Health Care Reform & the 2014 Mandates Navigating the Future of Healthcare October 14, 2011

Health Care Reform What we sought –Lower Medical Cost, Build from ESI –NRF Vision for Health Care Reform What we got –Affordable Care Act, a.k.a. Patient Protection and Affordable Care Act –Universal coverage first, fundamental changes to health care, marginal cost reductions in future?

2014 – A Key Year to Watch Employer, individual mandates become effective. Limits on waiting periods (90 days) become effective. Massive insurance market reform in all markets becomes effective. Exchanges are launched at state level with federal fall-back, regional exchanges.

End to Voluntary System Every American citizen and legal resident must purchase qualified coverage. Employers must provide coverage to full time employees or pay penalties. Employers are also subject to penalties if their coverage is deemed unaffordable for certain employees and they receive subsidized coverage. Employees must accept coverage but can opt out in designated low income categories.

Coverage Threshold Applies to employers with 50 or more full- time employees or full-time equivalents. Full-time employee is defined as working an average of 30 hours per week per month. Part-time employees count toward this threshold but not for penalties. –Total part-time hours per month divided by 120 = full-time equivalents.

Failure to Offer Qualifying Coverage to Full-Time Employees Penalized for the 31 st uncovered full- time employee (first 30 are $2,000 per if one covered employee is eligible by income (more than 9.5% of family income) for and receives an exchange subsidy. –Penalty is not tax deductible.

Failure to Offer Affordable Coverage to Full-Time Employees Full-time employees whose premium cost exceeds 9.5% of their family income or if the employer pays less than 60% of the cost of coverage can opt out of their employer’s plan and receive subsidized coverage in the Exchange. Employers are penalized the lesser of $3,000 per actual subsidy-recipient employee or $2,000 times every full-time employee minus the first 30 employees.

NRF Health Care Mandate Cost CalculatorMandate

Example: 35 full-time and 25 part-time employees 25 hours/week] = 2500 PT hours

Example: penalty for not providing coverage: 35 full- time EEs minus 30 = 5 full-time x $2,000 = $10,000 “Unaffordable” penalty is the lesser of $3,000 times actual FT recipients or $2,000 times every full time employee minus the first 30. Coverage would run between $350k - $525k

The cost for single coverage [$10K - $15K] would run to $50-75 million.

Also Effective 2014 State-based Exchanges (health insurance purchasing cooperatives). Regional compacts? 90-day limit on waiting periods Auto-enrollment for 200 or more employees becomes effective

Effective in 2014 Essential Benefits Package Defines cost-sharing, mandates, and minimum covered benefits Multiple levels available based on actuarial equivalents – bronze, silver, gold, platinum.

Effective 2014 Guaranteed issue coverage in all markets and must also be guaranteed renewable. Preexisting condition exclusions prohibited in all markets. Annual limits prohibited in all group (even self-funded plans) or individual plans.

Effective 2014 Strict Modified Community Rating Applies to all individual health insurance policies and all fully insured group policies 100 lives and under (and larger groups purchasing coverage through the exchanges). –Premium variations only allowed for age (3:1), tobacco use (1.5:1), family composition and geography –Wellness discounts are allowed for group plans under specific circumstances.

Effective 2014 Individual Mandate All American citizens and legal residents must purchase qualified health insurance coverage. Exceptions are provided for: –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 Low dollar penalties = spotty adherence?

Contact Information: Neil Trautwein Vice President Employee Benefits Policy Counsel National Retail Federation 202 / phone