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Summary of Health Care Reform Seminar

April 2013
Andre J. Lukez, CEBS, Chief Operating Officer, The Fedeli Group

1. Health Care Reform in Perspective Government role in health care has increased substantially since 1965, from approximately 20% to 50% Health care costs were considered a crisis in the 1990s, consuming 13.6% of GDP. Today, health care costs are 17.59% of GDP Demographics continue to work against reining in health care costs Median age has increased from 32.9 in 1990 to 37.2 in 2010 Over the same time period, the obesity rate has increased from 15.0% to 35.7%

2. Access to Health Insurance Today

3. Timeline

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April 2013

4. Essence of the Law: Participate or be Taxed Individual Mandate Maintain a Bronze Level Plan OR Pay an Annual Tax (greater of): 2014: $95 per uninsured person or 1% of household income above the applicable filing threshold ($10,000 for an individual and $20,000 for a family in 2013) 2016: $695 per uninsured person or 2.5% of household income above the applicable filing threshold Employer Requirements Offer a Plan with Minimum Value and Affordable Coverage OR Pay an Annual Tax per FT Employee $2,000-3,000 depending on situation 6. Affordable Coverage The Law: Premiums not to exceed 9.5% of family income Regulatory Response: IRS Notice 2012-58 employee portion of the self only premium for the employers lowest cost coverage that provide minimum value (the employee contribution) must not exceed 9.5% of the employees W-2 wages.

5. Where Do You Fit as an Employer?

Automatic Enrollment Provisions - Delayed until 2015


- DOL Technical Release 2012-01

7. Minimum Value The Law: The health plans share of the total cost must be 60% or greater of total costs Regulatory Response: IRS Notice 2012-31 followed by Federal Register Vol. 78, No. 37 this notice seeks comment on the following three potential approaches that could be used to determine whether an employer-sponsored plan provides minimum value. 1) AV and MV calculators 2) Design Based Safe Harbor 3) Actuarial Certification

Status: Minimum Value Calculator - released (beta version) Design Based Safe Harbors - not yet released Small group insurance minimum value regulations - released

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April 2013

8. The Employer, Health Exchanges, and Medicaid

9. Health Insurance Exchanges A Conduit for Subsidies The Affordable Care Act stipulates that those with incomes from 100% to 400% of the Federal Poverty Level are eligible for subsidies (premium credits) to help pay for insurance Massachusetts was the model for the Affordable Care Act Ohio joins 26 other states in opting for a federally facilitated exchange Ohio is expected to expand Medicaid, joining 25 other states. Ten states remain undecided Subsidies are only available for individuals and families through public exchanges There has been limited participation to date in private exchanges

10. Premium Credits

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April 2013

11. Part Time and Seasonal Employees The Law: A full time employee works on average at least 30 hours per week The Problem: The hours worked by part time and seasonal workers fluctuate and may average more than 30 hours per week Regulatory Response: IRS Notice 2012-58 safe harbor methods that employers may use to determine which employees are treated as full time employees for purposes of the shared responsibility provision of section 4980H for ongoing employees, an employer will be permitted to use measurement and stability periods of up to 12 months For new employees employers are permitted to determine whether the new employee is a full time employee using an initial measurement period of between 3 and 12 months

Guidance good through 2014

12. Ongoing Employees

13. New Employees

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April 2013

14. Labor Agreements Collectively Bargained Plans: No delayed compliance provisions. However, many of these plans are grandfathered Multiple Employer Plans: Contributions fulfill the employer shared responsibility requirement if: Coverage is offered to eligible employees It is affordable, provides minimum value, and has no more than a 90 day waiting period

15. Employment Relationships - Unique Situations How is full time status determined for salaried workers with variable work schedules, like teachers, pilots, or commissioned salespeople? A method of crediting hours would not be reasonable if it took into account only some of an employees hours of service with the effect of recharacterizing, as non-full time, an employee in a position that traditionally involves more than 30 hours a week. IRS Reg-138006-12 Are independent contractors considered employees under ACA? Common law employee definition is used to determine employment status What about leased employees? Leased employees are considered employees of the leasing company -shared responsibility requirements fall on the leasing company. 17. Small Group Considerations Essential Health Benefits 10 categories of coverage Includes maternity, newborn care, prescription drugs, etc. Does not directly apply for large employers Deductible Limits $2,000 single / $4,000 family Employer FSA contributions do not increase deductible limits Employer HSA contributions could increase deductible limits

Internal Revenue Service 26 CFR Parts 1 and 54: Shared Responsibility for Employers Regarding Health Coverage; Correction

16. Health Coverage Underwriting

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April 2013

18. Plan Designs and ACA

19. Wellness A health contingent wellness program is based on an individual satisfying a standard that is related to a health factor. Acceptable health contingent programs include: 1. A program charges a premium surcharge based on tobacco use. 2. A program uses biometric screening or a health risk assessment to identify employees with a specified risk factor such as cholesterol, high blood pressure, unhealthy body mass, or high glucose level and provides a reward to employees identified within a normal range while requiring employees outside the normal range to take additional steps (health coach, fitness course, health improvement action plan, etc) to obtain the same reward [summarized from Department of Treasury Regulation 122707-12; released 11/2/2012

20. HSAs, HRAs, FSAs, and Fixed Dollar Indemnity Plans HSAs: Employer HSA contributions can be included as part of the Actuarial Value calculation* HRAs: Employer HRA contributions can be included as part of the Actuarial Value calculation* Integrated with the health plan is allowed** Standalone generally prohibited FSAs: Employer FSA contributions cannot be included as part of the Actuarial Value calculation* Fixed Dollar Indemnity (FDI) Plans: Plans that pay on a per service basis, as opposed to a per period basis, are in conflict with the ACA** Self-Funding: The ACA creates an incentive for small employers to explore self-funding

21. Voluntary Benefits

*IRS Notice 2013-04084 ** **Department of Labor; FAQs About Affordable Care Act Implementation (Part XI) 1/24/2013

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April 2013

22. Other Reporting and Compliance Requirements W-2 Reporting Required if sending 250 or more W-2s, no further guidance for smaller firms SBC - Summary of Benefits and Coverage Notice of Coverage Options in Exchanges Original March due date delayed to late summer or fall 2013 Non-discrimination provisions Now apply to insured plans under 105(h) self-insured rules Additional IRS Reporting for Employers Information requested by the IRS to determine subsidy eligibility specifics unclear Grandfathered Plan Notice Provide annually as long as plan is grandfathered 24. More Than $400 Billion in Taxes and Fees by 2019 Medicare Unearned Income Tax Medicare Payroll Tax Excise Tax on Health Insurers Fees on Drug and Medical Device Companies Modifications to Tax Advantage Accounts Fees on High Cost Plans

23. Assessing Impact

Be wary of avoidance schemes such as 1. Shifting workers to independent contractor status 2. Moving workers to temporary staffing agencies 3. Splitting company less than 50 EEs each 4. Enter into affiliated service group agreements 5. Change plan year to 12/2013 to delay mandate 25. Health Care Ecosystem

Fees Specific to Health Plans Reinsurance Assessment Fee $63 annual fee per participant (scheduled to decline in years 2 and 3) 3 years starting January 1, 2014 Comparative Effectiveness Research Fee: Funds Patient-Centered Outcomes Research Institute (PCORI) $1 annual fee per participant, $2 annual fee beginning 10/1/2012. Increases with inflation afterwards Funding through 9/30/2019

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April 2013

26. Health Care Ecosystem

27. Health Care Ecosystem

28. Health Care Ecosystem

29. Health Care Ecosystem

1. Conduct a health care reform situational assessment 2. Develop a strategic benefits plan 3. Implement your strategic benefits plan

The health care reform situational assessment includes an analysis of: Affordability Minimum Value Part Time and Seasonal Plan Fees Auto Enrollment Provision Impact Self-Funding Feasibility

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The Fedeli Group

April 2013