The Health Care Reform Act What You Need To Know James P. Gelfand, Director of Health Policy

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Learning Objectives Identify key provisions of the legislation that will affect your organization Determine the course of action needed to comply with the new regulations Understand the implications of non- compliance with the regulations Determine the financial implications of the new law

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at What the Chamber supported… Bending the cost curve A focus on wellness and prevention Insurance market reforms coupled with individual responsibility Payment reforms (addressing cost-shifting & P4P) Medical liability reform Health IT Improved affordability subsidies Comparative effectiveness research

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at The Patient Protection and Affordable Care of 2010 (H.R. 3590)… Signed into law (P.L ) on Mar. 22, 2010 Extends health insurance coverage to about 32 million currently uninsured. Subsidies – provides subsidies for up to 400% of FPL Medicaid Expansion – Up to 133%FPL (14,000 ind./29,000 family) Individual Mandate – Starting 2014, with penalty of $695 ind./$2,915 family Employer Mandate – (Free rider) Penalty for lack of “affordable” coverage if 50 or more employees Creates State Insurance Exchanges – Available in 2014, state marketplace for purchasing insurance

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at The Patient Protection and Affordable Care of 2010 (H.R. 3590) – continued… Insurance Reforms  No rescissions (unless fraud – 2010)  Dependents covered until age 26 (2010)  No pre-existing condition exclusions (2010 for children; 2014 for everyone)  No lifetime limits (2010) or annual limits (2014 for group plans)  Requires preventative coverage (2010)  Guarantee Issue and rating limitations (2014) Small Employer Credits – Up to 50% of employer’s contributions (up to 5 yrs.) Minimum Benefits Package – All health plans offered through exchanges to provide the essential benefits

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Cost $$$.... According to the Congressional Budget Office (CBO)…  Cost = $938 billion/10 years Deficit reduction = $124 billion/1 st -10years, $1.2 trillion/2 nd -10 years Doc Fix will cost over $275 billion  $569 billion in new taxes and tax increases  $528 billion total cuts to Medicare  Creates 16,500 new jobs for the IRS  Billions more in spending authorized, but not appropriated.

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Pay Fors = $569 billion/10 years… 10% excise tax on tanning services $2.7 billion/10 (2010) Modification of tax treatment in certain health organizations$400 million/10(2010) Codify economic substance doctrine $4.5 billion/10(2010) Repeal of “black liquor” credit $23.6 billion/10 (2011) Conforming definitions for medical expenses $5.0 billion/10(2011) Additional tax on distributions from HSA’s and MSA’s other expenses $1.4 billion/10(2011) Excise tax on manufacturers and importers of drugs $27.0 billion/10(2011) Corporate reporting requirements (1099 issue)$17.1 billion/10 (2012) Limit flexible spending in cafeteria plans to $2,500$13 billion/10(2013) Excise tax on medical device manufacturers $20 billion/10 (2013) Medicare tax on HI earners $210.2 billion/10 (2013) Eliminate Part D subsidy deduction $4.5 billion/10 (2013) Limitations on executive compensation $600 million/10(2013) 10% medical expense deduction $15.2 billion/10 (2013) Excise tax on insurance providers $60.1 billion/10 (2014) Free Rider penalties$52 billion/10(2014) Individual Mandate penalties$17 billion/10(2014) 40% excise tax on Cadillac plans $32 billion/10 (2018) Effects on coverage provisions in revenue$46 billion/10(Misc.) Other changes in revenue$14.3 billion/10(Misc.)

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at 1099 reporting requirement… Burdensome reporting requirement that increases the cost of doing business Section 9006 requirement: Submit a separate 1099 form for every single business-to-business transaction in aggregate of $600 each year – GOODS and SERVICES Could affect over 40 million businesses House bill – H.R – repeal Section 9006 (Rep. Lungren) / Senate bill – S (Sen. Johanns)

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Implementation: What happens and when? Implementation will be a 10 year process Immediate changes: Longer term changes: Most significant changes: and beyond  Individual Mandate  Employer Mandate  Subsidies, Exchanges, Medicaid expansion

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Immediate changes… Insurance Reforms – 6 months after enactment  Prohibits lifetime limits, rescissions, and excessive waiting periods  Dependents covered until 26  No preexisting conditions for under 19 yrs. old  First dollar coverage for preventative care  Grandfathered plans

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Small business tax credit… Available to small companies and tax exempt organizations ( ). 2 Phases. PHASE 1 ( ):  Employers with less than 25 full-time employees w/ avg. wage of $50,000 or less, and company pays min. of 50% of premiums are eligible for tax credit up to 35% of premiums.  Maximum credit if you have 10 or less full-time employees w/ avg. wage of $25,000.  Credit claimed on business tax return, not employment tax return. PHASE 2 ( ):  Same criteria above; but only available to employers purchasing insurance through the exchange.  Credit increases up to 50% of premiums; but only good for 2 years.

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Important choices for businesses… What is the Employer “Free Rider” Mandate? Offering vs. Non Offering firms Plan cost considerations for those who are offering Other issues impacting employers

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Employer “Free Rider” Mandate… Employers with <50 Full-Time Equivalents (FTE) are exempt from offering. Employers with 50 or more FTE, who do not offer, no fines levied if all employees’ incomes are over 400% of FPL (88 K/family of 4). For employers with 50 or more FTE who don’t offer, if any employee receives tax credit through exchange, fine is equal to $2,000 times the # of employees minus 30. These penalties are also incurred if the employer is not offering a “Qualified” health plan. If an employer with 50 or more FTE does offer health insurance, but it is not “affordable” (employee’s share is more than 9.5% of income), and the employee goes into exchange (and gets tax credit), the penalty is $3,000.

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Employer Mandate and Penalties…

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Plan considerations for offering … Whether you are a self-insured or fully insured, may trigger different requirements. Here are some items to think about: Self-Insuring – New requirements for self-insured plans – Reporting value on W-2, will not need to cover “essential benefits” but will need to meet actuarial value (60%), will be exempt from new tax on insurers, but may be subject to “Cadillac Tax” in 2018 Sending Employees to the Exchange – Starting 2017, large employers (over 100) may be able to participate in the exchange Grandfathering of plans – What changes to your plan will trigger loss of “grandfather” status?

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Grandfathering rule – How it works… “Plans will lose their grandfather status if they choose to make significant changes that reduce benefits or increase costs to employees.” Changing carriers Any changes in coinsurance that increases employee share of medical payments (i.e. Going from 80/20 to 70/30) Any increase in a fixed payment amount (except co-payments) of more than medical inflation plus 15%; applies to deductible, max out of pocket, etc. (since 3/23/10) Any increase in co-payment that exceeds the greater of medical inflation plus 15% or $5 plus medical inflation (since 3/23/10) Decrease employer contribution to premiums by more than 5% below the level (since 3/23/10) Eliminating any benefit for diagnosis or treatment or any part of treatment for a particular condition (since 3/23/10)

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Issues impacting employer plans… Long-Term Care – Starting 2011, employers permitted to automatically enroll employees into CLASS program Retiree Prescription Drug Plans – In 2013, employers who receive 28% for RDP’s will no longer be able to deduct subsidy Compensation: Salary vs. Benefits – Employers may prefer compensation through income rather than health benefits. Consumer-Directed Account Options – Penalties for non-qualified purchases; limits on contributions

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at What’s next? Political – 2 election cycles before 2014 Legislative – Ongoing fixes in future Congresses, opportunities to improve the law. Regulatory – Guidance & Rulemaking – DOL, HHS, & IRS  Good Faith Compliance/Medical Loss Ratio Legal – Legal challenge; 21 states have filed suit on constitutionality

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Chamber resources… Vote For Business  Health Care Toolkit  Primer: Critical Employer Issues in the Patient Protection and Affordable Care Act  _issues_ppaca.htm _issues_ppaca.htm Health Reform Impacts 

U. S. C h a m b e r o f C o m m e r c e For more information, contact James Gelfand at Questions?