1 Robert D. Noonan, Esq.

 Representing Employers  Discrimination  Sexual Harassment  Employee Benefit Litigation  Unemployment Compensation Appeals  Legal Document Development  Separation Agreements  Employee Benefit Documents  Employee Handbooks 2

 Meriden and Middlefield   

 Federal Health Care Reform  Chronology Review  Special Topics: Individual Mandate, Employer Penalty, Grandfathered Plans, Age 26 Coverage  Implementation: HCR 2011, 2012 in Detail  Connecticut Laws Impacting HCR

 – Setting the stage for mandate  2014 – individual and large employer mandate  – Effort to reduce cost of health care in Medicare and Medicaid, and general effort in wellness and prevention

 Rate review  Rescission requirements  Early retiree reinsurance  Tax credits for small employers  Dependents to age 26  No pre-ex exclusions for children  No lifetime limits  Restrictions on annual limits  Coverage of recommended preventive services**  Patient protections (PCP selection, OB-GYN access, ER services)**  Consumer appeal process**  No benefit differences by employee salary**  ** Not apply to grandfathered plans

 Reporting cost of health coverage on employees’ W-2s (to be issued in 2012);  New form for employee benefit reports  Minimum medical loss ratios  Grants for small employer wellness programs  Prescription required for OTC drug reimbursement  Increased tax on nonqualified HSA disbursements  CLASS program developed (enrollment date TBD)

 Uniform coverage summaries must be distributed to employees, began March 23, 2012;  Information concerning exchanges must be distributed to employees;  Standard terms and conditions in insurance  FSA contributions limited to $2,500/year  Tax exclusion for Medicare Part D retiree drug subsidy payments eliminated  Quality initiative reporting

 Employer mandate (with auto-enrollment)  Expands small group to  Insurance exchanges for small group  New product framework for small group  Free choice vouchers-REPEALED  Increased small business tax credit  No annual limits  Essential Health Benefits mandates

 Effective January 1,  Individual and any dependent must have minimum essential coverage;  Individual must report his coverage status on tax return.

 Minimum Coverage  Medicare  Medicaid  TriCare for Life  Employer Plans  Any group plan in the small or large market;  Allows for plans to add dependents;  Allows new employees to join.  Exception for grandfathered plans

 Penalty: $ , $ , $ ; or three times that amount for family ($2,085)  Indexed thereafter at $750.

 Penalty will not apply if the cost of coverage is greater than 9.5% of the individual’s household income  If the individual is to be covered under an individual policy, the cost is equal to the lowest bronze plan  If the individual is under an employer’s plan, then the reference is to the employee’s coverage under the employer’s plan  No Penalty for incomes below tax filing threshold (e.g. 2009, $9,350 for singles and $18,700 for families).

 Individuals can get premium credits if they purchase insurance on the exchange and their income is below FPL.  Sliding Scale for individuals with incomes between 130 – 400% of FPL  Amount of Credit will be an amount such that the premium contribution for Exchange silver plan is limited to a certain % of individuals income.

 Subsidies to reduce cost-sharing amounts and cost-sharing limits of Exchange plan  In effect, subsidies will limit cost-sharing such that the costs covered by the silver plan (mid-plan, 70% of costs covered) will increase to:  100%–150% FPL: 94%  150%–200% FPL: 87%  200%–250% FPL: 73%  250%-400% FPL: 70%  Requires verification of income and citizenship status.

 Key Concept: Large employer  Does not offer coverage  Coverage is inadequate  Coverage is too expensive

 Requires 50 or more employees AND  Employer does not offer coverage OR  Employer’s coverage is inadequate or too expensive AND  An employee receives a premium credit or a subsidy.

 Count both full-time and part-time employees  “Full-time employees” are those working 30 or more hours per week.  The number of full-time employees excludes those full- time seasonal employees who work for less than 120  days during the year.  The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis, by taking their total number of monthly hours worked divided by 120.

 A firm has 35 full-time employees (30+ hours). In addition, the firm has 20 part-time employees who all work 24 hours per week (96 hours per month). These part-time employees’ hours would be treated as equivalent to 16 full-time employees, based on the following calculation:  20 employees x 96 hours / 120 = 1920 / 120 = 16  Total full-time equivalents is 51 (35 FT + 16 FTE)

 Beginning 2014: employers with 50 or more employees (includes full time equivalents) that do not offer coverage will pay an amount equal to $2,000 per full time employee, after subtracting 30 from that total, if:  Any of its full-time employees receive a premium credit toward coverage on the Exchange.

 Beginning 2014: employers with 50 or more employees (includes full time equivalents) that do offer coverage are subject to fine if:  Coverage is not equal to Bronze Plan OR  Coverage costs more than 9.5% of the employee’s household income AND  at least one full-time employee receives a premium credit toward coverage on the Exchange.  And will pay an amount equal to the lesser of:  A) Number of full-time employees minus 30 full-time employees, multiplied by $2,000  B) Number of full-time employees who receive subsidies on the Exchange, multiplied by $3,000

 Credits/subsidies not available to individual if individual is eligible for employer-sponsored plan that:  provides coverage minimum essential coverage (coverage that pays for 60% of covered expenses) and  employee’s required contribution does not exceed 9.5% of employee’s household income.

 Part-Time workers: counted by prorating (total hours worked by part-timers based on less than 30 hour week, in a month divided by 120).  Seasonal workers: Not counted for those working less than 120 days in a year  Part-Time workers: If employer is a “large employer,” a part-timer will not cause the employer to be subject to a penalty if the part-timer received a premium credit for exchange coverage.  Seasonal workers: If employer is a “large employer,” a seasonal worker still could case the employer to face a penalty for each month that a full-time seasonal worker received a premium credit for exchange coverage.

 Individuals enrolled in the plan on March 23, 2010  Renewal of coverage under that Plan after March 23, 2010 does not effect grandfathering status  New Employees who become covered under the Grandfathered Plan  If Plan allowed for Family/Dependent Coverage on March 23, 2010 – Then:  Family/Dependents of those individuals already enrolled in the plan on March 23, 2010  Family/Dependents of New Employees who become covered under the grandfathered plan

 Provides grants to states to begin planning for the establishment of American Health Benefit Exchanges and Small Business Health Options Program Exchanges, which facilitate the purchase of insurance by individuals and small employers.  Implementation: Grants awarded starting March 23, 2011; enrollment in Exchanges begins January 1, 2014

 Excludes the costs for over-the-counter drugs not prescribed by a doctor from being reimbursed through a Health Reimbursement Account or health Flexible Spending Account and from being reimbursed on a tax-free basis through a Health Savings Account or Archer Medical Savings Account. Increases the tax on distributions from a HSA or an Archer MSA that are not used for qualified medical expenses to 20% of the amount used.  Implementation: January 1, 2011

 Employers (250 W-2’s only) will be required to state the cost of employer-sponsored health insurance for the W-2 issued for 2013  Draft version of the IRS W-2 form issued.

 Employers must calculate and report the aggregate costs of employer-sponsored health coverage  Way to track coverage values for 40% excise tax (starting 2018) on “Cadillac plans”  Aggregate cost of coverage includes employee and employer portions  Determined under COBRA rules, minus 2% administrative cost  Requirement appears to impose a monthly calculation for employers  Though, if employee’s coverage terminates mid-month, cost will need to be prorated accordingly

 Compliance with new nondiscrimination testing delayed until plan years beginning after the DOL and HHS issue regulations.  Notice explains that the ACA provides that a group health plan (other than self-insured plan) must satisfy the requirements of Section 105(h)(2) of the Code and that “rules similar to the rules contained in paragraphs (3) [nondiscriminatory eligibility classification], (4)[nondiscriminatory benefits], and (8) [certain controlled groups] of § 105(h) of such Code shall apply.”  Regulatory guidance is essential to operation of this provision – therefore compliance must be delayed.  Code Section 105(h) continues to apply to self-insured plans subject to ERISA, as it has prior to and since the passage of the ACA.

 Section 18A provides that employer compliance with the automatic enrollment provisions of that section shall be carried out “[i]n accordance with regulations promulgated by the Secretary [of Labor].”  Accordingly, it is the view of the DOL that, until such regulations are issued, employers are not required to comply with section 18A.  DOL intends to complete this rulemaking by 2014.

 T here are no immigration-related restrictions on who can participate proposed health insurance exchanges;  To qualify for any subsidies for health insurance, "individuals must be lawfully present in a state in the United States." That does not preclude those in this country legally who have illegal immigrants in their family from qualifying for the subsidies.

 Enforcement: up to the Health Commissioner, who is instructed by law that he or must have some process to establish immigration status before giving subsidies.  Some illegal immigrants -- those who "meet the substantial presence test" -- would be taxed if they don't obtain health insurance that meets the requirements of the law;

 Under ACA, each state must establish a state exchange.

 Connecticut: Defined “essential benefits and is establishing state exchange.  Massachusetts: Enacted compliance law on March 23, 2012 and expands Health Care Connector to incorporate reform law.  Rhode Island: Enacted three special laws which will bring RI plans into reform compliance. Established 13 member exchange board.

 New Hampshire: Will not set up state exchange; will defer to federal exchange.  New York: After the New York State legislature failed to pass exchange legislation, governor establishes the New York Health Benefit Exchange by executive order.

 New Jersey: On October 18, 2012, the New Jersey legislature passed law to establish a health insurance exchange that is allocated to the Department of Banking and Insurance, but is independent of any supervision or control by the Department.

 Mandate-every person must have adequate coverage for self and dependents or pay fine.  Employees will require information about adequacy;  Government-will require information about plan and enrollments

 Employment Strategy: Seasonal Workers- consider the 120 day rule and cost impact;  Limit the number of work days;  Consider the application for assistance;  Some employees will not apply for assistance.  Benefits Strategy  Pay the fine  Give employees money to get their own  Benefits Administration  Paperwork on benefits has to be considered.  Uniform Coverage Summary  W-2’s