Health Care
Reform:
What comes next?
A Presentation for OPRA
Law
Regulations to be developed between:
* Department of Labor
* Department of Health and Human Services
* Department of the Treasury
Questions and Answers
• Do Employers have to provide health insurance for
employees?
o Fewer than 50 employees: No.
• Incentives to participate in SHOP exchange
through tax credits
• Sequestration
Questions and Answers
• Do Employers have to provide health insurance for
employees?
o More than 50 employees: Yes.
• Businesses with 51 or more FTE employees will be
fined $2,000 per employee (excluding the first 30
employees) if they do not offer coverage for
employees who average 30 or more hours per
week. Note that there is no penalty for part-time
employees not offered coverage.
Questions and Answers
• Do Employers have to provide health insurance for
employees?
o More than 200 employees: Yes, and the law
requires automatic enrollment.
o Employers with more than 200 employees are
required to enroll new employees in their health
care plan, subject to any waiting period.
Employers must provide notice of employees’
right to opt out of automatic enrollment.
Questions and Answers
• Do Employers have to provide health insurance for
employees?
• To avoid penalties:
o employers must offer insurance that covers at
least 60% of the actuarial value of the cost of
benefits. (on average it covers 60% of the cost of
covered services for a typical population)
o The coverage also must be affordable to
employees, meaning an individual employee’s
premium cannot exceed 9.5% of their household
income.
Questions and Answers
• What is a full-time employee?
o Full-time employees are those who are scheduled to work
30 hours or more per week on average.
o Full-time employees must be identified during 2013
o Used to determine if large employer
o http://www.irs.gov/pub/irs-drop/n-12-58.pdf IRS directive to help
you establish who is a full-time employee.
Questions and Answers
• How does the new law apply to self-funded plans?
• A self-funded plan is one where the employer
accepts the risk for health expenses, rather than
buying coverage from an insurance company.
o Generally exempt for state insurance regulations – regulated by the
Employee Retirement Income Security Act (ERISA).
o Health Care Reform does impose some requirements:
• Extension of dependent coverage until age 26
• No cost sharing for preventative services
• No more than 90 day waiting periods
• No lifetime or annual limits on coverage.
o As of now – may not have to meet the “minimum essential health benefit
requirements”
Questions and Answers
• Do employers have to notify their employees about
the law?
• The new law did require all employers to provide
each employee written notification of the existence
of health-insurance exchanges and subsidies by
March 1, 2013, but because there was not enough
information, that date has been extended.
• Regulations on this issue, with new dates to be
available in Early Fall 2013.
Questions and Answers
• Cadillac Insurance Plans: Will employees be taxed
for the portion of the health insurance premiums
paid by the employer?
• Beginning in 2018, plans valued at 10,200 for
individuals or $27,500 for families are subject to an
excise tax of 40% on the value of the plan
o Tax will be levied on insurers and self-insured employers – not on
employees.
o Threshold amounts will be adjusted for inflation in 2020, or sooner if health
care costs rise more than expected.
Questions and Answers
• As a Small Business, what can I do now to get ready
for enrollment in October of 2013?
• 1. Educate yourself on how insurance works,
levels of coverage and costs
• 2. Set a budget – how much can you afford to
spend on coverage for your employees, and how
much can they spend for their coverage
• 3. Get Organized – have basic information ready,
like the number of employees and the hours
worked.
Questions and Answers
• As a Small Business, what can I do now to get ready
for enrollment in October of 2013?
• 4. Consider what is most important to your
employees – coverage vs. cost
• 5. Get Help! Your insurance broker, attorney and
accountant should be part of the team.
o Even after the SHOPs go into effect you are able to use your own broker or
insurance company.
Closer Look at Employer
Mandate
Beginning in 2014, employers with 50 or more full-time employees that
do not offer coverage and have at least one full-time employee who
receives a premium tax credit will be assessed a fee of $2,000 per fulltime employee, excluding the first 30 employees from the assessment.
Employers with 50 or more full-time employees that offer coverage but
have at least one full-time employee receiving a premium tax credit,
will pay the lesser of $3,000 for each employee receiving a premium
credit or $2,000 for each full-time employee, excluding the first 30
employees from the assessment. (Effective January 1, 2014).
Employers with 200-plus full-time employees must automatically
enroll their employees into health insurance plans.
2013
Increase Medicare tax rate on wages
by 0.9% (from 1.45% to 2.35%) on
earnings over $200,000 for individual
taxpayers ($250,000 for joint filers).
Contributions to FSAs limited to
$2,500 per year.
3.8% tax increase on investment income
for taxpayers making $200,000 per year
($250,000 for joint filers); however in real
estate transactions there is an exemption
in current law for $250,000 on the sale of a
principal residence ($500,000 for joint
filers).
2014
Exchanges are created and open to
individuals and small businesses
(2-100 employees). Exchanges will
include four tiers of private plans
(Bronze- 60% actuarial value,
Silver-70%, Gold-80%, Platinum90%, and Catastrophic coverage).
Premium tax credits (subsidies for
purchase of health insurance)
available via exchanges for
individuals/families with incomes
between 100% and 400% of federal
poverty level who do not receive
employer based coverage.
Insurance plans required to abide
by guaranteed issue, minimum
benefit standards, revised rate
bands for individual and small
group market (2-100 employees).
Employers with more than 200
employees would be required to
automatically enroll employees
into health insurance plans offered
by employer (employees may optout).
2014 Cont’d
Individual Mandate: Individuals required to
purchase health insurance or face a tax
penalty of up to $95 per year (or 1.0% of
income, whichever is greater). In 2015 the
penalty is $325 per adult (or 2.0% of income)
and in 2016 the penalty is $695/year (or of
2.5% of income). After 2016, penalty amounts
are indexed to inflation.
Employer Mandate: Employers with more
than 50 employees who do not offer their
employees health insurance will be subject to
a $2,000 tax penalty/per full-time employee
(per year) if one of their employees is eligible
for a tax credit subsidy (first 30 employees
exempted from calculation).
Phase II of Small Business Tax Credit: Small
businesses with less than 25 employees and
average annual wages of less than $50,000 are
eligible for tax credits of up to 50% of the
employer’s contribution toward the
employee’s health insurance premium.
Employers must subsidize at least 50% of their
employees’ premiums in order to be eligible
for the tax credit. Credit only available for two
years.
New tax is levied on insurance
companies based on net premiums
written. This tax will raise an
estimated $8 billion in 2014,
reaching $14.3 billion by 2018. The
tax does not sunset and is indexed
thereafter.
2014 Cont’d
States must expand Medicaid to 133% of federal
poverty level. States will receive 100% federal
financing from 2014-2016, 95% financing in 2017,
94% financing in 2018, 93% financing in 2019, and
90% financing in 2020 and beyond. However, the
Supreme Court struck down the ability of the
federal government to withhold their portion of
current Medicaid funds to force states to comply
with the expansion.
Allow states the option of merging
the individual and small group
markets in Exchanges.
Waiting periods for coverage cannot
exceed 90 days.
2017
States are permitted to allow businesses with
more than 100 employees to purchase
coverage in SHOP Exchanges.
2018
“Cadillac Tax” takes effect. A 40% excise tax is levied
on insurers of employer-sponsored health plans with
aggregate values that exceed $10,200 for individual
and $27,500 for family. The tax is applied to the
amounts that exceed the threshold and it will be
indexed for inflation.
Thank You!
Mary Louisa L’Hommedieu is a partner with
Dodd, L’Hommedieu & McGrievy. She devotes a
substantial portion of her practice to the resolution
of business and regulatory disputes in the health
care industry. She has litigated numerous cases in
state and federal courts and before administrative
bodies, and has authored articles and presented
seminars on corporate, health care, employment
and real estate topics.
Mary Louisa is a member of the American
Health Lawyers Association, OHCA, OPRA and
Leading Age. She serves on the Boards of the
Hudson Chamber of Commerce and the Hudson
Community Foundation .