Patient Protection and Affordable Care Act (PPACA) – signed on March 23, 2010 Health Care and Education Reconciliation Act (Reconciliation Act) – signed on March 30, 2010 Why We Are Here

The health care reform law makes sweeping changes to our nation’s health care system, but Details will be issued in regulations from government agencies: –DOL –IRS –HHS Expect nearly 20K pages of rules and regs A Mountain of Regulation

Individuals now have a mandate to have insurance Individuals and some employers will be able to purchase coverage through state health benefit exchanges Some health insurance practices prohibited or reformed Coverage changes made to plans New duties for employers A Quick Global View

Simple answer: Yes The law does not require individuals or employers to terminate current coverage Many health care reform provisions don’t apply to existing plans, even if coverage is later renewed Existing Plans = Grandfathered Plans Can I Keep What I Have?

A group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of the health care reform legislation Significant changes to plan design could take a plan out of “grandfathered” status Law is not clear on this point – need to be cautious in redesigning any current plans Grandfather Status

Small Employer Tax Credit Auto Enrollment for Large Employers –Was effective on date of enactment, but no regulations/compliance provisions were included in the passed bill. High-Risk Pool Program – Running into state resistance Early Retiree Reinsurance Program Reforms Done or Expected Within the Year

Coverage for Adult Children until Age 26 Tax exclusion applies to coverage State mandates above this level continue to apply No lifetime limits on essential benefits Restricted annual limits on essential benefits –Allowed for plan years beginning before Jan. 1, 2014 Need HHS regulations Reforms Done or Expected Within the Year

No rescission of coverage –Applies to group and individual coverage –Exception for fraud or intentional material misrepresentation –Individual must be given prior notice of cancellation No pre-existing condition exclusions or limitations for children under age 19 –This prohibition will apply to everyone in 2014 Reforms Done or Expected Within the Year

Limits on preauthorization and cost- sharing Patients can chose an available participating primary care provider (or pediatrician) Apply to new plans Reforms Done or Expected Within the Year

As of Jan. 1, 2014, individuals must enroll in coverage or pay a penalty Penalty amount = greater of flat dollar amount (1/2 for children) or a % of income Individual Mandate

Individual Mandate Continued 2014 = $95 or 1%; 2015 = $325 or 2%; 2016 = $695 or 2.5% Amounts indexed for CPI after 2016 Family penalty capped at 300% of the adult flat dollar penalty or “bronze” level premium

States will receive funding to establish health insurance exchanges Individuals and small employers can purchase coverage through an exchange In 2017, states can allow employers of any size to purchase coverage through exchange State Exchanges

Employers can give “qualified employees” a voucher to buy coverage in exchange –Employers have to offer coverage and make a contribution Voucher is for amount employer would have contributed to plan Qualified employee –Household income not more than 400 percent of federal poverty level –Required plan contribution between 8 and 9.8 percent of income The Voucher Issue

Selected Tax Implications July 1, 2010 – Indoor Tanning Tax ($2.7 B) 2011 –Fee on Drug Manufactures ($27 B) –FSA, HAS, HRA definition of medical expenses ($5 B) –Increase to 20% Penalty for non-health withdrawals from an HSA ($1.4 B)

But Wait There’s More! Tax Impacts Continued Compliance ($17.1 B) Fee imposed on insurance and employer plans to pay for competitive research ($2.6 B) 2013 Eliminate the Medicare Part D employer subsidy ($4.5 B)

Selected Tax Impacts 2013 Cont Limit FSAs to $2,500 indexed to inflation ($13 B) Raise 7.5% AGI floor to 10% ($15.2 B) 2.3% tax on medical devices ($20 B) Increase Medicare payroll tax by.9% in excess of $200/250K (unindexed) and a 3.8% investment tax ($210.2 B)

Selected Tax Impacts 2014 Fee on insurance providers ($60.1 B) % Excise Tax on “Cadillac” High Cost plans ($32.0 B)

Small Business Tax Credit as a Percent (Maximum of 35%) of Employer Contribution to Premiums, For-Profit Firms in Firm size Up to $25,000$30,000$35,000$40,000$45,000$50,000 Up to 10 35%28%21%14%7%0% 1133%26%19%12%5%0% 1230%23%16%9%2%0% 1328%21%14%7%0% 1426%19%12%5%0% 1523%16%9%2%0% 1621%14%7%0% 1719%12%5%0% 1816%9%2%0% 1914%7%0% 2012%5%0% 219%2%0% 227%0% 235%0%

The Employer Perspective