1. Click to edit Master title style
The Supreme Court
Health Care Reform Decision
and Its Impact on Employers
Webcast Presenter:
Dennis Fiszer, JD
Eastern Region Chief Compliance Officer

2. Today’s agenda
• Supreme Court ruling
• Individual Mandate
• Looming PPACA Requirements
• Employer Mandate
• HUB International’s Health Care Reform
Impact Tool
• Compliance Strategies
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3. Click to editCourt’s title style
Supreme Master
PPACA Ruling
What does it mean
for Plan Sponsors?

4. Overview of Ruling
June 28, 2012: U.S. Supreme Court upholds
Patient Protection and Affordable Care Act (PPACA)
• Court found Congress did not have the power to pass the law
under Commerce Clause
– Led to some initial confusion as several news organizations mis-
reported outcome
• Court noted that Congress lacked the authority to regulate
“inactivity” (for example, the failure to buy a product or service)
– Not the determinative finding
• Court upholds citing Congressional taxing authority
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Individual Mandate
Supreme Court Validation

6. Individual Mandate
Individual mandate starts in 2014
• Requires individuals hold health coverage or pay a penalty
(limited exceptions)
– Fines (assessed as “taxes”) for failure to purchase
• $95 or 1.0% of adjusted income in 2014
• $325 or 2.0% of adjusted income in 2015
• $695 or 2.5% of adjusted income in 2016
• Individual subject to penalty unless shows evidence of coverage
for at least nine (9) months of the year
• Supreme Court was never asked to evaluate PPACA employer
mandate
– If law been invalidated and then found not severable employer
mandate would have disappeared
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7. Lingering battles
PPACA may face further legal challenges
• Catholic organizations recently filed lawsuits in a number of
states challenging the PPACA’s contraception coverage
requirement
• State and local governments may challenge the federal
government’s power to impose penalties on non-federal entities
as employers
• Plan sponsors are expected to challenge whether penalties
issued in states that failed to establish Exchanges are valid
under PPACA’s statutory language
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8. Immediate Affects
Full speed ahead with compliance and strategic
planning
• Employer coverage mandate will take effect in 2014
– Absent new Congressional legislative action to significantly change
or repeal the law
• November elections will factor strongly
– President Obama would certainly veto any action against the law
– Governor Romney has actively campaigned to “repeal and
replace” PPACA
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Looming PPACA
Requirements
What to expect

10. Looming PPACA Requirements
Key compliance duties include the following:
• Form W-2 reporting requirement
– Starting with W-2 reports issued in January 2013
– One year delay for employers that did not issue 250 W-2s in 2011
• Implement $2,500 limit on employee contributions to health
flexible spending accounts (FSAs)
– For plan years beginning in 2013
– Opportunity to explain FSA operation to workers in plan materials
– IRS recently issued guidance to resolve implementation problems
• Summary of Benefits and Coverage requirements
– For open enrollment periods starting on or after September 23, 2012
– Template published
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11. Looming PPACA Requirements
• Administer (to the extent applicable), any Medical Loss Ratio
(MLR) rebates stemming from insured group health plan
coverage
• Requirement for employers to notify employees of the availability
of health insurance Exchanges
– March 2013
• Comparative Effectiveness Research fees will be assessed ($1
per covered life for first year)
– Generally paid starting in 2013
• Comply with women’s health coverage expansions under
preventive care rule
– Not applicable to grandfathered plans
– Plan years starting on or after August 1, 2012
– Safe harbor delay for religious employers
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12. PPACA Requirements for 2014
Employers must provide health coverage under the new
“pay-or-play” mandate
• Penalties apply for employers who either:
– Fail to offer health coverage; or
– Offer health coverage that is either “unaffordable” (as defined by
PPACA) or does not provide “minimum value” (as to be defined by
agencies)
Employers must report on health coverage of each eligible
employee and family members:
• Name
• Address
• SSN
• Detail of coverage and other data
• Provided on a month-by-month basis
• Starting in January 2015 (for coverage provided in 2014)
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13. PPACA Requirements for 2014
Increase in permitted wellness incentives from 20% to 30%
• Possibly as high as 50%
Maximum 90-day limit on waiting periods
Coverage for certain approved clinical trials
• Grandfathered plans exempted
Comprehensive prohibition on preexisting condition
exclusions; and
Complete prohibition on annual dollar limits.
• Current transition rule in effect
• Mini-med programs eliminated
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14. Status of Nondiscrimination Rules
Compliance delayed and remains pending
• Non-discrimination rules for insured health plans
– Plan testing requirement added to measure whether benefits and
/or eligibility skewed to favor highly compensated employees
• Testing to be modeled after self-funded plan requirements
– Applies to non-grandfathered insured plans, but currently “on hold”
under an IRS non-enforcement policy
– Effective date unknown
• IRS delayed application of testing to insured plans in Notice
2011-1
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15. Status of Nondiscrimination Rules
• IRS attorney indicates they may delay release of rules until
2014, and then may limit application of rules to employers
with under 50 employees
– HUB is lobbying for delay or non-enforcement position even after
2014
• Grandfathered plans will remain excused from compliance as
long as grandfathered
– Remaining grandfathered will be difficult
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16. Additional concerns
Automatic enrollment of new employees in a group
health plan
• Applies to organizations with more than 200 employees
• Effective date unknown, except that it will apply after 2014
“Cadillac Tax” on high-cost health plans
• Effective for 2018
• Forty percent excise tax on employers offering coverage that is
too rich
– Generally, plans with a value over $10,200 single and $27,500
family
• Some group health plans are already at these valuation
thresholds due to unavoidable issues like union contracts and
geography
• Government estimates 60% of plans will pay tax soon after
effective date
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17. Additional concerns
• States will be required to have their health insurance Exchanges
up and running by 2014
– Rules governing Exchanges have not even been drafted in many
states
– Unlikely such states will be ready with operational Exchange
programs by the specified deadline
– Such states will default into a federal Exchange model
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Employer Mandate
What it means to your
organization

19. Employer Mandate: A closer look
PPACA mandates that employers provide health
coverage to workers starting on January 1, 2014
• Mandate applies starting the first day of 2014
– Caution: Not the employer’s plan year date in 2014
• Organizational planning must begin well ahead of the compliance
date
Employers with over 50 employees must offer coverage
to full-time workers and their family members
• Coverage must be “affordable” for the employee
• Penalties generally lower than the cost of coverage but intangible
factors apply
• Budgetary pressures expected to force government to revisit and
ratchet up its original penalty thresholds
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20. Employer Mandate: A closer look
• Employers must determine if they have over 50 full-time
employees or full-time equivalents
– Measured across control group
– Part-time equivalents
– New federal definition that sets that standard at 30 or more hours of
actual work on average per week in a month
– Actual year of measurement is 2013
– Employers need to know as early as possible
• Employers with fewer than 50 full-time workers excused from
federal mandate
– Smaller employers may be “incented” to voluntarily provide health
coverage by federal tax credits
– Employers may still be subject to state and local mandates
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21. How is Compliance Achieved?
To comply, an employer must offer a minimum level of
health plan coverage to full-time employees and their
dependents and spouses
• The key word is “offer” – employees can still waive coverage
• What will that cost be?
– Determining that figure should be done as soon as possible
• Employers must carefully compare penalty exposure to the cost
of compliance and weigh the decision versus intangibles
– Tax advantages
– Workforce expectations
• Several studies suggest that less than ten percent of employers
plan to discontinue benefits and pay the penalty
• HUB International Health Care Reform Impact Tool (HCR-IT)
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22. How is Compliance Achieved?
• Coverage has to be affordable for the employee, but not for
family members
– Most employers will shift all of family coverage cost to employees
– Failure to offer “affordable coverage” can trigger a $3,000 annual
penalty for each person who instead gets federal assistance with
coverage through tax credits
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Health Care Reform
Impact Tool
Available to HUB
International Clients

24. Health Care Reform Impact Tool
Offered by HUB International
• Projects an employer’s future costs
– Health Plan Cost through 2018
• Current plan versus one that would avoid Excise Tax
– Estimates 2014 costs related to in-and-out migration
• Individual Mandate
• Auto enrollment
• Movement to the state health Exchange
• Other employer costs under health care reform
• Please contact your HUB International Advisor for further details
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25. Indirect impact of the Decision
Anticipated ripple effects
• Self-funded ERISA plans will be more advantageous for
employers as they will be exempt from some of the key federal
PPACA obligations
– Also protected from many otherwise applicable state mandates
under ERISA’s preemption power
– Smaller groups may consider self-funded model
• Federal subsidies to individuals who qualify will increase
budgetary pressures on the federal government
– May manifest itself in greater cost shifting to the private sector,
causing premiums to increase
– Variation of what Federal government did in implementing Medicare
secondary payer program
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26. Indirect impact of the Decision
• Some analysts anticipate “system gaming” as the penalties for
not purchasing health insurance are artificially low
– Unlikely to deter healthier individuals from staying uninsured until
they require coverage
– Individual mandate annually satisfied with only nine (9) months
demonstrable coverage
– Exchanges will feature lengthy grace periods before premium
payment required
• Significant remainder of current uninsured population still
coverage ineligible
– Unreimbursed medical costs represents on-going system drain
– Additional pressure on health care costs
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Compliance Strategies
How you can prepare for
PPACA changes

28. Compliance Strategies / Tactics
Begin “pay or play” determinations and strategy
• Cost projections / budget measures
• Plan documentation changes / required notices
• Identify and delegate compliance functions
Carefully examine eligibility
• Who is full-time?
• Determine cost estimates as soon as possible
• Count employees in 2013 for compliance at 50 employees
• Review use of independent contractors/outside service providers
– Caution now because IRS audit area
– Complaints will trigger audit and possible penalties
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Thank You!
www.hubhealthreform.com

30. Upcoming Health Care Reform webinars
Election 2012: What does the outcome mean for Health Care Reform and Employers?
November 13, 2012
How will the makeup of the next Congress affect continuing implementation of the
Patient Protection and Affordable Care Act? What direction should we expect to come
from the White House? How will this translate to guidance from regulatory bodies? And
how will state election results factor into compliance duties as we move into 2013?
Register at http://www.hubinternational.com/employee-benefits/healthcare-
reform/webinar-series/
Additional webinars maybe scheduled as needed prior to our November
13 program. Please continue to visit www.hubhealthreform.com for
updates.
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