1. Implementing Health Care Reform National Association of Health Underwriters June 9, 2010

2. Confused – Implementation Overload!! DON’T PANIC YET!! No need to memorize this! We are at the end of the beginning — 7 to 10 years of rule making and changes

3. Recap on Legislation President signed Patient Protection and Affordable Care Act (PPACA) on March 23 Reconciliation bill signed on March 30 Interpretation of legislation now requires examining three sources: – Senate-passed bill, H.R. 3590 (now P.L. 111-148) – Manager’s amendment to the Senate bill – Reconciliation bill, H.R. 4872 Very important: Check all three sources when considering how the bill works

4. PPACA Overview Makes significant statutory changes affecting the regulation of and payment for many types of private health insurance – many insurance market reforms Will require almost all private sector employers to evaluate the health benefits they currently offer and consider whether they are compliant For those without access to employer coverage, new individual mandate to purchase and maintain minimum coverage

5. Grandfathered Plans Essentially all plans in effect on date of PPACA enactment (March 23, 2010) are “grandfathered” Grandfather plans exempt from some, but not all, of PPACA requirements Law does not address whether a plan that is amended on or after March 23, 2010 can still retain grandfather status – Eligible family members of existing employee plan OK, as well as new employees and their eligible family members Regulatory guidance expected soon clarifying many of these finer points

6. PPACA in 2010 Eligible small businesses are eligible for phase one of the small business premium tax credit. – Small employers with fewer than 25 employees will receive a maximum credit, based on number of employees, of up to 50% of premiums by 2014 for up to 2 years if the employer contributes at least 50% of the total premium cost. – Businesses do not have to have a tax liability to be eligible – Non-profits are eligible – Average salary must be $50,000 or less

7. PPACA in 2010 Temporary reinsurance program for employers that provide retiree health coverage for employees over age 55 begins within 90 days of enactment Deductibility for Part D subsidies is eliminated in 2013, but this results in an immediate accounting impact

8. PPACA in 2010 Creates high-risk pool coverage for people who cannot obtain current individual coverage due to preexisting conditions. – Employers cannot put people in the pool—would pay penalty This national program can work with existing state high-risk pools and will end on January 1, 2014, once the Exchanges become operational and the other preexisting condition and guarantee issue provisions take effect Financed by a $5 billion appropriation

9. Effective Plan Years Sept. 23 – All Plans, Inc. Grandfathered Restrictions on annual limits – Plans may impose only “restricted annual limits” on the dollar value of “essential benefits”. HHS to establish annual limits on the dollar value of essential benefits. On and after January 1, 2014, no annual limits will be permitted No lifetime limits – Plans may not impose lifetime limits on dollar value of “essential benefits”

10. Effective Plan Years Sept. 23 – All Plans, Inc. Grandfathered New strictures on “rescissions” – Plans may not rescind coverage unless person commits fraud or makes a material misrepresentation prohibited under the terms of the plan Pre-Ex Restrictions – Plans may not impose any preexisting condition restriction on children under the age of 19. After January 1, 2014, plans may not impose preexisting condition restrictions on anyone

11. Effective Plan Years Sept. 23 – All Plans, Inc. Grandfathered Coverage for dependents to age 26 – If a plan offers dependent coverage of children, such coverage must extend to a child until the child reaches age 26 – For grandfathered plans, this requirement applies before January 1, 2014 only if the adult child is not eligible to enroll in another plan

12. Effective for Plan Years on/after Sep. 23, 2010 other than Grandfathered Preventive care without cost sharing Nondiscrimination rules under IRS Code 105(h) applies to fully-insured plans New appeals process rules for coverage determinations and claims Certain new patient protections

13. Effective for Plan Years on/after Sep. 23, 2010 other than Grandfathered Preventive care without cost sharing Nondiscrimination rules under IRS Code 105(h) applies to fully-insured plans New appeals process rules for coverage determinations and claims Certain new patient protections

14. New Patient Protections Other Than Grandfathered Plans For all group and individual plans, including self- insured plans, emergency services covered in- network regardless of provider Enrollees may designate any in-network primary care physician as their primary care physician New coverage appeal process

15. PPACA in 2010 Establishes federal review of health insurance premium rates Secretary of HHS, in conjunction with the states, will have new authority to monitor health insurance carrier premium increases beginning in 2010 to prevent unreasonable increases and publicly disclose such information Carriers that have a pattern of unreasonable increases may be barred from participating in the exchange In addition, $250,000,000 is appropriated for state grants to increase their review and approval process of health insurance carrier premium rate increases

16. PPACA in 2011 and 2012 All employers must include on their W2s the aggregate cost of employer-sponsored health benefits If employee receives health insurance coverage under multiple plans, the employer must disclose the aggregate value of all such health coverage, – Excludes all contributions to HSAs and Archer MSAs and salary reduction contributions to FSAs – Applies to benefits provided during taxable years after December 31, 2010 A new federal tax on fully insured and self-funded group plans, equal to $2 per enrollee, takes effect to fund federal comparative effectiveness research takes effect in 2012

17. PPACA in 2013 Additional 0.9% Medicare Hospital Insurance tax on self-employed individuals and employees with respect to earnings and wages received during the year above $200,000 for individuals and above $250,000 for joint filers (not indexed) – Self-employed individuals are not permitted to deduct any portion of the additional tax Reconciliation measure levied a new 3.8% additional Medicare contribution on certain unearned income from individuals with AGI over $200,000 ($250,000 for joint filers)

18. PPACA in 2014 Imposes new annual taxes / fees (non-deductible) on private health insurers based on net premiums – $8.1 billion annually beginning in 2014 and rising to $14.3 billion by 2018 (and indexed for medical inflation thereafter) – Small businesses and employees could be disproportionately affected because tax only applies to fully insured health benefits (self-funded plans exempt)

19. PPACA in 2014 Coverage must be offered on a guarantee issue basis in all markets and be guarantee renewable Exclusions based on preexisting conditions would be prohibited in all markets Full prohibition on any annual limits or lifetime limits in all group (even self-funded plans) or individual plans Redefines small group coverage as 1-100 employees. – States may also elect to reduce this number to 50 for plan years prior to January 1, 2016

20. Employer Responsibilities

21. Key Concepts – Applies to “large” employers with 50 or more employees – “Grandfathering” rules do not apply to these provisions – Individuals can satisfy their coverage requirement by enrolling in an employer plan, a government sponsored plan or a plan in an insurance exchange – Unlike original House bill (approved last November), large employers are not required to meet minimum benefit requirements (applicable to individual and small groups) or make minimum contributions to premiums

22. Employer Responsibilities Effective starting January 1, 2014 Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more employees – Certain seasonal workers are not counted in determining if employer has 50 workers – Full-time = 30 or more hours per week, determined on a monthly basis Penalties assessed for “no coverage” or coverage that is not “affordable”

23. No Coverage If an employer fails to provide its full-time employees (and their dependents) the opportunity to enroll in “minimum essential coverage,” and One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost-sharing reduction, then Employer penalty = $2,000 for each of its full-time employees in the workforce

24. Unaffordable Coverage If employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and One or more full-time employees enrolls for coverage in an exchange and qualifies for a premium tax credit or cost sharing reduction because – The employee’s share of the premium exceed 9.5% of income, or – The actuarial value of the coverage was less than 60%, then Employer penalty = $3,000 for each full-time employee who receives a tax credit or cost-sharing reduction

25. Additional Details Actuarial value = the portion of allowable costs paid by plan. Penalties assessed on a monthly basis. No penalties assessed on first 30 full-time employees. No penalties apply to part-time employees. No penalties for waiting periods (if any), not exceeding 90 days. Total “affordability” penalty is capped. May not exceed penalty for “no coverage.” Employer does not determine if employee is eligible for premium tax credit based on household income, but is notified by the exchange if full-time employee qualifies.

26. Other Responsibilities Employers must automatically enroll “new full-time employees” in employer-sponsored coverage – Must provide adequate notice and opportunity to opt out – Applies to employers with “more than 200 full-time employees” – No effective date specified, but must be “in accordance with regulations promulgated by the Secretary (of DoL)…” (so presumably not effective until regulations are issued) Notice to current employees and new hires about exchange and subsidies – Existence of exchange, services and how to obtain assistance – Availability of premium assistance if plan value below 60% – Loss of employer contribution and tax exclusion for contribution – Effective March 1, 2013

27. Health & Wellness

28. For services performed on or after July 1, 2010: o New 10% excise tax on amounts paid for indoor tanning services, whether or not insurance policy covers service. Service provider to asses tax on customer

29. Health & Wellness HHS tasked with coordination among all Federal agencies with respect to prevention, wellness, and health promotion practices – Public Health. Beginning FY2010, administer the Prevention & Public Health Fund to expand and sustain national investment in prevention and public health programs Wellness Programs – HHS to enforce employer wellness provisions for group market and work with DOL and Treasury to implement a 10-state pilot program to apply wellness program provisions to the individual market

30. Health & Wellness PPACA authorizes – Beginning in 2011, $200 million over 5 years in grants for employees of small businesses to participate in comprehensive workplace wellness programs Eligible employers are those 100 employees who work 25 hours or more per week, and did not have a workplace wellness program as of March 23, 2010 – Grants to allow state and local health departments to design community-based public health interventions and screenings for people age 55-64; and – $25 million child obesity demonstration project

31. Health & Wellness Within 2 years after enactment, HHS will develop reporting requirements for use by group health plans designed to: – improve health outcomes – implement activities to prevent hospital discharge readmissions – implement activities to improve patient safety and reduce medical errors – implement and design wellness programs.

32. Health & Wellness 2010 Reinsurance Program for employer “early retiree” health benefits (age 55-64) provides for subsidies up to 80 percent of the insurance costs IF they invest the difference in wellness and chronic care management programs, among other things

33. Health & Wellness In 2014, new opportunities for companies to provide wellness and prevention programs to employers and to new health care exchanges – Enhances HIPAA’s rules regarding wellness programs, with an increase in the limit applicable to wellness incentives from 20% to 30%. Generally the reward for satisfying the wellness program, together with the reward for other wellness programs available under the plan, may not exceed 30% of the cost of employee-only coverage under the plan – Secretaries of HHS, Labor, and the Treasury would have the discretion to increase the reward up to 50% of the cost of coverage if the increase is determined to be appropriate

34. Health & Wellness In 2014, “qualified health plans” are plans that offer coverage meeting specified standards of “essential health benefits, including coverage for: – ambulatory patient services; – emergency services; – hospitalization; – maternity and newborn care; – mental health and substance use disorder services; – prescription drugs; rehabilitative services and devices; – laboratory services; – preventive and wellness services; – chronic disease management and pediatric services

35. Health & Wellness HHS to develop program criteria based on research and best practices. Wellness program must be made available to all employees and include: – Health awareness initiatives (including health education, preventive screenings and health risk assessments) – Efforts to maximize and encourage employee engagement and participation – Initiatives to change unhealthy behaviors and lifestyle choices (including counseling, seminars, online programs, and self-help materials) – Supportive environment efforts (including workplace policies to encourage healthy lifestyles, healthy eating, increased physical activity, and improved mental health)

36. What can you do? Working with NAHU members in addressing questions to regulatory agencies — reformimplementation@nahu.org Those of you with “practical” business knowledge give a unique perspective Talk with your clients, your payroll vendors and tax advisors Will be updating as more information is available

37. Discussion and Questions Janet Trautwein NAHU Executive Vice President and CEO jtrautwein@nahu.org