THE PATIENT
PROTECTION &
AFFORDABLE CARE ACT
KATIE BURCH, ESQ.
POTTS-DUPRE DIFEDE & HAWKINS
WASHINGTON, DC
.
New Guidance
for 2013 and
Beyond
OVERVIEW
 Background
 Key Provisions
 Implementation Delays
 Upcoming Changes
 State Exchanges
 “Play or Pay” Employer Sponsored
Coverage
 90-Day Waiting Period
 Patient-Centered Outcomes Research Trust Fund
 Transitional Reinsurance Program
 Conclusion
BACKGROUND OF THE ACA
 Main Goals:
Increase # of Americans with Health Coverage
Decrease Cost of Health care
 Key Provisions
Individual Mandate
State Exchanges
Medicaid Expansion
IMPLEMENTATION DELAYS
 Mid-Term Election of 2010
 Republicans gained 63 seats in House, 5 seats in Senate
 Republicans won 10 governor’s races in states held by Democrats
 Litigation Challenges
 Individual Mandate
 Medicaid Expansion
 Contraceptive Mandate
 Supreme Court Decision (June 28, 2012)
 Individual Mandate was constitutional as a tax
 Provision allowing the Dept. of Health & Human Services to withhold
all Medicaid funding was unconstitutional
 Election of 2012
UPCOMING CHANGES IN 2013 & BEYOND
 State Exchanges
 “Play or Pay” Employer-Sponsored Coverage
 90-Day Waiting Period
 Patient-Centered Outcomes
Research Trust Fund
 Transitional Reinsurance
Program
STATE EXCHANGES
Online marketplaces where individuals
and small businesses can purchase health
insurance coverage
STATE EXCHANGES
 Purchasing Coverage on the Exchange
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Bronze – 60% actuarial value
Silver – 70% actuarial value
Gold – 80% actuarial value
Platinum – 90% actuarial value
 Individual & Small Business Health Options Program (SHOP)
Exchanges
 Who is Eligible for SHOP Exchanges?
 Premium Tax Credits & Small Business Subsidies
STATE EXCHANGES
 Offering Coverage on the Exchange
 Must be a Qualified Health Plan (“QHP”)
 What is a QHP?
 Health Insurance Issuer
 Certified by the State Exchange
 Guaranteed Issue
STATE EXCHANGES
 Multiemployer Plans on the Exchange
 Purchasing coverage on the Exchanges?
 Offering coverage on the Exchanges?
 Not health insurance issuer
 No guarantee issue
 Future guidance to address Multiemployer Plans’ role in
Exchanges?
STATE EXCHANGES
 State v. Federal Exchanges
 As of January 4, 2013, 19 states, including DC, have have
declared to their intentions to run their states’ Exchange
marketplaces
 7 states are planning for State-Federal Partnership Exchange
 25 states will default to Federal Exchange
“PLAY OR PAY”
EMPLOYER SPONSORED COVERAGE
 Beginning January 1, 2014, large employers must offer minimum
essential coverage to full-time employees and dependents
 95% Threshold
 Who is a Large Employer?
 Employs an average of at least 50 full-time employees, including fulltime equivalent employees
 Large Employer = (Full-time Employees + Full-Time Equivalent
Employees) / 12
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 Who is a Full-Time Employee?
 An employee is considered to be full time in any month if he or she is
employed at least 30 hours per week, or, if the employer elects, had
130 or more hours of service in the calendar month
 Who is a Full-Time Equivalent Employee?
 Total hours of service (not to exceed 120 for any employee) for all
employees who were employed on average less than 30 hours of
service per week for the month, divided by 120
 “Hours of service” includes paid time off for vacation, holidays,
illness, disability, jury duty, military duty and leaves of absence, but
excludes service relating to non-U.S. sourced income
 What about Seasonal Workers?
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 Determining Coverage for New Hires: Variable Hour Employee
 “Initial Measurement Period” – Safe Harbor
 Between 3 and 12 months
 Measure the new employee’s hours of service completed during the Initial
Measurement Period to determine whether the employee completed an
average of 30 hours of service per week or more
 “Stability Period”
 If the new employee is a full-time employee during the Initial
Measurement Period, the new employee is entitled to health coverage in
the subsequent Stability Period, regardless of the employee’s number of
hours of service during the Stability Period




Same length as the Stability Period for ongoing employees
At least 6 consecutive calendar months
No shorter than the Initial Measurement Period
Begins after the Initial Measurement Period and any associated Administrative Period
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 Administrative Period
 Employers may need time between the Measurement Period and the
associated Stability Period to determine which employees are eligible for
coverage, and then notify and enroll employees
 Administrative period following the Measurement Period is related to the
90-Day Waiting Period Rule
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 Determining Coverage for On -Going Employees
 “Look-Back” Standard Measurement/Stability Period – Safe Harbor
 A look-back of 3 to 12 months, as chosen by the employer, to determine
whether during the Standard Measurement Period the employee averaged
at least 30 hours of service per week
 If the employee is considered a full-time employee, employee treated as a
full-time employee during the subsequent Stability Period, regardless of
the employee’s number of hours of service during the S tability Period
 Who is an “On-Going Employee”?
 Employed by the employer for at least one complete standard
Measurement Period
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 What is Minimum Essential Coverage ?
 Coverage is comprehensive and affordable
 Comprehensive
 Covers at least 60% of the total allowed cost of benefits that are provided
under the plan
 Affordable
 Employees’ contributions to health premiums are not more than 9.5% of
employees’ household incomes
 Coverage offered to the employee is affordable based on the employee’s W-2
wages (as reported in Box 1)
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 Penalties for Non-Compliance
 Failing to Offer Coverage
 Do not offer coverage and at least one full-time employee receiving
subsidized coverage in the Exchange:
 Annual fee of $2,000 per full-time employee, BUT the first 30 employees are excluded
 Example:
 If the employer does not offer coverage for one month only
 Penalty = 1/12 x $2,000 x (Number of full -time employees - 30)
 Offering Inadequate Coverage
 Unaffordable or inadequate coverage and at least one full-time employee
receiving subsidized coverage in the Exchange
 Annual fee of $3,000 for each full-time employee receiving subsidized coverage, excluding
the first 30 employees
 Example:
 If the employer offers unaffordable coverage for one month only:
 Penalty = 1/12 x $3,000 x (Number of full -time employees - 30)
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 Penalties for Dependents?
 An employer may also be subject to a penalty if it fails to offer
coverage to an employee’s dependents
 BUT “Dependent” has been defined to only include an employee’s
children who are under 26 years of age
 “Dependent” definition does NOT to include an employee’s
spouse
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 Contributions to Multiemployer Plans
 IRS requested comments in the most recent regulations for how the
“play or pay” requirements should apply to employers who contribute
to multiemployer plans
 For 2014, an employer who contributes to a multiemployer plan will
be considered to have provided coverage to its full -time employee if:
 Required to contribute under a collective bargaining agreement or related
participation agreement
 Affordable, comprehensive coverage to employee (and dependents)
 “Affordable” if the employee's required premium does not exceed 9.5% of the
wages reported to the multiemployer plan
“PLAY OR PAY”
EMPLOYER-SPONSORED COVERAGE
 What Should Employers Being Doing to Prepare?
 Large Employer?
 Does health plan offer minimum essential coverage?
 Is it “affordable”?
 Is it “comprehensive”?
 Adjustments to eligibility requirements to comply with Safe
Harbor methods?
90-DAY WAITING PERIOD
 Section 2708 of the ACA – For plan years beginning on or
after January 1 , 2014, a group health plan or health insurance
issuer of fering health coverage cannot apply a waiting period
that exceeds 90 days
 What is a Waiting Period?
 Period of time that must pass before coverage for an employee or
dependent who is otherwise eligible to enroll for plan coverage can
become effective
 i.e. Administrative Period
90-DAY WAITING PERIOD
 How does it apply to:
 Full-Time Employees?
 Variable Hour Employees?
 Part-Time Employees?
90-DAY WAITING PERIOD
 Example (Variable Hour Employee):
 ABC Company – Full-Time Employee Coverage Only (30 or more hours per
week)
 Samantha’s start date is November 26, 2014
 Samantha expected to work 20-45 hours per week
 ABC Company’s Initial Measurement Period is 12 months
 Samantha is determined to be eligible on November 25, 2015
 If Samantha then elects coverage, Samantha’s first day of coverage will
be January 1, 2016
PATIENT-CENTERED OUTCOME
RESEARCH TRUST FUND (“PCORTF”)
 What is it?
 Funds the Patient-Centered Outcomes Research
Institute (“PCORI”)
 What is the purpose of PCORI?
 “To conduct research to provide information about the best available
evidence to help patients and their health care providers make more
informed decisions. PCORI’s research is intended to give patients a
better understanding of the prevention, treatment and care options
available, and the science that supports those options”
 How is it funded?
 Per Member fee on Group Health Plans and Health Insurance Issuers that
provides accident or health coverage
PCORTF (CONT’D.)
 Who Pays the Fee?
 Health insurers will pay the fee on behalf of their insured population
 For self-insured plans, the fee is paid by the plan sponsor
 For multiemployer plans, the plan sponsor is the board of trustees
 DOL permits PCORI fee to be paid from plan assets under ERISA
PCORTF (CONT’D.)
 When does the PCORI fee become effective?
 Policy and plan years ending after September 30, 2012 and before
October 1, 2019
 For calendar year plans, the requirement to pay fees begins with the
2012 plan year
 When is Payment Due?
 Report and pay PCORI fee no later than July 31 of the calendar year
following the last day of the policy or plan year
PCORTF (CONT’D.)
 Fee Assessment
 Fee Amount x Number of Average Covered Lives
 Generally, fee amount is $2 per Member
 Adjusted annually based on national health expenditures
 What is a Covered Life?
 All participants and beneficiaries, including retirees and those receiving
COBRA coverage
 Calculating Average # of Covered Lives
 Actual Method
 Snapshot Method
 Form 5500 Method
TRANSITIONAL REINSURANCE PROGRAM
 ACA §1341 – Requires that a Transitional Reinsurance
Program be established in each State to help stabilize
premiums for coverage in the individual market from 2014
through 2016
 $10 billion in 2014
 $6 billion in 2015
 $4 billion in 2016
 What is the purpose of the TRP?
 Designed to alleviate the need to build into premiums the risk of
enrolling individuals with significant unmet medical needs
(considered “high risk pools”)
TRANSITIONAL REINSURANCE PROGRAM
 Who Pays?
 Contributing Entities
 Health insurance issuers and group health plans that offer major medical
coverage
 Exclusions
 HRAs, HSAs, FSAs, Employee Assistance Plans (EAP), Disease
Management Programs, and HIPAA-excepted plans (i.e. stand-alone
dental and vision plans)
TRANSITIONAL REINSURANCE PROGRAM
 How does it work?
 Dept. of Health & Human Services collects the reinsurance
contributions from all Contributing Entities
 Allocated funds to the states based on need
 States make reinsurance payments to individual market insurers that
cover “high risk” individuals
 States can assess a higher reinsurance contribution within their
state, but cannot not assess this contribution against plans that are
governed by the Employee Retirement Income Security Act (ERISA)
TRANSITIONAL REINSURANCE PROGRAM
 How is the fee calculated?
 Estimated annual contribution rate will be
$63 per Covered Life in 2014
 What is a Covered Life?
 Includes Participant and all Dependents and Retirees (except for those for which Medicare is
primary)
 Similar Counting Methods used to calculate PCORTF fees
# of Covered Lives x National Contribution Rate
 Example
 $63 per Covered Life x 15,000 Covered Lives = $ 945,000
RECAP
 State Exchanges
 “Play or Pay” Employer Sponsored Coverage
 90-Day Waiting Period
 Patient-Centered Outcome Research Trust Fund
 Transition Reinsurance Program