered full-time based on these rules

88. ★ What are “full-time equivalents” 2014
How do you count those who work less?
 Look at their hours worked during the “look-back stability
period” – which would be between 3 months and 12 months
 Compare that as a percentage to 30 hours/week or 130 hours
per month
 The fractional shares are added together to reach a “non-FT”
FTE count

89. ★ What are “full-time equivalents” 2014
Example:
 Company A
 Group 1
 30 employees who work 130 hours or more a month
 Group 2
 40 employees who work 20 hours a week or 86 hrs a month (on
average)
 Now add it up
 Group 1: 30
 Group 2: 26.667
 TOTAL: 56+ FTEs – Employer Pay or Play Mandates apply

90. ★ Seasonal Employees 2014
Some will not be counted
 Who? Who knows for now….
Who will be counted:
 Much more complicated formula
 IRS contemplates using a six-step process to determine
whether a seasonable employee is eligible for coverage
However if the “over 50” is not for more than four
months in the prior calendar year
 No employer pay-or-play mandate

91. ★ Who is eligible? 2014
 Employer would calculate each employee’s full-time status
by looking back “at a defined period of not less than three
but not more than 12 consecutive calendar months”
 determine if the employee worked an average of 30 hours per week
during this “measurement” period.
 Stability period: considered a full-time employee during a subsequent
“stability” period, regardless of the number of hours worked during that
subsequent period.
 Exception:
 Hired to work part-time or not sure if full or part-time (seasonal) and 30+
hour average during measurement period:
 If representative of hours to be worked: eligible
 If not, not eligible

92. ★ Who is eligible? 2014
Example:
 Sally works an average of 25 hrs a week
 However for a three month period, she works full-time to fill in
for someone…
 Since the number of hours worked was not represent what
Sally would normally work, then she would not be eligible to go
on health plan.

93. ★ Penalties 2014
If no coverage
 Employer does not have a group health plan for their
employees
 $2,000 per FTE annual penalty
 Credit for 30 (or $60,000) under current rules
 Example:
 75 FTEs within group, but no coverage offered
 Penalty: $90,000 annually

94. ★ Penalties 2014
If “unaffordable” coverage
 Employee pays more than 9.5% of their household income on
benefits
 $3,000 per FTE annual penalty (no reduction)
 Example:
 75 FTEs within group, but employees required are required to pay
$250/month for employee only coverage
 Employer pays penalty for each employee who makes less than
$31,250 annually

95. ★ Penalties 2014

96. ★ Penalties 2014
If benefits are not “minimum level”
 Each plan must have benefits at or above the actuarial value of
the “bronze” level benefit
 If benefits do not meet that level, $3,000 per employee penalty
(no reduction)
 Who is responsible for actuarial determination?
 Employer or insurance company?
 How do you determine if a plan is creditable or noncreditable for
Medicare Part D notices?
 Employer ultimately responsible

97. ★ Penalties 2014
Details on the penalties
 Treated as an Excise tax
 not deductible from income
 Those taxed as partnerships (“S” Corps, LLCs, etc) would have
the penalty go to the owners’ personal taxes

98. ★ How caught? 2014
Just one employee who gets coverage from Exchange
would cause employer to be reviewed for penalties
How will they know?
 The Exchanges are responsible to review each individual’s
income to determine the level of premium subsidy that they
are eligible for in the Exchange
 The Exchange will obviously review tax information for each
applicant  they find employer

99. What are larger businesses considering?
Drop employer coverage completely
 Pay the $2,000 penalty and absorb productivity issues
Keep existing coverage and not add other
populations
 Pay $3,000 per non-covered employee penalty
Drop employer coverage and subsidize employee
coverage through exchanges
 Pay $2,000 penalty + pay all or some portion of coverage cost
Continue employer-based coverage
 Economic realities may make this difficult…

100. ★ What about participation? 2014
Could an employee choose not to be covered?
 If employer has less than 200 FTEs: Yes
 If employer has more than 200
 Employee must be covered on employer plan
 Only way for employee to waive coverage is to prove that they
have other coverage
• Other group coverage
• Medicaid or Medicare
 Effective date is officially 2014, according to guidance
issued in January 2012
Waiting periods in excess of 90 days are prohibited
 This mandate does not go into effect until 2014

101. Small Business Incentives
Small employers will receive a 50% tax
credit/subsidy for the first two years of purchasing
coverage through the exchange
 Details? None yet

102. Employer Mandate 2014
Free Choice Vouchers
 Requires employers to provide a voucher to use in the
exchange instead of participating in the employer-provided
plan in limited circumstances
 Employees must be ineligible for subsidies
 Employees share of premium must be more than 8% to 9.8% of
family income that is less than 400% of FPL
 Employee can keep amounts of the voucher in excess of the cost of
coverage

103. Benefits 2014
 Three benefit packages to be defined – Gold, Silver, &
Bronze
 Known changes to the benefit mandates
 Preexisting conditions limitations prohibited
 Prohibition on any annual limits or lifetime limits in all group (even
self-funded plans) or individual plans.
 Multiple levels available based on actuarial equivalents
 Self-funded plans may not be subject to all requirements, but may
not meet employer mandate requirements if they don’t comply
 Allows catastrophic-only policies for those 30 and younger.

104. Benefits 2014
 All plans must meet standard packages or be based on
actuarial equivalents
 The plans will define maximum cost-sharing amounts, benefit
mandates, and other minimum covered benefits
 Ambulatory patient services
 Emergency services
 Hospitalization
 Maternity and newborn care
 Mental health and Substance use disorder services
 Prescription drugs
 Rehabilitative services and devices
 Preventive and wellness services and chronic disease management
 Pediatric services, including oral and vision care

105. ★ Benefits 2014
 Institutes of Medicine recommendations:
 Build the plan to look like the “typical” small employer health plan
 Be sure that it costs about what the average small employer would pay
 If there are changes to be made, process should be transparent
 Summary: Keep it affordable was the recurring theme
 Late 2011 - HHS: no “national” essential benefits design
will be established and will allows states/Exchanges to
establish the standards reflective of their local needs
 Differing opinions on this “solution”
 More to come
 Standards will not apply to large group (100+)
or self-funded plans

106. Wellness 2014
Codifies and improves upon the HIPAA bona fide
wellness program rules and increases the value of
workplace wellness incentives to 30% of premiums
with DHHS able to raise to 50%
 Establishes a 10-state pilot program to apply the rules to
HIPAA bona fide wellness program rules the individual market
in 2014-2017 with potential expansion to all states after 2017.
 New federal study on wellness program effectiveness and cost
savings.

107. Beyond 2014
Cadillac Tax:
 40% excise tax on insurers of employer-sponsored health plans
with aggregate values that exceed $10,200 for singles and from
$27,500 for families takes effect in 2018.
 Transition relief would be provided for 17 identified high-cost
states.
 Values of health plans include reimbursements from FSAs, HRAs
and employer contributions to HSAs.
 Stand-alone vision and dental are excluded from the calculation.
 Premium values are indexed to CPI
 Allows plans to take into account age, gender and certain other
factors that impact premium costs

108. What happens from here?
Regulatory Process
 Numerous federal agencies in charge of drafting rules for
implementing law
 HHS in charge (working with DOL, Treasury/IRS, EEOC, FTC)
State Implementation
 Legislatures, Governors, Insurance Commissioners
Litigation
 Supreme Court: DONE

109. What happens from here?
From Mercer, Emerging challenges and opportunities in
the new health care world, May 2011

110. EbenConcepts
 We are actively involved in the “next steps”
 We will be updating our clients regularly
 COBRA Subsidy
 HIRE Act compliance work today
 Modified HCR Notices
 We will work cooperatively with our clients to find the best
product, to protect their status as grandfathered plans, and
to continue to advocate for your needs with carriers or
administrators

111. Questions?
Chris Harrison
csharrison@ebenconcepts.com
David C. Smith
dcsmith@ebenconcepts.com