affordable care act 2016 update

AFFORDABLE CARE ACT
2016 UPDATE
Donna Lively
Managing Director, Insurance Plans
GuideStone Financial Resources
ACA Update
Agenda
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Cost Drivers
Has it really been six years?
Individual Mandate and Exchange
Employer Mandate
ACA Reporting
Cadillac Tax
Final Thoughts
Q&A
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Cost Drivers
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ACA Update
Current Cost Drivers
 Medical cost increases
• While utilization may be down, the cost of health
care continues to rise at alarming rates
 Consolidation of carriers
• Reduced price competition
• Five largest carriers reducing to three
• 22 of 23 ACA-created co-ops lost money and half
closed, so reduced alternatives
 Fewer plan options
• Costs, mandates and compliance shrinking plan
options
• Texas only offers HMOs in exchange
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ACA Update
Current Cost Drivers
 Shrinking access to physicians
• Carrier negotiates better rates with slimmer
network
• Physician shortage — 2025 — 46K–90K fewer
physicians than needed
 Rx costs increasing
• 6.4% trend increase in 2010
• 11.2% trend increase in 2016
• Specialty drugs driving the increased trend
• Predict by 2025, 40% of medical plan cost will be
drugs
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Has it really been six years?
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ACA Update
2010
 Dependent children up to age 26
 Medicare Part D “donut hole” begins to close
 Prohibited:
• Rescission of coverage
• Lifetime coverage limits on essential benefits
• Annual limits on essential benefits
• Pre-ex for children under 19 YOA
 10% tax on indoor tanning services in lieu of the tax
on cosmetic surgery
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ACA Update
2011
 Medical Loss Ratio thresholds placed on insurer
• 85% (LG)
• 80% (SG)
 Preventive services with no co-pay, deductible or
co-insurance including women’s contraceptive
 Tax on Health Savings Account (HSA) non-medical
distributions increased from 10% to 20%
 Over-the-counter drugs excluded from reimbursement
through Flexible Spending Account (FSA), Health
Reimbursement Account (HRA) or HSA (213d expenses)
unless prescribed by a doctor
• BAND-AID® Brand Adhesive Bandages, etc. can still be
reimbursed through FSA without an Rx
 Medicare provides free annual wellness visits and
personalized prevention plans
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ACA Update
2012
 Contributions to FSAs limited to $2,500 per year,
indexed annually
 Medicare payroll tax increase from 1.45% to 2.35% for
singles earning more than $200,000 and for marrieds
earning more than $250,000
 Unearned income subject to a 3.8% tax (ex: gains on
home sale)
 Employers disclose the cost of medical benefits,
including HRA/HSA contributions on employees’ 2012
Forms W-2
• COBRA-exempt entities and fewer than 250
employees exempt
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ACA Update
2013
 Medical expense write-off on taxes — income
threshold increased from 7.5% to 10%
 Rx and medical device taxes — $20+ billion
 Patient-Centered Outcomes Research Institute
(PCORI) fee begins
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ACA Update
2014
 Mandate everyone purchase insurance or pay penalty
 Health insurance exchanges open in each state
• Provide individual and small employer coverage
 Elimination of medical underwriting and pre-existing
condition
 Exchange coverage provides federal subsidies for
qualified — 100% to 400% of Federal Poverty Level
 Employer mandate takes effect
• Delayed to 2015 for 100+
• Delayed to 2016 for eligible 50–99
 Transitional Reinsurance Fee (TRF)
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ACA Update
2014
 Health plans prohibited from:
• Imposing annual limits on all coverage, not just
essential benefits
• Deductible and co-insurance greater than the
standard IRC Section 223 HSA-qualified allowance
 Waiting periods no greater than 90 days
 Medicaid eligibility increased to 133% of Federal
Poverty Level for all non-elderly individuals
• 2014–2016 feds pay all costs for covering newly
eligible Medicaid beneficiaries
• Majority of states did not expand Medicaid
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ACA Update
2014
 National premium tax on fully insured carriers
estimated at $70 billion over 10 years
 New rating rules for small group (<50 lives — up to
100 lives in 2016)
• Community rating
• Experience rating prohibited
• Rating based on family composition and
geography
• Age rates cannot be more than a 3:1 ratio from
youngest to oldest
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ACA Update
2018–2020
 40% tax on “Cadillac” plans:
• Greater than $27,500 for family coverage and
$10,200 for single coverage
• Increased limits for individuals, retirees and
employees in high-risk professions
• Delayed to 2020
 Medicare’s “donut hole” for prescription drugs will
finally be closed in 2020
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Individual Mandate and
Marketplace Exchanges
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ACA Update
Individual Shared Responsibility (Mandate)
 Effective 01/01/2014 most Americans required to
have Minimum Essential Coverage (MEC)
 Without MEC, penalties apply
 MEC is:
• Coverage through the government
‐ Medicaid, Tricare, CHIP, Medicare
• Coverage through an exchange
• Coverage through an employer
• Coverage through the individual insurance market
• COBRA or medical continuation coverage
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ACA Update
Individual Mandate Penalty
 If you are OFFERED employer-sponsored coverage,
regardless of whether you choose it, you are not
eligible to receive a subsidy from the exchanges
• If you go to the exchange and receive a subsidy,
the IRS will expect a subsidy reimbursement
 Family glitch
• If employer coverage offered is affordable for
individual but not deemed affordable for
dependents, dependents are prohibited from
receiving a subsidy if they purchase exchange
coverage
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ACA Update
Exchanges and the Carriers
 United HC lost $400M
 BCBS-TX lost $400M
 Three sources of “bail-out” for the insurers in the
exchange
• TRF
• Insurance tax
• Exchange tax
 Insurers submitted $2.78B in claims for 2014
 Government paid out 12 cents on the dollar ($220M)
 Half of the 23 Accountable Care Organizations (ACOs)
went out of business — $2.5B in claims
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ACA Update
Exchanges and the Carriers — Highmark’s Experience
 50% of the exchange market were new customers
to Highmark
• Used more services and continued to use services
 Exchange networks — 50–70% are select, skinny
networks
 Primarily federally-qualified High Deductible Health
Plans in exchange
 Look for more carriers to exit exchange in 2017
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Applicable Large Employer
and the Employer Mandate
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ACA Update
2016 Impact: Applicable Large Employer
Applicable Large Employer (ALE) if:
 You have 50 or greater full-time equivalent
employees (FTEEs)
 IRS control group rules apply
• 80% control of money, board or business and you
include all entities in your count
 Count all full time, part time, seasonal workers and
seasonal employees
 Count hours worked AND earned hours, such as sick
time, vacation time, holidays, jury duty, short-term
disability, long-term disability, etc.
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ACA Update
2016 Impact: Applicable Large Employer
Employer mandate effective for all ALEs beginning
2016
 All employers with 50+ FTEEs must:
• Offer coverage to 95% of employees working 30 or
greater hours
• Coverage offered must be affordable and
adequate
• Report coverage annually under IRC Section 6056
on IRS Forms 1095-C and 1094-C
‐ Full-time covered
‐ Full-time not covered
‐ Part-time covered
 If the above rules are not met, penalties apply
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ACA Update
2016 Impact: Applicable Large Employer
 Affordable — contribution limits for employee-only
coverage
• 9.66% of household income is maximum employee
contribution to employee-only coverage
‐ Indexes annually
• Contribution can be determined by one of the
below safe harbors
‐ W-2 wages
‐ Employee’s hourly rate
‐ Federal Poverty Level
 Adequate — plan provides minimum value coverage
• Plan pays an actuarially equivalent 60% of
required health care expenses
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ACA Update
2016 Impact: Applicable Large Employer
 No offering penalty (a):
$2,160 penalty assessed for all FT employees if not
offering coverage to all 30-hour workers and one
receives a subsidy
• First 30 workers do not count toward penalty
calculation
 Affordable/Adequacy penalty (b):
$3,240 per FT employee receiving subsidy
 Penalties indexed annually
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Section 6055 &
Section 6056
Reporting Requirements
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ACA Update
2016 Impact: Reporting for Individual Mandate
 IRC Code 6055
• Applies to plan providers or self-funded employers
• All size employers affected
 Provider of coverage will complete the IRS forms
• Fully insured — insurance carrier
• Self-insured — employer
 Coverage provider sends report to IRS with copies of
participant forms and sends form to individual
policyholder
• Substantiates individual MEC
• Prevents individual mandate penalty
 GuideStone completed the Forms 1095-B for our
participants and sent them ahead of deadline
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ACA Update
2016 Impact: The “B” Forms
Forms 1095-B (participant) and 1094-B (IRS
transmittal)
 Report in 2016 for 2015 coverage
 Follows W-2 reporting timelines
 Participant keeps 1095-B with tax documents
 Coverage provider may contact you for missing SS#
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ACA Update
2016 Impact: Reporting for Employer Mandate
 IRC Code 6056
• Applies to all ALEs (50+ FTEEs)
 Annual report to IRS to substantiate employer
mandate compliance
• Coverage offered to all 30-hour plus FTEs
• Coverage was minimum value of 60% or greater
• Coverage was affordable
‐ Employee-only contribution not greater than
9.66% of household wage (safe harbor)
 IRS will determine employer mandate penalty liability
based on information reports
 If 50–99 in 2015 and met transition relief rules for
employer mandate, reporting still applies
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ACA Update
2016 Impact: The “C” Forms
Forms 1095-C (participant) and 1094-C (IRS transmittal)
 Applies ONLY to ALE — 50 or greater FTEEs
• Exception: self-insured report B & C forms
regardless of size
 Report to individual participant, send copies and
transmittal to IRS
 Employer completes the forms
 Report in 2016 for 2015 coverage
 Follows W-2 reporting timelines
 Each entity in control group files forms separately and
must adhere to employer mandate provisions
regardless of size
• List affiliated entities on 1094-C
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ACA Update
Penalty for 6056 Reporting
 Fail to file in a timely fashion with IRS
• Fine of $250 per report submitted
• Maximum fine of $3 million
 First year transition grace
• No penalty if you make a good faith effort to
comply but filed incorrect or incomplete
information and corrected errors within stated
time period
• No grace or transition relief for failure to timely file
 Important tax forms with potentially serious financial
consequences
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ACA Update
2016 Impact: Updated Filing Timeline
 Form 1095 (B and C) — to employee
• Due March 31, 2016
 Form 1094 (B and C) — to IRS
• Due May 31, 2016 if filing paper
• Due June 30, 2016 if filing electronically
– Greater than 250 reports must be filed
electronically
• Same due dates as Forms W-2 and W-3
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Cadillac Tax
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ACA Update
Cadillac Tax — 2018
 2018 tax threshold
• $10,200 for self-only coverage
• $27,500 for other than self-only coverage
 Aggregation of the dollars spent for:
• Medical coverage for active employees
• Medical coverage for former employees, including
COBRA and retirees
• FSA employer contribution
• HSA or Archer Medical Savings Accounts (MSAs)
employer contribution
 If the above adds up to less than $10,200 — no tax
 Greater than $10,200 — 40% tax on portion above
the threshold
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ACA Update
Services Counted Toward Cadillac Tax Maximums
 Insured and self-insured group health plans
(including behavioral and prescription drug coverage)
 Wellness programs that are group health plans (most
wellness programs)
 Health FSAs
 HSAs, employer and employee pretax contributions*
 HRAs*
 MSAs, all pretax contributions*
 On-site medical clinics providing more than de
minimis care*
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ACA Update
Services Counted Toward Cadillac Tax Maximums
Executive physical programs*
Pretax coverage for a specified disease or illness
Hospital indemnity or other fixed indemnity insurance
Federal/State/Local government-sponsored plans for
its employees
 Retiree coverage
 Multi-employer (Taft-Hartley) plans
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*As indicated by IRS notice issued on February 23, 2015 and subject to
future regulatory clarification
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ACA Update
Cadillac Tax - 2018
 Who pays tax?
• Coverage provider
‐ Fully insured plans — insurer (carrier) pays
‐ HSA — employer pays
‐ Self-insured plans — not clear whether thirdparty administrator or employer pays in selfinsured plans
 How is tax paid?
• Employer advises coverage provider of persons
with excess benefit and amount in excess of
threshold for tax calculation
• Coverage provider pays tax
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Final Thoughts
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ACA Update
Recent Updates from the Hill
 Repealed auto-enrollment for groups of 200+
 Repealed small group definition to 100 for purposes
of rating and product and left decision to states
• VA, CA, CO, NY, VT
 Delay of Cadillac Tax to 2020
• Change Cadillac Tax threshold
 CBA bill asked for Cadillac Tax relief similar to W-2
reporting
• If COBRA-exempt entity then the Cadillac Tax
doesn’t apply
 Summary of Benefits and Coverage revision
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ACA Update
Recent Updates from the Hill
 DOL FAQ#29 — clarified and expanded Women’s
Preventive Services mandate
 Moratorium on insurance taxes for 2016 to stabilize
exchange rates and keep exchange coverage
available
• Currently costs $500 per family in fully insured
plan
 PCORI fee increases in 2016 to $2.17 from $2.08
• Expires in 2019
 TRF scheduled to sunset in 2016
 Proposed three-year federal funding to states to
encourage Medicaid expansion
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ACA Update
GuideStone Supreme Court Challenge
 GuideStone committed to maintaining health plans
which align with our biblical beliefs around sanctity
of life
 Churches, conventions and those associated with
either are exempt under the law from providing
objectionable contraceptive methods
 3/23/16 SCOTUS hears our appeal to allow all
employers under the GuideStone plan umbrella
exemption from the Women’s Preventive Services
contraception mandate
 Regardless of SCOTUS decision, we have avenues of
appeal to continue the fight into 2017 and beyond
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ACA Update
Going Forward
 Expect change
 Read, read and read some more
 IRS.gov/affordable-care-act/employers
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ACA Update
The preceding information is general in nature and is
intended to keep you apprised of certain important
developments and is not intended to be legal advice.
This information may be subject to interpretation or
clarification over time, so we cannot guarantee its
accuracy or how it might be determined to apply in
certain situations.
However, we hope it will provide you a useful frame of
reference as you endeavor to carry out your
responsibilities and serve your employees.
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Questions?
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