Health Care Reform 101:
A New Jersey-Oriented, Top-Line Summary of the Affordable Care Act and Health Insurance Exchanges
ACA Training Broker Webinars
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§§ ACA Overview
§§ New Law—New Exchange Marketplace
§§ What Your Clients Need to Know (Part I)
§§ Ask Horizon—Question & Answers
§§ Welcome & Housekeeping Items
§§ Overview of Webinar Series
HC Reform 401
– Horizon Portfolio of Offerings
– Product Pricing On and Off the Exchange
– Commissions On vs. Off the Exchange
– What Your Clients Need to Know
Goals of the Affordable Care Act
High cost correlated with lower quality
~15% of the population uninsured nationally, and in New Jersey
1 Decrease the number of uninsured
2 Improve the quality of health care
3 Reduce health care
The ACA was Signed into law on March 23, 2010; Many Provisions are now in Place, However, Many Others Have yet to Take Effect
HCR Key Provisions Timeline
2010 – 2012
Extend Dependent Coverage to age 26
Appeals Process Changes
Summary of Benefits and Coverage (SBC)
Fewer Form 1040 Medical Deductions
Medicare Wage Tax Increase
$2,500 Yearly FSA Max Contribution
Exchanges Begin Operations
Guaranteed Issue and Renewability
Modified Community Rating
Individual and Employer Mandates
Prohibition of Annual Limits
Essential Health Benefit Requirement
Tax Credit for Small
No Pre-existing Condition Exemptions for Children under 19
Prohibition of Lifetime Limits and No Cost-sharing for Preventive Services
Deductibles Capped for Small Groups
Except Under Certain Circumstances
The ACA is expected to significantly grow the individual market and reduce the size of the uninsured population in NJ
Expected Changes in the New Jersey Market Size (in thousands)
Medicaid / NJ FamilyCare
Individual Insurance Uninsured
Exchanges Provide New Mechanisms for Insurance Coverage for Individuals and Small Employers
- The Health Insurance Marketplace will be a new sales channel where individuals and families can shop for insurance and receive financial assistance.
- The Small Business Health Options Plan (SHOP) is the exchange where small groups can compare and purchase coverage.
Individual Mandate & Tax Penalty
- The ACA requires individuals to obtain minimum essential coverage e.g., Government sponsored plans, employer-sponsored plans, or other coverage as determined by the Secretary of HHS in coordination with the Treasury. Individual penalties for non-compliance include:
Only Qualified Health Plans can Participate on the Exchange
§§ The Exchange may certify a plan if the issuer complies with the minimum certification requirements:
– Meet marketing requirements
– Ensure a sufficient choice of providers
– Include essential community providers in their networks
– Be accredited on quality
– Implement a quality improvement strategy
– Use a uniform enrollment form
– Present plan information in a standard format
– Provide data on quality measures and other business practices
– Comply with the essential health benefits package
Implications for Your Clients
- Employers eligible for participation in the SHOP will find QHPs on the Exchange and non-QHPs off the Exchange that largely mirror one another due to the fact that all non-group and small group plans must abide by the EHB rules and price products similarly. As a result, they may get confused and will depend on you for guidance.
QHPs = Qualified Health Plans
CMS = Centers for Medicare and Medicaid Services 9
FFE = Federally-Facilitated Exchange
Individual and Small Group Health Insurance Products Offered on and Off the Exchange Must Provide Coverage for Essential Benefits
Overview of Essential Health Benefits Requirements
§§ The ACA defines 10 broad categories* of services that must be covered:
– Ambulatory patient services.
– Emergency services.
– Hospitalization Maternity and newborn care.
– Mental health and substance use disorder services, including behavioral health treatment.
– Prescription drug.
– Rehabilitative and habilitative services and devices.
– Lab services.
– Preventive/wellness services and chronic disease management.
– Pediatric services, including oral and vision care.
§§ All new plans issued in the individual and small group market (on and off the Exchange) must offer EHB beginning January 1, 2014.
§§ On 12/10/12, Governor Christie designated the following as NJ’s benchmark for EHB coverage: Medical: Horizon HMO Access HSA Compatible
Pediatric oral supplement: NJ FamilyCare dental package (Children’s Health Insurance Program) Pediatric vision supplement: Federal Employees Dental and Vision Insurance Program (FEDVIP)
§§ Plans may substitute benefits, or sets of benefits, within benefit categories, but not across categories.
Your Clients with less than 25-Employees may be Eligible for Tax Credits
§§ Businesses with 25 employees or fewer may be eligible for a small business healthcare tax credit—if :
- If the number of full-time equivalent (FTE) employees adds up to 25 employees or less your client may qualify for the tax credit if their business also meets the requirements of numbers 2 and 3 below.
o Note that independent contractors and seasonal workers do not count as employees, and part-time employees are counted as a percentage of a full-time employee.
- The average annual wages of employees must be below $50,000 a year.
- Employer covers at least 50% of healthcare insurance costs for employees, based on the single-person rate.
Applicable large employers must offer coverage that provides minimum essential value or face penalties
Employer Mandate & Tax Penalty
- The law penalizes employers (with 50 or more full-time and full-time equivalent employees) that do not offer affordable coverage that provides minimum value; moreover, the number of part-time (full-time equivalent) employees is considered when determining employer size.
- The penalties are triggered if one or more employees obtain subsidies for individual coverage through the Exchange. Specifically, the ACA sets penalties as follows:
|Does the employer offer coverage?||Applicable Penalty|
|§§ Employer offers coverage that is unaffordable (>9.5% of employee income) or fails to provide minimum value and at least one full-time employee receives a premium subsidy or cost sharing reduction through Exchange.||§§ Penalty will be the lesser of:
(a) Penalty as if coverage is not offered, or
(b) $3,000 times the number of full-time employees receiving subsidies in an Exchange
|§§ Employer does not offer minimum essential coverage (i.e. coverage does not meet minimum standards).||§§ Penalty is $2,000 times the number of full-time employees in the business, not counting the first 30.|
“Full-time employee” means 30 hours per week
Full-time equivalent employees means hourly workers. 12
Employer Reporting Requirements
§§ Employee Notification of Coverage Options
Employers must provide information to employees about the Exchange. DOL has supplied a model notice in a recently released DOL technical release. The Notice must be provided to existing full-time employees by October 1, 2013. For new hires thereafter, the Notice must be provided within 14 days of hire. Electronic delivery is permitted if the delivery conforms to the ERISA electronic delivery safe harbor requirement.
§§ W-2 Reporting
Employers must report the value of the benefits on each employee’s annual Form W-2 beginning with the calendar year 2012 forms. Some employers are exempt from this requirement until the IRS issues further regulations, including but not limited to employers filing fewer than 250 W-2s in the prior calendar year, multiemployer plans, HRA plans and self-insured plans not subject to COBRA rules.
§§ Coverage and Minimum Value Reporting
Employers providing minimum essential coverage must report to the IRS annually with information about the coverage offered, beginning in 2014. Similarly, information must be supplied to IRS whether the coverage provides minimum value. Applicable large employers with at least 50 full-time and full-time equivalent employees must annually file additional information pertaining to fulfillment of employer responsibilities beginning in 2014. IRS has not released final rules on this point.
Clients and Carriers Will Face New ACA-Related Taxes and Fees
Taxes and Fees
§§ Annual Fee: Annual flat fee on the health insurance sector beginning in 2014 (excludes self-funded plans).
§§ Comparative Effectiveness Research Fee: Fee on insurers and self-funded plan sponsors to fund the Patient-Centered Outcomes Research Trust Fund. The fee is $1 per member per year for policy or plan years ending after September 30, 2012, increasing to $2 for policy years ending after September 30, 2013, and is indexed to national health expenditures until it ends in 2019.
§§ Exchange Financing: States may generate funding through user fees on participating issuers to operate exchanges, which must be self-sustaining by January 1, 2015.
§§ Reinsurance Fee: Contributions are required from all health insurance issuers and self-insured group health plans. HHS estimates a national per capita contribution rate of $5.25 a month ($63 per year) in 2014.
§§ Tax on High-Cost Plans: Excise tax on employer health insurance plans that offer policies with generous levels of coverage. The tax is equal to 40% of the plan’s value that exceeds $10,200 for an individual and $27,000 for family coverage, beginning in 2018. Collection method is uncertain as rule-making has not started.
Implications for Your Clients
- The excise tax may cause some employers to rethink health plan options
- Contributions to the reinsurance program will place a significant cost burden on self- insured group health plans, which are not eligible for reinsurance payments
Summary of Key Take-A-Ways
§§ The new Exchanges are meant for individuals and small groups; through the Individual Exchange, low income individuals can access financial assistance in paying for health insurance
§§ Small employers with fewer than 25 employees may be eligible for tax credits
§§ Applicable large employers with greater than 50 full-time and full-time equivalent employees will be subject to certain penalties if at least one full-time employee purchases subsidized coverage through the exchange
§§ All employers face new reporting requirements and may be subject to new taxes and fees