2. 6/27/2013
2
AgendaAgendaAgendaAgenda
• History of Health Insurance and Costs
• Individual Mandated Health Insurance
• Tax Credits and Subsidy Programs
• The Exchange: Covered California
• Pay or Play for Large Employers
• ACA Compliance Checklist
• Strategies for Containing Costs
• Resources & Tools Available
3333
3. 6/27/2013
3
A Brief History of HealthA Brief History of HealthA Brief History of HealthA Brief History of Health InsuranceInsuranceInsuranceInsurance
• EmployerEmployerEmployerEmployer sponsored health insurance was born during World Warsponsored health insurance was born during World Warsponsored health insurance was born during World Warsponsored health insurance was born during World War IIIIIIII
• Medicare and Medicaid passed inMedicare and Medicaid passed inMedicare and Medicaid passed inMedicare and Medicaid passed in 1965196519651965
• ACA signed into law on March 23,ACA signed into law on March 23,ACA signed into law on March 23,ACA signed into law on March 23, 2010201020102010
• Supreme Court upheld the ACA on June 28,Supreme Court upheld the ACA on June 28,Supreme Court upheld the ACA on June 28,Supreme Court upheld the ACA on June 28, 2012201220122012
WorldWar IIWorldWar II 19651965 20102010 20122012
5555
Cumulative Premium Increases Compared to InflationCumulative Premium Increases Compared to InflationCumulative Premium Increases Compared to InflationCumulative Premium Increases Compared to Inflation
Family Coverage, California, 2002 toFamily Coverage, California, 2002 toFamily Coverage, California, 2002 toFamily Coverage, California, 2002 to 2012201220122012
• California Employer Hearth
Benefits Cost of Health
Insurance
• Since 2002, health insurance
premiums in California have
increased by 169%, more than
five times the 31.5% increase
in the state's overall inflation
rate.
6666
4. 6/27/2013
4
How Much Will Premiums Increase?How Much Will Premiums Increase?How Much Will Premiums Increase?How Much Will Premiums Increase?
• One state report shows that premiums will go
up 30% in 2014
• Age banded rates cannot vary more than 3:1
for adults for individual and small group
• Eliminates “Risk Adjustment Factor” for small
groups (2 50 ees)
• Essential Benefits
• New health insurance taxes
7777
Essential BenefitsEssential BenefitsEssential BenefitsEssential Benefits8888
6. 6/27/2013
6
Other Employer Cost ConsiderationsOther Employer Cost ConsiderationsOther Employer Cost ConsiderationsOther Employer Cost Considerations
• Must offer benefits to those working 30 hours or more per week
• Maximum waiting period 60 days in CA
• Adjusting contributions to avoid penalties
• Individual mandate may cause employees to join the plan
• Automatic enrollment for companies with 200 plus employees
• More administration for reporting and eligibility mandates
11111111
Individual MandateIndividual MandateIndividual MandateIndividual Mandate
• Jan. 1, 2014 all individuals are required to have health insurance
• Exceptions:
o Family income is below threshold of having to file a tax return
o Currently enrolled in Medicare or Medicaid
o Enrolled in a plan offered by an employer
12121212
7. 6/27/2013
7
Individual/Family Penalties for Not HavingIndividual/Family Penalties for Not HavingIndividual/Family Penalties for Not HavingIndividual/Family Penalties for Not Having
HealthHealthHealthHealth InsuranceInsuranceInsuranceInsurance13131313
YearYearYearYear Percentage ofPercentage ofPercentage ofPercentage of
IncomeIncomeIncomeIncome
Set Dollar Amount perSet Dollar Amount perSet Dollar Amount perSet Dollar Amount per
AdultAdultAdultAdult
Set Dollar Amount perSet Dollar Amount perSet Dollar Amount perSet Dollar Amount per
ChildChildChildChild
YearYearYearYear
2014201420142014 1%1%1%1% $95$95$95$95 $47.50$47.50$47.50$47.50 2014201420142014
2015201520152015 2%2%2%2% $325$325$325$325 $162.50$162.50$162.50$162.50 2015201520152015
2016201620162016 2.5%2.5%2.5%2.5% $695$695$695$695 $347.50$347.50$347.50$347.50 2016201620162016
Health Insurance Penalty PhaseHealth Insurance Penalty PhaseHealth Insurance Penalty PhaseHealth Insurance Penalty Phase In ScheduleIn ScheduleIn ScheduleIn Schedule
Pay the greater of the two amountsPay the greater of the two amountsPay the greater of the two amountsPay the greater of the two amounts
Covered CaliforniaCovered CaliforniaCovered CaliforniaCovered California
• Public, state run Exchange
• Guaranteed Issue for ALL Individuals/Families
• Provides online “apples to apples” comparison
• Begins open enrollment 10/1/13 for coverage effective 1/1/14
• Must have coverage before 3/1/14 or wait until next open enrollment
• 13 carriers state wide with 7 carriers in LA County
• Rates based on age and 19 territories
14141414
8. 6/27/2013
8
Levels of CoverageLevels of CoverageLevels of CoverageLevels of Coverage15151515
CategoryCategoryCategoryCategory
Percentage of expensesPercentage of expensesPercentage of expensesPercentage of expenses
paid by health planpaid by health planpaid by health planpaid by health plan
Percentage of expenses paidPercentage of expenses paidPercentage of expenses paidPercentage of expenses paid
by individualby individualby individualby individual
PlatinumPlatinumPlatinumPlatinum 90% 10%
GoldGoldGoldGold 80% 20%
SilverSilverSilverSilver 70% 30%
BronzeBronzeBronzeBronze 60% 40%
HigherHigherHigherHigher
percentage ofpercentage ofpercentage ofpercentage of
expensesexpensesexpensesexpenses paidpaidpaidpaid
bybybyby planplanplanplan
Lower monthlyLower monthlyLower monthlyLower monthly
premiumpremiumpremiumpremium
paymentpaymentpaymentpayment
Individual PlanIndividual PlanIndividual PlanIndividual Plan RatesRatesRatesRates16161616
PlanPlanPlanPlan BronzeBronzeBronzeBronze SilverSilverSilverSilver GoldGoldGoldGold PlatinumPlatinumPlatinumPlatinum
Health NetHealth NetHealth NetHealth Net
HMO
__ $242 $276 $311$311$311$311
AnthemAnthemAnthemAnthem
HMO
__ $259 $327 $374
Molina HealthcareMolina HealthcareMolina HealthcareMolina Healthcare
HMO
$204 $259 $285 $342
L.A. CareL.A. CareL.A. CareL.A. Care
HMO
$196$196$196$196 $265 $301 $332
Blue ShieldBlue ShieldBlue ShieldBlue Shield
PPO
$240 $287 $342 $392
AnthemAnthemAnthemAnthem
EPO
$225 $299 $363 $420
KaiserKaiserKaiserKaiser
HMO
$245 $325 $399 $429
Health NetHealth NetHealth NetHealth Net
PPO
$301 __ __ __
South Los Angeles CountySouth Los Angeles CountySouth Los Angeles CountySouth Los Angeles County –––– 40 Year Old40 Year Old40 Year Old40 Year Old
9. 6/27/2013
9
2014 Individual Plan Rates to Comparable Small Group2014 Individual Plan Rates to Comparable Small Group2014 Individual Plan Rates to Comparable Small Group2014 Individual Plan Rates to Comparable Small Group
RatesRatesRatesRates
17171717
AreaAreaAreaArea Avg. Cost of Silver PlanAvg. Cost of Silver PlanAvg. Cost of Silver PlanAvg. Cost of Silver Plan
Average cost of 2013 Comparable SmallAverage cost of 2013 Comparable SmallAverage cost of 2013 Comparable SmallAverage cost of 2013 Comparable Small
Group PlansGroup PlansGroup PlansGroup Plans
DifferenceDifferenceDifferenceDifference
Los Angeles (North)Los Angeles (North)Los Angeles (North)Los Angeles (North)
$242$242$242$242 $311$311$311$311 22%22%22%22%
Los Angeles (South)Los Angeles (South)Los Angeles (South)Los Angeles (South) $253$253$253$253 $362$362$362$362 29%29%29%29%
FINANCIALFINANCIALFINANCIALFINANCIAL ASSISTANCE PROGRAMSASSISTANCE PROGRAMSASSISTANCE PROGRAMSASSISTANCE PROGRAMS
AVAILABLE ONLY INAVAILABLE ONLY INAVAILABLE ONLY INAVAILABLE ONLY IN
COVEREDCOVEREDCOVEREDCOVERED CALIFORNIA EXCHANGECALIFORNIA EXCHANGECALIFORNIA EXCHANGECALIFORNIA EXCHANGE
18181818
10. 6/27/2013
10
Federal Poverty Level (FPLFederal Poverty Level (FPLFederal Poverty Level (FPLFederal Poverty Level (FPL))))19191919
Persons in HouseholdPersons in HouseholdPersons in HouseholdPersons in Household FPLFPLFPLFPL 138%138%138%138% FPLFPLFPLFPL 200% FPL200% FPL200% FPL200% FPL 250% FPL250% FPL250% FPL250% FPL 400% FPL400% FPL400% FPL400% FPL
1111 $11,490 $15,856 $22,980 $28,725 $45,960
2222 $15,510 $21,404 $31,020 $38,774 $62,400
3333 $19,530 $26,951 $39,060 $48,825 $78,120
4444 $23,550 $32,499 $47,100 $58,875 $94,200
Medi Cal
Cost Sharing
Subsidies
Premium Subsidies
MediMediMediMedi CalCalCalCal
• Free coverage for qualified individuals and children
• In 2014, Medi Cal eligibility increases from 100% FPL to 138% FPL for
adults and includes adults without children
• Eligibility for children is up to 250% FPL, however differs in other
states
• Estimates range from 1.7 million to more than 3 million Californians
will become eligible
20202020
11. 6/27/2013
11
1111) Cost) Cost) Cost) Cost SharingSharingSharingSharing SubsidiesSubsidiesSubsidiesSubsidies
• Eligibility: 138% to 250% FPL
• Sliding scale based on FPL
• 138% 150% FPL covers 94% of costs
• 150% 200% FPL covers 87% of costs
• 200 250% of FPL covers 73% of costs
21212121
WhatWhatWhatWhat is the benefit?is the benefit?is the benefit?is the benefit?
Allows the purchase of a Silver Plan (which covers the cost of medical
services at 70%) to a HIGHER percentage of coverage (which means
lower deductibles and copayments)
1111) Cost) Cost) Cost) Cost SharingSharingSharingSharing SubsidiesSubsidiesSubsidiesSubsidies22222222
Coverage CategoryCoverage CategoryCoverage CategoryCoverage Category
94% Silver94% Silver94% Silver94% Silver
Covers 94% avg.Covers 94% avg.Covers 94% avg.Covers 94% avg.
annual costannual costannual costannual cost
87% Silver87% Silver87% Silver87% Silver
Covers 87% avg. annual costCovers 87% avg. annual costCovers 87% avg. annual costCovers 87% avg. annual cost
73% Silver73% Silver73% Silver73% Silver
Covers 73% avg. annual costCovers 73% avg. annual costCovers 73% avg. annual costCovers 73% avg. annual cost
70% Silver70% Silver70% Silver70% Silver
Covers 70% avg.Covers 70% avg.Covers 70% avg.Covers 70% avg.
annual costannual costannual costannual cost
Income RangesIncome RangesIncome RangesIncome Ranges 138% 150% FPL 150% 200% FPL 200% 250% FPL 250% 400% FPL
Office VisitOffice VisitOffice VisitOffice Visit $3 $15 $40 $45
LabLabLabLab
DiagnosticsDiagnosticsDiagnosticsDiagnostics
$3
$5
$15
$20
$40
$50
$45
$65
Generic DrugsGeneric DrugsGeneric DrugsGeneric Drugs $3 $5 $20 $25
Annual Out of PocketAnnual Out of PocketAnnual Out of PocketAnnual Out of Pocket
Max. Individual/Max. Individual/Max. Individual/Max. Individual/
FamilyFamilyFamilyFamily
$2,250
$4,500
$2,500
$4,500
$5,200
$4,500
$6,350
$12,700
Examples based on FPLExamples based on FPLExamples based on FPLExamples based on FPL
12. 6/27/2013
12
2222) Premium) Premium) Premium) Premium SubsidiesSubsidiesSubsidiesSubsidies (aka Tax(aka Tax(aka Tax(aka Tax CreditsCreditsCreditsCredits))))
• Eligibility 138% to 400% FPL
• Amount of subsidy is based on a sliding scale
• Applied to the monthly premium
• Individual can earn up to $45,960
• Family of four can earn up to $94,200
• Available only in the Exchange
• Must be Silver plan or higher
23232323
2222) Premium) Premium) Premium) Premium Subsidy ExamplesSubsidy ExamplesSubsidy ExamplesSubsidy Examples24242424
PlanPlanPlanPlan 150 FPL150 FPL150 FPL150 FPL 200 FPL200 FPL200 FPL200 FPL 250 FPL250 FPL250 FPL250 FPL 400 FPL400 FPL400 FPL400 FPL
Health NetHealth NetHealth NetHealth Net
HMOHMOHMOHMO
$40$40$40$40 $103$103$103$103 $175$175$175$175 $242$242$242$242
$202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0
AnthemAnthemAnthemAnthem
HMOHMOHMOHMO
$57$57$57$57 $121$121$121$121 $193$193$193$193 $259$259$259$259
$202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0
Molina HealthcareMolina HealthcareMolina HealthcareMolina Healthcare
HMOHMOHMOHMO
$58$58$58$58 $121$121$121$121 $193$193$193$193 $259$259$259$259
$202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0
L.A. CareL.A. CareL.A. CareL.A. Care
HMOHMOHMOHMO
$64$64$64$64 $127$127$127$127 $199$199$199$199 $265$265$265$265
$202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0
Blue ShieldBlue ShieldBlue ShieldBlue Shield
PPOPPOPPOPPO
$86$86$86$86 $149$149$149$149 $221$221$221$221 $287$287$287$287
$202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0
AnthemAnthemAnthemAnthem
EPOEPOEPOEPO
$97$97$97$97 $160$160$160$160 $232$232$232$232 $299$299$299$299
$202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0
Kaiser PermanenteKaiser PermanenteKaiser PermanenteKaiser Permanente
HMOHMOHMOHMO
$123$123$123$123 $186$186$186$186 $258$258$258$258 $325$325$325$325
$202$202$202$202 $138$138$138$138 $66$66$66$66 $0$0$0$0
40 Year Old Single/ South LA County/Silver Plan40 Year Old Single/ South LA County/Silver Plan40 Year Old Single/ South LA County/Silver Plan40 Year Old Single/ South LA County/Silver Plan
Subsidies shown in
green premium
after subsidy and
monthly premium
after subsidy is
shown in black
13. 6/27/2013
13
CoveredCoveredCoveredCovered California :California :California :California : Cost Estimate Calculator25252525
Groups ofGroups ofGroups ofGroups of EmployeesEmployeesEmployeesEmployees26262626
MediMediMediMedi CalCalCalCal EligibleEligibleEligibleEligible
IndividualIndividualIndividualIndividual with income lower
than $15,856
Or
Family of 2Family of 2Family of 2Family of 2 with income lower
than $21,404
Or
Family of 3Family of 3Family of 3Family of 3 with income lower
than $26,951
Or
Family of 4Family of 4Family of 4Family of 4 with income lower
than $32,499
Group 1Group 1Group 1Group 1
Less than 138% FPLLess than 138% FPLLess than 138% FPLLess than 138% FPL
Group 2Group 2Group 2Group 2
138 to 250% FPL138 to 250% FPL138 to 250% FPL138 to 250% FPL
CostCostCostCost Sharing & PremiumSharing & PremiumSharing & PremiumSharing & Premium
Subsidy EligibleSubsidy EligibleSubsidy EligibleSubsidy Eligible
IndividualIndividualIndividualIndividual with income
between $15,856 $28,725
Or
Family of 2Family of 2Family of 2Family of 2 with income
between $21,404 $38,774
Or
Family of 3Family of 3Family of 3Family of 3 with income
between $26,951 $48,825
Or
Family of 4Family of 4Family of 4Family of 4 with income
between $32,499 $58,876
Must purchase on
the Exchange to
receive subsidies
14. 6/27/2013
14
Groups ofGroups ofGroups ofGroups of EmployeesEmployeesEmployeesEmployees27272727
Premium SubsidyPremium SubsidyPremium SubsidyPremium Subsidy EligibleEligibleEligibleEligible
Individual with income of
$22,980 $45,960
Or
Family of 2 with income of
$31,020 $62,400
Or
Family of 3 with income of
$39,060 $78,120
Or
Family of 4 with income of
$47,100 $94,200
Group 3Group 3Group 3Group 3
138% to 400% FPL
Group 4Group 4Group 4Group 4
Higher than 400% FPL
NoNoNoNo SubsidiesSubsidiesSubsidiesSubsidies
Individual with income
higher than $45,960
Or
Family of 2 with income
higher than $62,400
Or
Family of 3 with income
higher than $78,120
Or
Family of 4 with income
higher than $94,200
Must purchase on
the Exchange to
receive subsidies
Groups ofGroups ofGroups ofGroups of EmployeesEmployeesEmployeesEmployees28282828
GroupGroupGroupGroup 5555
Waives Coverage and Opts to Pay Penalty
YearYearYearYear % of Income% of Income% of Income% of Income AdultAdultAdultAdult ChildChildChildChild
2014 1% $95 $47.50
2015 2% $325 $162.50
2016 2.5% $695 $347.50
15. 6/27/2013
15
Group Health Benefit ChangesGroup Health Benefit ChangesGroup Health Benefit ChangesGroup Health Benefit Changes
Effective Already:Effective Already:Effective Already:Effective Already:
1. Dependents covered until age 26
2. No cost for preventative care
3. No cost for contraceptives
4. No lifetime or annual benefit limits
Effective Jan. 1, 2014:Effective Jan. 1, 2014:Effective Jan. 1, 2014:Effective Jan. 1, 2014:
1. No pre existing exclusions
2. Maximum OOP $6,350 / $12,700
29292929
Small EmployersSmall EmployersSmall EmployersSmall Employers
• No mandate to provide group health insurance
• Defined as 1 – 50 full time employees
• Small employer expands to 100 employees in 2017 but penalty
still applies over 50 FTEs
• Community rating
• Max. plan deductible of $2,000/$4,000
• In the Exchange: min. participation and contribution
requirements may no longer apply (must enroll during special
open enrollment period Nov. 15 – December 15)
30303030
16. 6/27/2013
16
Small Business Health Options Program (SHOP)Small Business Health Options Program (SHOP)Small Business Health Options Program (SHOP)Small Business Health Options Program (SHOP)
• Public Exchange run by Covered California
• Side by side comparison of plans
• Choice of health plans, dental and carriers
• Can provide defined contribution amount towards Bronze,
Silver, Gold or Platinum plans
• One consolidated bill for all plans
• Tax credits are available for 2 years from 2014 to 2020
• On a sliding scale up to a maximum of 50%:
o 25 or fewer FTEs with average payroll less than $50,000 per year and contribute
50% are eligible for minimal tax credit
o 10 or fewer FTEs with average payroll less than $25,000 are eligible for
maximum tax credit
31313131
Large EmployersLarge EmployersLarge EmployersLarge Employers
• Pay or Play!
• 50 or more full time equivalent (FTE) employees in the prior
year.
• Employees working 30 hours per week are deemed full
time.
• Part time employees: add up hours worked for the month and
divide by 120
• 10 employees @ 15 hours per week = 600 hours divided by
120 = 5 FTEs
32323232
17. 6/27/2013
17
Large Employer PenaltiesLarge Employer PenaltiesLarge Employer PenaltiesLarge Employer Penalties
• No health insurance = $2,000 per year/per employeeNo health insurance = $2,000 per year/per employeeNo health insurance = $2,000 per year/per employeeNo health insurance = $2,000 per year/per employee
o The first 30 employees are not counted:
o Example: 60 employees – 30 = 30 x $2,000 = $60,000 annual penalty
• Unaffordable Coverage = $3,000 per year/per employee that purchases healthUnaffordable Coverage = $3,000 per year/per employee that purchases healthUnaffordable Coverage = $3,000 per year/per employee that purchases healthUnaffordable Coverage = $3,000 per year/per employee that purchases health
insurance through the Exchange and receives a subsidy.insurance through the Exchange and receives a subsidy.insurance through the Exchange and receives a subsidy.insurance through the Exchange and receives a subsidy.
33333333
Minimum Value andMinimum Value andMinimum Value andMinimum Value and AffordabilityAffordabilityAffordabilityAffordability TestTestTestTest
1)1)1)1) Minimum ValueMinimum ValueMinimum ValueMinimum Value TestTestTestTest: health plan must pay a minimum of 60% of
expenses
2)2)2)2) Affordability TestAffordability TestAffordability TestAffordability Test: employees’ contribution cannot exceed 9.5% of
their W 2 wages
• Penalty does not apply:
• If employee has coverage through spouse
• Employee buys health insurance through the Exchange but does not qualify for
a subsidy
• Employee is enrolled in Medicaid/Medicare
34343434
18. 6/27/2013
18
Penalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable Coverage
Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014
35353535
Penalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable CoveragePenalties for Employers Not Offering Affordable Coverage
Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014Under the Affordable Care Act Beginning in 2014
36363636
19. 6/27/2013
19
Employer Survey on Health ReformEmployer Survey on Health ReformEmployer Survey on Health ReformEmployer Survey on Health Reform
McKinsey & Company, a leading global management consulting firm,
conducted a survey of 1,329 employers to measure their attitudes about
healthcare reform:
• 30% of employers will “definitely or probably” stop providing employer sponsored
insurance in the years following 2014
• Among employers with a “high awareness of reform, this proportion increases to
more than 50%”
• 45 to 50% of employers will “pursue some alternative to traditional” group health
coverage
37373737
Research and Consumer SurveysResearch and Consumer SurveysResearch and Consumer SurveysResearch and Consumer Surveys
• At least 30% of employers would gain economically from dropping
coverage even if they make employees 100% whole
• Contrary to what other employers assume, more than 85% of
employees would remain at their jobs even if their employer stopped
offering employer sponsored insurance
“Most employers, however will find value“Most employers, however will find value“Most employers, however will find value“Most employers, however will find value creating options between thecreating options between thecreating options between thecreating options between the
extremes of completely dropping coverage and making no changes toextremes of completely dropping coverage and making no changes toextremes of completely dropping coverage and making no changes toextremes of completely dropping coverage and making no changes to
the current offering”the current offering”the current offering”the current offering”
Source: McKinsey & Company
38383838
20. 6/27/2013
20
Key Concepts and Plan Design StrategiesKey Concepts and Plan Design StrategiesKey Concepts and Plan Design StrategiesKey Concepts and Plan Design Strategies
39393939
Defined ContributionDefined ContributionDefined ContributionDefined Contribution
Employer provides fixed dollarEmployer provides fixed dollarEmployer provides fixed dollarEmployer provides fixed dollar amountamountamountamount and theand theand theand the
employee canemployee canemployee canemployee can choosechoosechoosechoose how to allocate it amonghow to allocate it amonghow to allocate it amonghow to allocate it among aaaa
variety of benefit options.variety of benefit options.variety of benefit options.variety of benefit options.
40404040
21. 6/27/2013
21
Defined Contribution &Defined Contribution &Defined Contribution &Defined Contribution & PrivatePrivatePrivatePrivate ExchangesExchangesExchangesExchanges
A benefits exchange is an online store where employees purchase
benefit to suit their individual and family needs.
41414141
What is a private exchange?What is a private exchange?What is a private exchange?What is a private exchange?
A benefits model that:
• Allows employees to select health
plans and other benefits from a
menu of products and services
• Employees shop for the products
that best fit them personally using
defined contribution dollars from
their employer, and their own money
if they choose
Health Reimbursement Arrangements (HRAs)Health Reimbursement Arrangements (HRAs)Health Reimbursement Arrangements (HRAs)Health Reimbursement Arrangements (HRAs)42424242
What is an HRA?What is an HRA?What is an HRA?What is an HRA?
• Created under Section 105 of the IRS Code and further
clarified by the IRS in 2002
• HRAs are an employer funded plan to reimburse
employees for medical expenses including individual
and family premiums
• HRAs are notional arrangements; no funds are
expensed until reimbursements are paid
• HRAs are tax deductible for the employer and tax free
to the employee
• HRAs can be restricted for the purchase of individual
and family health and other specified benefit plans
and medical expenses
22. 6/27/2013
22
Healthcare Reform &Healthcare Reform &Healthcare Reform &Healthcare Reform & Defined Contribution HRADefined Contribution HRADefined Contribution HRADefined Contribution HRA43434343
• Medical Underwriting
• No Federal Subsidies for
Individual Policies
• No Standardized System
for Comparing Plans
• Employer Driven
• No Medical Underwriting
• Federal Subsidies for
Individual Policies
• Easy comparison of plans
• Individual/Family DrivenVs.Vs.Vs.Vs.
AfterAfterAfterAfter 2014201420142014BeforeBeforeBeforeBefore 2014201420142014
Advantages to HRAsAdvantages to HRAsAdvantages to HRAsAdvantages to HRAs & Defined& Defined& Defined& Defined ContributionContributionContributionContribution44444444
• Control & predict costs
• No min. contribution or
participation
• Establish own rules
• No admin. hassle
• Allows you to focus on your
business
• Portable & permanent
• Total choice & flexibility
• Up to 29% less cost
• Allows for premium &
cost sharing subsidies
• Better educated consumers
EmployeeEmployeeEmployeeEmployeeEmployerEmployerEmployerEmployer
23. 6/27/2013
23
Pay or Play Spectrum of StrategiesPay or Play Spectrum of StrategiesPay or Play Spectrum of StrategiesPay or Play Spectrum of Strategies45454545
Continue as plan
sponsor for all
employees
(plan provides
minimum value is
affordable)
Restructure
contributions
to qualify
lower paid
employees and
their dependents
for federal
subsidies in
the Exchange
Limit eligibility to plan
and direct ineligibles
to the Exchange
Exclude classes
of full time
employees
Reduce weekly hours
to 29 or less
Discontinue plan
and provide tax free
defined contribution
for employees to
purchase individual
plans in the
Exchange
Discontinue plan
with no employee
contributions
Play and RedirectPlay and RedirectPlay and RedirectPlay and Redirect
• Calculate potential penalties
• Establish defined contribution plan and HRA
• Restructure contributions so that employee contributions are
greater than 9.5% of income for employees earning less than
400% FPL
• Redirect eligible employees to receive cost sharing and premium
subsidies through the Exchange
• Allow non eligible employees to continue group health insurance
or receive tax free defined contribution allowance to purchase
policies through the Exchange
• Provide eligible employees with a tax free defined contribution
HRA allowance to purchase policies through the Exchange
46464646
24. 6/27/2013
24
PayPayPayPay and Redeploy Strategiesand Redeploy Strategiesand Redeploy Strategiesand Redeploy Strategies
• Employer discontinues group coverage and completely subsidizes employee participation
in the Exchange (make employees whole)
• Employer discontinues group coverage and keep employee contributions in the exchange at
the same level of what continued group coverage would have cost (employer cost neutral
Defined Contribution HRA)
• Employer discontinues group coverage and provides contributions for individual exchange
at a level to achieve a savings target i.e. 20% (employer cost savings defined contribution
HRA)
• Employer discontinues coverage and eliminates entire cost of coverage by not subsidizing
any employee exchange participation and pays penalties (pay and exit )
By implementing an HRA, employers avoid using pay increases and paying increased payroll
taxes to compensate employees. Employees still maintain tax free benefits and avoid paying
increased income taxes.
47474747
ACAACAACAACA ComplianceComplianceComplianceCompliance ChecklistChecklistChecklistChecklist
2013:2013:2013:2013:
Summary of Benefits Coverage (SBC)
Include in Open Enrollment Packets
Include in New Hire Packets
W 2 Reporting Requirements (over 250 ees)
Employee Notice of Exchange Distributed by 10/1
Include in New Hire Packets
2014:2014:2014:2014:
Maximum Waiting Period of 60 days in CA
Automatic Enrollment (200 or more ees)
Pending:Pending:Pending:Pending:
Eligibility and Benefits Non Discrimination Testing
48484848
25. 6/27/2013
25
What Are You Doing with Your Plan?What Are You Doing with Your Plan?What Are You Doing with Your Plan?What Are You Doing with Your Plan?
• 90% of employers have moved beyond a “wait and see”
approach
• Only 10% of companies are still in the “wait and see” mode
• More than 50% of companies are developing tactics to deal
with the implications of health reform
• About one third of companies have modeled the financial
impact of reform on their organization
49494949
Which category do you fall into today?Which category do you fall into today?Which category do you fall into today?Which category do you fall into today?
Source: International Foundation of Employee Benefit Plans Survey Results: “2013 Employer
Sponsored Health Care: ACA’s Impact”
Action StepsAction StepsAction StepsAction Steps
Talk to other companies in your industry. What are they doing?
Take advantage of our free whitepapers, reports, tools and resources
Register for our next monthly webinar: “Beyond the Basics: Advanced
Healthcare Reform Strategies” on Thursday, July 18
Evaluate your broker: How well informed are you on the ACA? What
strategies have been discussed and developed specifically for your company?
Take advantage of your complimentary one hour, no obligation consultation
and we’ll develop specific strategies for your company (or to discuss any
topic you desire)
Expect my call tomorrow to answer any questions you might have
50505050
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Employer Tools and ResourcesEmployer Tools and ResourcesEmployer Tools and ResourcesEmployer Tools and Resources
Free White Papers and EBooksFree White Papers and EBooksFree White Papers and EBooksFree White Papers and EBooks
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Thank you !
