PPACA ADVISOR - EXCHANGE ELIGIBILITY

HHS ISSUES PROPOSED RULE ON EXCHANGE LIABILITY; IRS PROVIDES COORDINATION OPTIONS FOR NON-CALENDAR YEAR PLANS

The following is a summary of proposed regulations. Some or all of the provisions may change when the final rules are issued. 

On Jan. 14, 2013, the Department of Health and Human Services (HHS) issued another lengthy proposed rule under the Patient Protection and Affordable Care Act (PPACA).  Among other things, the proposed rule provides some information on how employers will be notified if an employee applies for a premium subsidy / tax credit and how an employer may appeal a determination of premium subsidy eligibility that it believes is incorrect.  The proposed rule is HERE.


Employee Requests for Premium Subsidies An employee will be eligible for a premium subsidy only if:

• His household income is less than 400 percent of federal poverty level,
• He purchases coverage through the public exchange,
• He does not have access to affordable, minimum value coverage through his employer, and
• He is not covered by a plan through his employer that provides minimum essential coverage (even if that coverage is not affordable or it does not provide minimum value)

The employee will be required to provide information to the exchange about his income and access to employer-provided affordable, minimum value coverage.  The exchange (or HHS if the state asks HHS to do this) will attempt to verify this information from available data bases, but in all likelihood it will need to contact the employer for verification of information regarding coverage.
HHS is considering the use of a one-page template that the employer would complete with respect to the employee's eligibility for coverage, plan affordability and plan value.

Employee Eligibility for a Premium Subsidy
Under the proposed rule, HHS or the exchange would notify the employer if an employee is determined to be eligible for a premium subsidy ("certified under Section 1411").  The employer would have 90 days to appeal the determination if it believed the employee should not be eligible for the subsidy.  (All employers, regardless of size, would receive the notice that an employee has been found to be eligible for a premium subsidy. Employers large enough to be responsible for paying a penalty on employees who receive a premium subsidy would receive a separate notice from the IRS actually assessing the penalty. The IRS notice most likely would be sent during the second quarter after the calendar year for which the premium subsidy was provided.)

Coordinating Exchange and Plan Open Enrollments
On Jan. 2, 2013, the IRS issued a detailed rule that, among other things, provides that noncalendar-year plans may amend their Section 125 plans to allow employees to make midyear changes because of PPACA.  Open enrollment for the exchanges will begin in October 2013 for a Jan. 1, 2014, effective date, and the individual coverage mandate also begins Jan. 1, 2014.  The proposed rules provide that employers with noncalendar-year plans may amend their Section 125 plans to allow participants to drop coverage as of Jan. 1, 2014, to enroll in an exchange plan.  Employers also may amend their plans to allow employees who had declined coverage to enroll and pay premiums on a pre-tax basis as of Jan.1, 2014, so that the employee can meet the coverage requirement.  (Employers considering allowing a special enrollment for those who had declined coverage should obtain the consent of their carrier or reinsurer before implementing this option.)   The proposed rule is HERE.

Important: The HHS rules are still in the "proposed" stage, which means that there may be changes when the final rule is issued.  Employers should view the proposed rules as an indication of how plans will be regulated beginning in 2014, but need to understand that changes are entirely possible.

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PROPOSED REGS EMPLOYER PENALTY

HEALTH CARE REFORM UPDATE:

IRS PROPOSES REGULATIONS ON EMPLOYER PENALTY

The Internal Revenue Service has released proposed regulations on the health care reform employer "shared responsibility" penalty provision. This is the penalty on "large" employers (those with at least 50 full-time or full-time equivalent employees) that do not provide affordable minimum essential coverage for full-time employees and their dependents and have at least one full-time employee who receives subsidized Exchange coverage (new Internal Revenue Code section 4980H, enacted as part of the Patient Protection and Affordable Care Act of 2010 as amended by the Health Care and Education Reconciliation Act of 2010). The IRS also posted on its website a set of related questions and answers.

Employers Affected
An employer meets the penalty provision's large employer threshold if it employed, on average, at least 50 full-time or full-time equivalent employees in the prior calendar year. Thus, for 2014, the first year the penalty is effective, an employer would consider the average number of such employees it had during 2013 to determine whether it is a covered large employer. The proposed regulations include a transition rule under which employers may use any consecutive six-month period in 2013, instead of the full year, to calculate the average number of employees.

A full-time employee is one who is employed by the employer an average of 30 hours per week. Part-time employees count, too, taking into account the number of full-time equivalents: For a given month, add the number of hours for all part-time employees (counting no more than 120 hours for any one employee) and divide by 120. Count all hours worked and all hours for which payment is made or due for vacation, illness, holiday, incapacity, layoff, jury duty, military duty, or leave of absence. Notice 2011-36 had limited the period of leave that must be included to 160 hours but the proposed regulations eliminate this limitation.

The proposed regulations clarify that the IRS's safe harbor for determining full-time status (i.e., using the look-back/stability period approach) will not apply for purposes of determining whether an employer meets the threshold of 50 full-time employees. Instead, whether an employer is a large employer for a given year will be determined by calculating employees' actual hours of service in the immediately preceding year. Equivalency rules may be used for employees not paid on an hourly basis. An entity not in existence in the preceding year may be a large employer in its first year if it is reasonably expected to employ an average of at least 50 full-time employees during its first year. Special hours-counting rules are proposed for educational institutions, employees paid on a commission basis, and other circumstances.

Whether a worker is an employee of a particular employer will be based on the long-standing common law principle that, if a service recipient has the right to direct and control how a worker performs services, that service recipient is the worker's employer. The proposed regulations also reiterate that controlled group rules apply for purposes of identifying the employer. Thus, all common law employees of all entities that are part of the same controlled group or affiliated service group must be counted to determine whether the threshold of 50 full-time employees is met.

Assessable Penalty for Affected Employers
For a given month beginning after 2013, if an employer does not offer minimum essential coverage to "substantially all" of its full-time employees and their dependents and a full-time employee obtains subsidized Exchange coverage, the employer must pay a penalty equal to $166.67 multiplied by the number of its full-time employees in excess of 30. Under the proposed regulations, "substantially all" means all but five percent of full-time employees or, if greater, five full-time employees. The proposed regulations define "dependent" as a child, within the meaning of Code 152(f)(1), who is under age 26. (Thus, a spouse is not a dependent.) 

The proposed regulations offer transitional relief (only for 2014) for employers that do not currently provide dependent coverage. Any employer that takes steps during its plan year that begins in 2014 toward offering dependent coverage will not be liable for penalties solely on account of its failure to offer dependent coverage for that plan year. The proposed rules also explain that the 30-employee reduction used when calculating this penalty is applied on a controlled group basis so that each member company reduces its number of full-time employees by a ratable share of 30.

If an employer offers minimum essential coverage to substantially all of its full-time employees and their dependents, but a full-time employee nevertheless obtains subsidized Exchange coverage (i.e., because the employer's coverage fails to meet the minimum value or affordability test), the employer must pay a penalty equal to the lesser of the penalty determined in the preceding paragraph or $250 multiplied by the number of full-time employees who are certified as having subsidized Exchange coverage for the month.

Since no penalty is triggered unless at least one full-time employee obtains subsidized Exchange coverage, it is important to know whether a full-time employee can obtain subsidized Exchange coverage. An employee can obtain subsidized Exchange coverage only if his or her household income is between 100 percent and 400 percent of the federal poverty line, he or she enrolls in Exchange coverage and is not eligible for Medicaid (or other government coverage), and either no employer coverage is offered or the employer coverage offered fails to meet either a minimum value test or an affordability test:

• Employer coverage meets the minimum value test if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. The Department of Health and Human Services is working with IRS to develop a calculator that employers may use to determine whether this test is met.
• Employer coverage meets the affordability test if the employee is required to pay no more than 9.5% of his household income for self-only coverage. Since employers have no practical way of knowing what an employee's household income is, the IRS previously stated that employers could use an employee's W-2 reported wages as a safe harbor. The proposed regulations explain how that safe harbor would apply, including how it would apply to partial years worked. The W-2 safe harbor will be very useful to most employers, but the proposed regulations also offer two additional safe harbors that employers may use to determine affordability: one based on monthly rate of pay (i.e., coverage is affordable if the employee's monthly cost for self-only coverage does not exceed 9.5% of his monthly rate of pay) and the other based on eligibility for Medicaid (i.e., coverage is affordable if the employee's cost for self-only coverage does not exceed 9.5% of the federal poverty line for a single individual).

If an employee elects coverage under an employer's group health plan, the employee cannot qualify for subsidized Exchange coverage even if the employer coverage fails the minimum value or affordability test. 

However, providing mandatory group health coverage that fails the minimum value or affordability test will not prevent an employee from obtaining subsidized Exchange coverage.

The proposed regulations retain the look-back/stability period safe harbor method provided in prior guidance for determining which employees are full-time for purposes of the penalty calculation. Thus, an employer can use a look-back period of up to 12 months to determine whether an on-going employee (i.e., one employed for at least the length of the look-back measurement period selected) is a full-time employee. 

If an employer uses a look-back/stability period for its on-going employees, it also can use the look-back/stability period for new and seasonal employees. The proposed regulations include additional special rules for a new variable-hour employee or seasonal employee whose status changes during the look-back measurement period, for rehired employees and employees returning from unpaid leaves of absence, for employees of temporary agencies, and for other special circumstances.

The proposed regulations assure that an employer will (a) receive certification of an employee's receipt of subsidized Exchange coverage and (b) have an opportunity to respond regarding application of the penalty before IRS actually assesses a penalty in connection with that employee.

Recordkeeping obviously is important both for compliance (existing law already requires substantial recordkeeping for tax purposes) and to substantiate any defense to a penalty.

Opportunity to Comment on Proposed Regulations
Employers and other stakeholders can help shape final regulations at a public hearing on April 23, 2013, and by submitting written comments by March 18, 2013. In addition, the government also requests comments on the new Code § 6056 employer-reporting requirements and the 90-day waiting period rule.

Please contact a specialist at TrueNorth if you have any questions about health care reform. We can be reached at 319.364.5193 or 1.800.798.4080.

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DOL BEGINS AUDITING GROUP HEALTH PLANS FOR PPACA, GINA & WELLNESS PROGRAM COMPLIANCE

Employers that have had their group health plans audited by the Employee Benefits Security Administration (EBSA, the arm of the U.S. Department of Labor that enforces Title I of ERISA) are aware of the broad nature of the document requests and compliance reviews carried out under these audits. The EBSA has updated its audit protocols to include a review of plans' compliance with the Patient Protection and Affordable Care Act (PPACA), the Genetic Information Nondiscrimination Act (GINA), and wellness programs, in addition to the laundry list of other federal benefits laws pertaining to group health plans. An uptick in PPACA enforcement appears to be underway, and many plan sponsors have received EBSA audit notices. Click here to see an actual EBSA audit letter. It provides insight into the kind of information EBSA is requesting in these audits.


EBSA audits examine compliance with a range of federal statutes and regulations, such as ERISA, HIPAA, COBRA, and the Women's Health and Cancer Rights Act. However, as employers begin to ramp up in earnest concerning the PPACA's employer shared responsibility requirement and other provisions of the health care reform law going into effect in 2014, many will be facing audits on the full range of PPACA mandates. The DOL's audit letters are looking for information and documentation concerning particular aspects of the PPACA, such as the plan's grandfather status, coverage for adult children, lifetime and annual limits, and claims and appeals procedures. (See questions 18-20 in the Letter.)

The DOL also is looking at the design of wellness programs offered in connection with group health plans and the related, required notices that have to be provided with outcome-based programs. (See question 17 in the Letter.) 

These inquiries will allow the DOL to begin looking at how employers have complied with the HIPAA nondiscrimination regulations concerning wellness programs, as well as Title I of GINA. Of course, the rules for wellness programs will be changing beginning in 2014.
Employers should consider taking a serious look at their group health plans, not only for compliance with the PPACA, but also with the long standing mandates for group health plans - ERISA, HIPAA, COBRA and other laws.

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PPACA ADVISOR - PARAMETERS; MULTI-STATE

HHS ISSUES PROPOSED RULES ON 'BENEFIT AND PAYMENT' PARAMETERS,' MULTI-STATE PLAN PROGRAM

The following is a summary of proposed regulations. Some or all of the provisions may change when final rules are issued. 

On Dec. 5 and 7, 2012, the Department of Health and Human Services (HHS) issued two more sets of proposed rules that provide added details on how the Patient Protection and Affordable Care Act (PPACA) will probably unfold.
The "Benefit and Payment Parameters" proposed rule addresses a number of topics.  Of particular interest to employers are proposed rules regarding:

• The temporary reinsurance and risk adjustment programs
• Small-business health options program (SHOP) exchanges
• A timing change for medical loss ratio (MLR) beginning in 2014
• A user fee for those using federally facilitated exchanges

The public comment period for this proposed rule ends Dec. 31, 2012.  

Temporary Reinsurance Program
The Temporary Reinsurance Program (TRP) is intended to provide funding to cover additional costs associated with covering formerly uninsured individuals who may have unmet health needs.  The program will run from 2014 through 2016 and would be funded by both fully insured and self-funded plans. The estimated fee for 2014 is $5.25 per covered person per month ($63 per year).  This fee will decline by about one-third for 2015 and by yet another one-third for 2016.

The fee would be assessed based upon the average number of covered lives (employees, pre-Medicare retirees and dependents) covered by major medical plans during the year, which means that standalone dental and vision, specified disease, hospital indemnity, employee assistance programs (EAPs), wellness programs, health reimbursement arrangements (HRAs), health savings accounts (HSAs) and health flexible spending accounts (FSAs) would not be included.

The insurer would be responsible for reporting and paying the fee if the employer only offers one fully insured plan.  If the plan is self-funded, or if the employer offers multiple options, the plan sponsor (typically, this is the employer) would be responsible for determining the fee, to allow each person to only be counted once. The calculation would be similar to that used for the Patient Centered Outcomes Research (PCORI) fee, which among other things, allows use of a quarterly or monthly snapshot.   (Employers would be allowed to use different methods of counting covered lives for the PCORI and TRP reporting.)

Data would be reported by Nov. 15 based upon covered lives during the first nine months of the calendar year.  The amount to be available for this program is set out in the law ($10 billion to 12 billion in 2014, $6 billion to 8 billion in 2015 and $4 billion to 5 billion in 2016), so HHS would divide that amount by the reported covered lives to determine each entity's liability.  That amount would be billed mid-December and would be due around Jan.15 of 2015, 2016 and 2017.  Amounts would then be disbursed to insurers in the individual market to help pay large claims.

Risk Adjustment Program
The risk adjustment program is permanent, and will involve the annual transfer of funds from insurers who have a concentration of low-risk insureds to those with high-risk insureds.  The program will impact all nongrandfathered insured plans in the individual and small group markets, whether the plan is provided through or outside of an exchange.

Each year, an insurer's total risk would be calculated, and insurers below the average risk would transfer funds to insurers with a total risk above the average risk. Insurers would pay a fee to HHS each June to cover the administrative costs of the program; the fee is expected to be about $1 per covered life per year.

FFE Fee
HHS has proposed a fee of three and one-half percent of premium to cover the cost of running a federally facilitated exchange (FFE) for those states that choose not to run their own exchange.

SHOP Exchange
The proposed rule provides that, at least through 2016, eligibility for the small-business health option program (SHOP) exchange would be limited to small employers.  An employer would be "small" for exchange purposes if it has 100 or fewer employees, although a state could elect to use 50 employees for the limit in 2014 and 2015.  Employees would be counted the same way employees are counted for purposes of the employer shared responsibility/play or pay penalty (employees who average 30 or more hours per week would be considered full-time, and the hours of part-time employees would be totaled to calculate "full-time equivalent" employees).  In states that have a federally-facilitated exchange (because the state chose not to set up its own exchange), the maximum number of full-time and full-time equivalent employees an employer could have to be in the SHOP would be 100 employees.

In FFEs (and in states with their own exchanges unless the state opts to do otherwise), the employer would choose a metal level (bronze, silver, gold or platinum), and employees would choose the plan they want that is available at that metal level.  The employer would be required to offer coverage to all full-time employees who had satisfied the waiting period.  A 70 percent participation rate (excluding those with coverage through another employer, Medicare, Medicaid and TRICARE) would apply unless a different rate is generally used in the state.  The employer would choose the amount it would contribute toward the cost of coverage (carriers would be allowed to impose a minimum contribution requirement).

MLR Adjustments
The proposed rule provides that if an MLR payment is used to reduce premiums, it would need to be applied to the next premium due after the MLR due date.  Also, beginning in 2014, the MLR payment due date would be Sept. 30.

The text of the proposed rule is here:  Proposed Rule - Benefit and Payment Parameters

Multi-State Plan Program
PPACA directs the federal Office of Personnel Management (OPM) to enter into contracts with private health insurance issuers to offer at least two Multi-State Plans (MSPs) through the exchanges. Health insurance issuers who wished to provide an MSP would apply to OPM. OPM would determine which issuers are qualified to become MSP issuers, enter into contracts with the issuers and approve the plans to be offered on exchanges.

The proposed rules:

• Would require the MSP issuer to be operating in all states by 2018 but allow it to phase in the states in which it offers coverage from 2014 to 2018
• Provide that insurers and nonprofits operating under a single service mark or common ownership could join together to provide the required national coverage
• Provide for assessment of user fees to help OPM cover the cost of running the MSP program
• Allow an MSP to choose between offering the state essential health benefits (EHB) package approved in each state in which it operates, or offering one of three EHB benchmark plans available to federal employees
• Provide that an MSP would have to comply with the same cost-sharing rules that apply to other plans in the exchange, would have to offer at least gold-level coverage and silver-level coverage and would be included in the state's risk pool

The text of the proposed rule is here: Proposed Rule - Multi-State Plan Program
Public comments are due Jan. 4, 2013.

Important: These rules are still in the "proposed" stage, which means that there may be changes when the final rule is issued.  Employers should view the proposed rules as an indication of how plans will be regulated beginning in 2014, but need to understand that changes are entirely possible.

Highlights of Rules On Health Insurance Market Rules

HIGHLIGHTS OF RULES ON HEALTH INSURANCE MARKET RULES

The following is a summary of proposed regulations. Some or all of the provisions may change when final rules are issued.

On November 20, 2012, the Department of Health and Human Services (HHS) issued proposed rules that address a number of health insurance market reforms. The rule is still in the "proposed" stage, which means that there may, and likely will, be changes when the final rule is issued. 

The proposed rule confirms that nongrandfathered health insurers (whether operating through or outside an exchange) would be prohibited from denying coverage to someone because of a pre-existing condition or other health factor. Individuals generally would be required to purchase coverage during an open enrollment period, with special enrollment periods available following qualifying events. Small employers would be able to purchase coverage throughout the year.

The proposed rule reiterates PPACA's limits on permissible premium variations for policies in the exchanges and individual and small group markets, providing that premiums may only vary based upon:

• Age (with a maximum 3-to-1 ratio, which is well below the 5-to-1 or t-to-1 ratio currently in use in some states)
• Tobacco use (with a maximum 1 and 1/2-to-1 ratio)
• Geographic location; and 
• Family size

Other parts of the proposed rule call for a great deal of standardization in implementation of the reforms, including:

• A proposal that rates be set by totaling rates that are calculated separately for each covered individual (although employers would be permitted to either use an average composite rate or a method that charges older employees and smokers the allowable surcharge when determining premium contributions)
• A proposal that all carriers use one-year age bands, with a prescribed age band table, for everyone except children under age 21 and adults over age 63
• A requirement that all individuals enrolled in nongrandfathered small-group plans be considered one risk pool (all those in nongrandfathered individual policies would be in another risk pool, although a state could choose to merge the two pools); this means that different blocks could no longer be considered different risk pools
• Allowing states to identify up to 7 geographic regions for rating purposes but requiring that any rating differences between the regions be actuarially justified
• Allowing employer contribution and group participation requirements to reduce adverse selection
• Requiring that all rate increases be submitted to HHS

The proposed rule may be found here: Health Insurance Market Rules

Important: This rule is still in the "proposed" stage, and HHS has asked for input on a number of issues. This means there may be a number of changes when the final rule is issued. The public may make suggestions until December 26, 2012, on how the proposed rule should be changed before it is finalized. Employers should view the proposed rule as an indication of how the exchanges and small group market will be regulated beginning in 2014, but need to understand that changes are entirely possible. 

IRS Posts Three Proposed Regulations Addressing Open Issues Under PPACA

On Nov. 20, 2012, the Department of Health and Human Services issued proposed rules that address:

·      Wellness programs under PPACA
·      Essential health benefits and determining actuarial value
·      Health insurance market reforms

All three rules are still in the "proposed" stage, which means that there may -- and likely will -- be changes when the final rules are issued.  There is a 30-day comment period on the essential health benefits and market reforms rules, and a 60-day comment period on the wellness rule.

Nondiscriminatory Wellness Incentives

The proposed rule largely carries forward the rules that have been in effect since 2006.  It reiterates that there are no limits on incentives that may be provided in a program that simply rewards participation, such as a program that reimburses the cost of a smoking cessation program, regardless whether the employee actually quits smoking.  Programs that are results-based (now called "health-contingent wellness programs") still must meet five conditions (the program must be reasonably designed to promote health or prevent disease, provide a chance to qualify for the reward at least once a year, provide an alternative standard for those for whom it is unreasonably difficult due to a medical condition to satisfy the standard, describe the availability of the alternative standard in program materials, and cap the reward or penalty at a percentage of the total cost of coverage).

The proposed rule also:

• Confirms that the maximum reward or penalty beginning with the 2014 plan year is 30   percent of the total cost of coverage (up from the current 20 percent limit)
• Would provide an exception to the 30 percent maximum reward/penalty for tobacco use, and would instead allow a penalty of 50 percent of the total cost of coverage for smoking (to be consistent with the 1.5:1 surcharge that will be allowed in the exchange and small employer market plans for tobacco use)
•  Confirms that grandfathered plans would be allowed to use the increased 30 (or 50) percent reward/penalty beginning in 2014
• Provides that the employer would have to locate and pay for the alternative standard program 
• Would prohibit limits on the number of times an employee could use an alternative standard (meaning, for example, that an employee would be eligible for the non-smoker discount if he continues to smoke, but participates in a smoking cessation program multiple times)

Essential Health Benefits (EHBs) and Actuarial Value

The proposed rule resolves an ambiguity in the law, and provides that the restrictions on cost sharing (i.e., maximum deductibles and out-of-pocket maximums) will not apply to self-funded and large employer plans.  The proposed rule also:

• Confirms that nongrandfathered plans in the exchanges and the small group market will be required to cover the 10 essential health benefits (ambulatory/outpatient, emergency, hospitalization, maternity and newborn care, mental health and substance use, prescription drugs, rehabilitative and habilitative services and devices -- e.g., speech, physical and occupational therapy, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including pediatric dental and vision care) and meet the "metal" standards (provide an actuarial value of 60, 70, 80 or 90 percent)
• Provides that states have 30 days from the date the proposed rule is published to elect the policy that will serve as their baseline for EHBs, and includes a list of state elections to date and the applicable default policy
• Provides a method for supplementing the baseline plan's benefits, if the baseline does not cover all 10 EHBs
• Provides that other policies in the exchange and small group market must generally provide the same coverage within each EHB category as the baseline plan, but that they may substitute an actuarially equivalent benefit within a category
• States that HHS will provide a calculator that must be used to determine actuarial value (with exceptions for unique plan designs); the proposed methodology for the calculator is provided in the proposed rule
• Provides that a plan that is within 2 percent of the metal standard would be acceptable (so, for instance, a plan with an actuarial value of 68 percent - 72 percent would be considered a "silver" plan)
• Provides that state mandates in effect as of Dec. 31, 2011, would be considered EHBs
• Confirms that self-funded plans and those in the large employer market would not need to provide the 10 EHBs; instead, they must provide an actuarial benefit of at least 60 percent and provide coverage for  hospital and emergency care, physician and mid-level practitioner care, pharmacy, and laboratory and imaging to be considered "minimum value"
• States that HHS and the IRS will provide a minimum value calculator and safe harbor plan designs that self-funded and large group plans could use to determine whether the plan provides minimum value
• Provides that current year employer contributions to a health savings account (HSA) or a health reimbursement arrangement (HRA) will be considered as part of the actuarial or minimum value calculation (essentially as a reduction of the deductible)

 Market Reforms

While the wellness and EHB proposed rules reflect previously published regulations or bulletins, there is much that is new in the market reform proposed rule.  The proposed rule reiterates PPACA's limits on permissible premium variations for policies in the exchanges and individual and small group markets, providing that premiums may only vary based upon:

•  Age (with a maximum three to one ratio)
• Tobacco use (with a maximum one and one-half to one ratio)
• Geographic location, and
• Family size

 Other parts of the proposed rule call for a great deal of standardization in implementation of the reforms, including:

•  A proposal that rates be set by totaling rates that are calculated separately for each covered individual (although employers would be permitted to either use an average composite rate or a method that charges older employees and smokers the allowable surcharge when determining premium contributions)
• A proposal that all carriers use one year age bands, with a prescribed age band table
• A requirement that all individuals enrolled in nongrandfathered small group plans be considered one risk pool (all those in nongrandfathered individual policies would be in another risk pool, although a state could choose to merge the two pools); this means that different blocks could no longer be considered different risk pools
•  Allowing states to identify up to seven geographic regions for rating purposes, but requiring that any rating differences between the regions be actuarially justified
• Allowing employer contribution and group participation requirements, to reduce adverse selection
• Requiring that all rate increases be submitted to HHS

The proposed rules may be found here:

Wellness: http://www.ofr.gov/OFRUpload/OFRData/2012-28361_PI.pdf

Essential health benefits and actuarial value: http://www.ofr.gov/OFRUpload/OFRData/2012-28362_PI.pdf

Market reforms: http://www.ofr.gov/OFRUpload/OFRData/2012-28428_PI.pdf

The proposed rules are quite lengthy.  We will provide additional information once we have had a chance to study them in more detail.

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WHAT DOES THE ELECTION MEAN FOR EMPLOYERS & PPACA?

On November 6th, 2012, America re-elected President Barack Obama into office. Below we detail what this could mean for you as an employer: 

Maintenance of the status quo in Washington, D.C. (the re-election of Barack Obama, with a Republican majority in the House of Representatives and a Democratic majority in the Senate) means that implementation of the Patient Protection and Affordable Care Act (PPACA) will move forward largely as the law was passed in 2010.

The law left the task of working out many of the details to the regulatory agencies (the Department of Labor, the IRS and the Department of Health and Human Services), and with many questions remaining unanswered, employers can expect that an enormous number of regulations and other types of guidance will be issued between now and the end of 2013.

Of greatest interest to many employers is the employer shared-responsibility (“play or pay”) requirement.  As of Jan. 1, 2014, employers who have 50 or more full-time or full-time equivalent employees must offer “minimum essential” (basic) medical coverage for their full-time (30 or more hours per week) employees or pay a penalty of $2,000 per full-time employee, excluding the first 30 employees.  Employers who offer some coverage but whose coverage is either not “affordable” or fails to provide “minimum value” must pay a penalty of $3,000 for each employee who receives a premium tax credit.  (Coverage is not “affordable” if the employee’s cost of single coverage is more than 9.5 percent of income.  Coverage does not provide minimum value if it is expected to pay less than 60 percent of anticipated claims.  Regulations are still needed to provide details on how the penalty will be determined and collected for employers who do not provide health coverage to their full-time employees, what exactly is the “minimum value” coverage that must be provided to avoid the penalties, and when dependent coverage is “affordable.”)

The health insurance exchanges are also scheduled to begin operation in January 2014. (While PPACA is a federal law, the health insurance exchanges were designed to be operated by the states.)  A number of states have delayed work on the exchanges pending the outcome of this election, while a few have affirmatively decided not to create a state exchange. If a state is unable or chooses not to create an exchange, the federal government will run the exchange on the state’s behalf.  According to the Kaiser Family Foundation, as of Sept. 27, 2012, the following have established exchanges: California, Colorado, Connecticut, District of Columbia, Hawaii, Kentucky, Maryland, Massachusetts, Nevada, New York, Oregon, Rhode Island, Utah, Vermont, Washington and West Virginia. Arkansas, Delaware and Illinois were planning for a partnership exchange with the federal government.  Alaska, Florida, Louisiana, Maine, New Hampshire, South Carolina and South Dakota have stated that they will not create an exchange (meaning the federal government will run the exchange on the state’s behalf).  The remaining states are studying their options but could well end up with a federally run exchange at least for 2014 as the deadline to submit the state’s plan for implementing an exchange is next week (Nov. 16).  It remains to be seen whether the federal government will be able implement so many exchanges on behalf of the states by the 2014 target date. It also remains to be seen whether a change of governor, insurance commissioner or control of a state legislature or political realities, will change a state's stance on the exchanges. Because employees may choose to obtain coverage through the exchange even if they have access to coverage through their employer and because the exchanges likely will request information from employers when determining eligibility for premium tax credits, all employers will want to have an understanding of the status of their state’s exchange. 
In addition to deciding whether to “play” (provide health coverage) or “pay” (the penalties), employers (including those with fewer than 50 employees) have a number of compliance obligations between now and 2014, including:

• Expanding first-dollar preventive care to include a number of women’s services, including contraception, unless the plan is grandfathered
• Distributing medical loss ratio rebates if any were received from the insurer
•  Issuance of summaries of benefits and coverage (SBCs) to all enrollees
• Reducing the maximum employee contribution to $2,500, if the employer sponsors a health flexible spending account (FSA), beginning with the 2013 plan year
• Withholding an extra 0.9 percent FICA on those earning more than $200,000 beginning in 2013
• Providing information on the cost of coverage on each employee’s 2012 W-2 if the employer issued 250 or more W-2s in 2011
• Providing a notice about the upcoming exchanges to all eligible employees in March 2013
•   Calculating and paying the Patient Centered Outcomes Fee in July 2013 if the plan is self-funded (insurers are responsible for calculating and paying the fee for insured plans but will likely pass the cost on)
• Working with the exchanges to identify those employees eligible for premium tax credits
• Removing annual limits on essential health benefits and pre-existing condition limitations for all individuals, beginning with the 2014 plan year
• Reporting to the IRS on coverage offered and available (the first reports are actually due in 2015 based on 2014 benefits)

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If you have questions or would like additional information about your options and obligations under PPACA,

please contact us at 319.364.5193 or 1.800.798.4080.

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