HCR EXCHANGE NOTICE HIGHLIGHTS

HIGHLIGHTS OF THE EXCHANGE NOTICE REQUIREMENT

As of March 1, 2013, employers must give a notice about the upcoming health exchanges to all existing employees and new hires.  It is not yet clear whether employers who are not subject to the Fair Labor Standards Act (because they only operate in one state and have sales below $500,000) must give the notice. 

So far, there is no information about the requirements of the notice, beyond what is in the PPACA itself.  It is very possible that the government will issue a model notice.   It is also possible this notice requirement will be delayed. What we do know is that the notice will need to include:

• A statement about the existence of the exchanges
• A description of the services provided by the exchange
• Contact information to request assistance from the exchange
• If the plan provided by the employer has less than a 60 percent actuarial value, that the employee may be eligible for a premium tax credit and/or a cost-sharing reduction if he or she purchases a qualified plan through the exchange
• A statement that if the employee purchases coverage through the exchange, the employee may lose his or her employer contribution toward health benefits, and that the employer contribution may be tax-free

ACTION STEPS:

•  Watch for updates about this requirement
•  The effective date may be delayed if work to implement the exchanges is behind schedule
• A model notice may be issued
• Verify that you can easily determine which states that employees are living in, as the notice may need to contain state-specific information

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

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Patient Centered Outcomes / Comparative Effectiveness Fee

HIGHLIGHTS OF THE PATIENT-CENTERED OUTCOMES/COMPARATIVE EFFECTIVENESS FEE

Important: these highlights describe the rules based on the actual law and proposed regulations. Most likely, therefore, the rules will take effect largely as described here, but some of the details may change. 

• The fee applies from 2012 to 2019, based on plan/policy years ending on or after       October 1, 2012 and before Oct. 1, 2019
• The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended 
•  The first fee is due July 31,2013, for calendar year plans and for those on October, November and December plan year
• The first fee is not due until July 31, 2014, for those with plan years that start February through September
• The fee will be calculated and paid by:
• The insurer for fully insured plans (although the fee likely will be passed on to the plan)
•  The plan sponsor of self-funded plans
• This includes health reimbursement arrangements (HRAs)
• Third-party administrator (TPA) may assist with calculation, but plan sponsor must file
• If multiple employers participate in the plan, each must file separately unless the plan document designates one as the plan sponsor
•  The fee is based on covered lives (i.e., employees, retirees, and dependent spouses and children)
• May exclude employees/dependents residing outside U.S
• May exclude dependents, and only count the employee/retiree, when counting for an HRA
• For the first year, the fee is $1 per covered life during the plan/policy year
• For the second year, the fee is $2 per covered life during the year
• For the third through seventh years, the fee is $2, adjusted for medical inflation, per covered life during the year
• Applies to private, government, not-for-profit and church employers
• Applies to grandfathered plans
• “Group Health Coverage” includes:
• Medical plans
• Retiree only plans
• HRAs
• “Group Health Coverage” does not include:
• Stand alone dental and vision (stand alone means these benefits are elected separately from medical and have discrete premiums)
• Life insurance
• Short and long term disability and accident insurance
• Long-term care
• Health flexible spending accounts to which only employee contributions are made
• Health savings accounts
• Hospital indemnity or specified illness coverage
• Employee assistance programs and wellness programs that do not provide significant medical care or treatment
•  Stop loss coverage
•  Several options have been proposed for calculating the fee:
• Actual count method – count the covered lives on each day of the year, and average the result
• Snapshot method – determine the number of covered lives on the same day of each quarter or month, and average the result
• Could multiply the employee/retiree count by 2.35 to approximate the number of covered dependents rather than actually counting them
• 5500 method – determine the number of participants at the beginning and end of year as reported on the 5500
• If dependents are covered, add the participant count for the start and the end of the plan year
• If dependents are not covered, add the participant count for the start and end of the plan year and average the result (this method cannot be used by insurers)
• If there are multiple self-funded plans (e.g. insured medical and a self-funded HRA), with the same plan year, only one fee would apply to a covered life
• If there are both fully insured and self-funded plans (e.g. insured medical and a self-funded HRA), a fee would apply to each plan – the insurer would pay the fee on the insured coverage and the plan sponsor would pay the fee on the HRA
• Plan sponsor reporting and paying the fee would be done electronically on IRS Form 720 each July 31
• This would be an annual filing, even though form 720 is generally filed quarterly

ACTION STEPS:

•  Insured plans may want to:
• Ask their carrier if/when this fee will be reflected in rates
•  Include the anticipated fee in their budget
•  Self-funded plans may want to:
•  Include the anticipated fee in their budget
•  Review the likely calculation methods, determine which is best for their situation and close any data gaps
•  Verify there is a named plan sponsor if more than one employer participates in the plan and if a plan sponsor has not been named, amend the plan to name a plan sponsor before the first fee is due

Note: PPACA created a private, non-profit corporation called the Patient-Centered Outcomes Research Institute. The Institute’s job is to research the comparative effectiveness of different types of treatment for certain diseases, and to share its findings with the public and the medical community. The goal is to improve quality of treatment and reduce unnecessary spending. This fee is to support this research.Reminder: These highlights describe the rules based on proposed regulations. Some of this may change.

This Legislative Update is brought to you by: 

Highlights of the Health FSA Contribution Limit

Are you overwhelmed by all of the legislation coming through lately? Don't worry - we've got you covered!

Here are some of the highlights of the FSA contribution limit:

• Applies to all employers who sponsor a health FSA
• Effective as of the start of the 2013 plan year
• May not change plan year simply to delay application of the limit
• Employee salary reduction contribution may not exceed $2,500 per health FSA per year
• Amount applies regardless how many family members are covered by the health FSA (i.e., a simple employee can contribute up to $2,500 and a married employee with four children can contribute up to $2,500)
• Limit is per employee (so a married couple could each contribute $2,500, even if both are employed by the same employer)
• Employer contributions, whether direct or through flex credits, do not count toward the $2,500 limit
• If the plan offers a grace period to incur claims, amounts reimbursed during the grace period do not apply to the $2,500 limit
• Contributions to HRA's, HSA's, dependent care FSAs and/or for pre-taxation of premiums do not count toward the $2,500 limit
• An employee with two employers during the year (who are not part of the same controlled or affiliated service group) who each sponsor a health FSA could contribute $2,500 to each health FSA
• Must amend the plan to reflect this change by December 31,2014 (which is longer than employers normally have to amend a section 125 plan)
• The $2,500 limit is indexed for inflation

ACTION NEEDED:

• Verify that the administrator of the FSA is prepared for this change
• Communicate the limit to employees as part of FSA enrollment for 2013
• Amend the plan to include the new limit by December 31, 2014

HealthCare Reform Timeline

We have partnered with our colleagues at UBA to provide you with a timeline of changes that will affect employers and group health plans in 2012 and beyond:

2012:

August 1, 2012

• Minimum Loss Ratio letters (applies only to fully insured plans)

First Plan Year Beginning On or After August 1, 2012

• First dollar preventive care services for women (not applicable to grandfathered plans; one year moratorium for certain religious institutions)*

First Open Enrollment Beginning after September 23, 2012

• Uniform Health Plan Summary of Benefits and Coverage (SBC)

2013:

January 1, 2013

• Employer W-2 reporting for benefits provided during prior year (not applicable to employers that issued fewer than 250 W-2's for 2011)
• Health FSA contributions limited to $2,500*
• Increased Medicare health insurance tax withholding on high-income individuals
• Repeal of employer business deduction for qualified retiree drug programs +

March 1,2013

• Employee notice requirement re: exchanges (minimal details have been released on this requirement)

July 31, 2013

• Patient-centered outcomes ("comparative effectiveness") fee due for plan years ending between October 1, 2012 and December 31, 2012

* or start of 2013 plan year, if later

+ 2013 tax year

2014:

Plan Coverage Provisions - Plan Design

• Pre-existing conditions exclusion not applicable to adults (or children)
• Employee waiting period for coverage cannot exceed 90 days
• Annual limits prohibited on essential health benefits
• Limits on cost-sharing (deductibles and out-of-pocket maximums)*
• Wellness programs may increase penalty/reward to 30%
• Clinical trials coverage*

Other Provisions Impacting Employer-Based Coverage

• Exchanges available to individuals and small employers (employers with fewer than 100 employees, although state may drop the threshold to 50 employees)
• Qualified Health Plans (QHP's) participating in exchanges may be offered through cafeteria plans
• Shared responsibility ("play or pay") penalty for employers with 50 or more full-time employees (or full-time employee equivalents) who fail to provide minimum, affordable coverage to full-time employees

Employer Reporting and Notice Requirements

• Employer reporting: providing minimum essential coverage
• Employer reporting: furnishing of qualifying and affordable coverage
• Return filing requirements for employers not offering coverage

Individual Mandate Effective

• Penalty applies if individual fails to obtain coverage through employer, exchange or a government program
• Individual subsidies are available up to 4x the federal poverty level

Exchanges

• State-based Insurance exchanges (some may be run by federal government)
• Co-ops / multi-state plans / interstate compacts possible
• Small business health options (SHOP) exchanges available
• Navigators
• Initially available only to individuals and small employers (employers with fewer than 100 employees, although state may drop the threshold to 50 employees); states may expand to large employers in 2017
• Cost sharing available for individuals below 2.5x the federal poverty level

Exchanges - Benefit Designs and Qualified Plans

• Minimum essential benefits required for exchange plans
• Optional additional required benefits
• Qualified plans to offer "metal" levels of coverage (platinum [90%], gold [80%], silver [70%] and bronze [60%]
• Health care quality rewards via market-based incentives

Insurer Provisions

• Guaranteed issue*
• Guaranteed renewability*
• Modified community-rating ("fair health insurance premium) requirements (small group market only)*
• Insurance risk pools

Medicaid Expansion (unless state opts out)

Nondiscrimination Requirements

• Currently applies to self-funded plans
• Effective date for fully insured plans indefinitely delayed*
• Will impact ability to provide different eligibility, benefits and premium subsidies to different groups

Automatic Enrollment

• Applies to employers with more than 200 employees
• Effective date delayed until at least 2014

Excise on High Cost "Cadillac" Plans (effective 2018)

* = Grandfather rules apply