Preparing for health reform in 2013 and 2014UnitedHealthCare April 24, 2013
UnitedHealthcare recognizes that our American health system requires fundamental change to provide affordable, quality care. Health reform is a start but more is needed to address health care costs that are rising continually and a system where care is too variable. Innovative, value-oriented and outcome-focused approaches can help make the system work better for everyone.
At UnitedHealthcare, our goal is helping people live healthier lives.TM Through the use of best practices, UnitedHealthcare is working to build a better, more affordable health care system. We help make this happen by:
- Providing innovative and affordable choices in the health plans we offer
- Modernizing delivery of health care by development of tools and programs to make health care easier to understand and navigate
- Focusing on quality of service and simplicity of administration
- Informing and engaging your employees regarding their health to help them make healthier choices
The Affordable Care Act (ACA) brings significant changes to how Americans access and pay for health care. And while change is good, it can be challenging. We want to help you understand health reform and let you know that you are not
in this alone. We’re with you every step of the way. We are taking steps to ensure that UnitedHealthcare’s plan designs conform to the ACA’s mandates.
Changes in federal law are just one way to move toward a more modern health care delivery system. UnitedHealthcare is at the forefront of improving access to quality care, containing costs, using technology to increase transparency and
changing the way the system pays for care. We understand that when physicians, insurance companies, employers, consumers and government bring their best ideas to the table, we can help improve access to quality and affordable care.
The Big Picture
The ACA is rolling out in phases that began in 2010 and extend through 2019. Generally, the provisions fall into one of these areas:
- Standards for minimum health benefit plan offerings
- State-based Health Benefit Exchanges (Exchanges)
- Mandates for employers and individuals to provide or purchase health care coverage
- Premium credit or cost-sharing subsidies to qualified individuals to purchase coverage Taxes and fees
- Requirements that insurance companies spend a certain percentage of premium dollars on patient care
- Certain preventive care services covered without cost-share
- Insurance market reforms
- Expanded appeal rights for consumers
- Expanded Medicaid eligibility
- Changes to Medicare reimbursement
Keeping Your Grandfathered Plan
For employers who decided to “grandfather” their health benefit plan, some of the health reform changes are not required. Grandfathering a plan means that you decided to keep the plan that you had in effect on March 23, 2010, and made no or only minimal changes as permitted by the grandfather rules. However, there are a number of changes that apply to all plans whether or not they are a grandfathered plan.
As we approach 2014, grandfathered plans will not be required to implement a number of health reform law provisions, including:
- Rating restrictions such as adjusted community rating (small group plans only)
- Capping deductibles and/or implementation of the ACA’s out-of-pocket limits
- Providing essential health benefits (small group plans only)
- Providing coverage for clinical trials
In general, plan changes that can cause loss of grandfathered status include eliminating certain benefits, increasing coinsurance, increasing fixed-dollar cost-sharing (copayments, deductibles and out-of-pocket limits) beyond allowed amounts, and the plan sponsor’s decrease in its contributions toward the cost of coverage by more than 5 percent below the contribution rate on March 23, 2010.
So, if you have chosen to maintain grandfathered status, you will need to satisfy the notice and recordkeeping obligations that are required to maintain grandfathered status.
Five Things Employers Need to Know
As regulations, mandates and laws become effective over the next months and years, it’s important to know where to begin and what to focus on as you prepare your business and employees. Depending on your group size, some of these changes may involve changing your processes as well as updating plan documents and materials to comply with the new regulations. Read more below and on Page 6 in “On the Horizon for 2013.” Here are five things employers need to know:
- 1. A number of taxes and fees related to the health reform law will affect employers. Several health reform fees will impact premiums and rates. Employers need to know who is responsible for submitting each fee and the effective dates.
- 2. Employers filing 250 or more W-2 forms will be required to report the cost of employees’ health benefit coverage on the employees’ 2012 W-2 forms that are distributed in January 2013. The W-2 reporting requirement is informational only for the individual and does not mean that they will be taxed on these dollars.
- 3. Small groups can leverage tax credits. The Small Business Health Care Tax Credit is designed to encourage small businesses and small, tax-exempt organizations to offer health insurance coverage for their employees. UnitedHealthcare has developed a modeling tool (available at uhc.com/reform) to assist employers and brokers in determining eligibility for the credit and estimating the potential credit amount. In 2014, the tax credit is increased and available only to those employers who purchase insurance through a Small Business Health Options Program (SHOP) Exchange. You should seek advice from an accountant and attorney to determine how the credit may affect your specific situation.
- 4. Exchanges could affect how you offer coverage to your employees in the future. Although Exchanges are not in place until 2014, you must provide all employees with information about Exchanges (also called Health Benefit Exchanges), including employee eligibility to participate in an Exchange and available health insurance subsidies if the coverage you provide to employees is considered unaffordable by the ACA’s guidelines.
- 5. There will be coverage changes based on benefit expansion or coverage limits. Small groups will be required to implement changes within the plans they offer, including: – Expanding coverage to their employees to include Essential Health Benefits (EHB) and Minimum Essential Coverage (MEC). This change affects employers with 50-plus average total number of employees (ATNE). – Ensuring that out-of-pocket limits do not exceed the limit as outlined by health savings accounts (HSAs). This change affects large groups as well.
The categorization of a benefit as essential or nonessential does not indicate that the benefit will or will not be covered under your plan. All services (essential or nonessential) must meet all other requirements for coverage, including any cost-effective requirements and that the service or device must not be unproven, experimental or investigational.[/box]
Here are key health reform changes that went into effect on or before December 31, 2012:
- Accountable Care Organization (ACO) requirements
- Appeals provision*
- Dependent coverage up to age 26
- Limitation on Flexible Spending Account (FSA), Health Reimbursement Account (HRA) and Health Savings Account (HSA) coverage for over-the-counter medications
- Medical Loss Ratio (MLR) rebates
- Patient-Centered Outcomes Research Institute (PCORI) Fee
- Patient Protections*
- Preexisting condition protections for persons under age 19
- Preventive services as well as an expanded list of women’s preventive services with no cost-sharing*
- Quality bonus began for Medical Advantage plans
- Removal of lifetime and per-beneficiary annual restricted dollar limits for EHB
- Summary of Benefits and Coverage (SBC), the Uniform Glossary and
- 60-day advance notice of material modifications
*Not required of grandfathered plans
On the Horizon for 2013
Flexible Spending Account (FSA) Limits
Starting in 2013, there is a new maximum of $2,500 that can be set aside in a health FSA. In subsequent plan years, this will change based on inflation. This change is in addition to no longer allowing health FSAs to be used for over-the-counter medications that became effective in 2011.
Exchanges – Online Insurance Marketplace
Exchanges are intended to help individuals and small groups shop for, select and enroll in highquality, affordable private health plans that fit their needs at competitive prices.
The ACA requires Exchanges to be established in each state by Jan. 1, 2014. If a state does not establish an Exchange, the federal government will step in and operate the Exchange. Between 2014 through 2016, only individuals and employers in the small group market are eligible to participate in an Exchange. In 2017, states may permit employers in the large group market to participate. Exchanges will open for business beginning Oct. 1, 2013, offering coverage beginning Jan. 1, 2014. Exchanges may be operated by the state or federal government or as a partnership between a state and the federal government. In 2014, small groups will be defined as businesses with up to 100 employees, although until 2016 a state may choose to limit the definition to businesses of up to 50 employees. The definition for large groups will remain as businesses with more than 100 employees.
In late summer or fall (future guidance is expected on complying with this notice requirement), employers must provide written notice to current employees and going forward, new employees, to inform them of the Exchanges and the circumstances under which an employee may be eligible for health insurance subsidies.
Employees meeting certain requirements who cannot afford the coverage provided by their employer may purchase a plan in the Exchange.
Employers with at least 50 full-time employees who decide not to offer a health benefit plan to their employees, and instead leverage the Exchange, are subject to penalties referred to as the employer mandate. Read more on Page 8 in “What’s Coming in 2014.”
Private exchanges are being established by a variety of different entities such as consulting firms and cooperatives. Private exchanges are available to all business segments and fully insured or self-funded groups of all sizes. Because private exchanges are operated by private entities, subsidies are not available to those purchasing health care insurance through a private exchange.
Taxes and Fees
To fund several of the changes mandated by the health reform law, new fees will apply to health insurance issuers and self-funded plan sponsors. Based on the government rule and industry analysis for fully insured customers, in 2014 the cumulative impact of the health reform fees shows an increase in the premium by about 3.8 percent. For self-funded plan sponsors, it is about $5 to $6 per member per month.
- The Patient-Centered Outcomes Research Institute (PCORI) Fee applies to health insurance issuers and employers sponsoring self-funded group health plans. The temporary fee helps to fund research on the comparative effectiveness of medical treatments. Beginning with plan years ending on or after Oct. 1, 2012, the fee is $1 per covered life for the first year, $2 per covered life for the second year, and indexed to medical inflation in subsequent years. The fee began in 2012 and ends in 2019. The PCORI fee is due by July 31 of the calendar year immediately following the last day of the plan year. So, the 2012 fee must be paid by July 31, 2013, regardless of renewal date. – In the case of fully insured coverage, UnitedHealthcare is responsible for filing Form 720 and paying the required PCORI fee. The fee is rolled into the premium rates and is not called out separately on the invoice. – Self-funded customers, as the plan sponsor, must file federal excise Form 720, and pay the fee directly to the IRS.
- The Excise Tax, also known as the Cadillac tax, begins in 2018, and imposes a 40 percent excise tax on the value ofhealth insurance benefits exceeding a certain threshold. The thresholds are $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation). The thresholds increase for individuals in high-risk professions and for employers who have a disproportionately older population.
- The Pharmaceutical Manufacturer’s Fee is an annual fee that began in 2011 and is imposed on any manufacturer or importer of branded prescription drugs with sales of more than $5 million.
- The following three fees under the ACA will be progressively incorporated into fully insured plan premiums and not called out separately on the invoice beginning Feb. 1, 2013, as renewals or new business cases begin and state regulatoryapprovals are received. Because groups with a February 2013 effective date will have one month of coverage subject to taxes and fees (January 2014), the fee for this month is included in the 2013 rates. Likewise, groups with a March 1 effective date will have two months of impact; groups with an April 1 effective date will have three months of impact; etc. The fees are prorated and spread over 12 months. – The Insurer Fee, also called the health insurance industry tax or premium tax, is an annual, permanent fee on health insurance issuers beginning in 2014. The Insurer Fee applies only to health insurance issuers, such as UnitedHealthcare. Therefore, it affects fully insured business only. The fee will fund premium tax subsidies for low-income individuals and families who purchase health insurance through an Exchange. The amount of the Insurer Fee is determined by the market share of the health insurance issuer. It is based on its net written health insurance premiums in the previous year, with certain exclusions. Although we have not received final federal guidance on the Insurer Fee, based on the government rule and industry analysis, the impact of the fee during the first year is about 2.3 percent of the premium. – The Transitional Reinsurance Fee is designed to stabilize non-grandfathered individual market plans (in and out of the Exchange). It is assessed on a per capita basis for both fully insured and self-funded members and applies to group and individual business. The Reinsurance Program will exist for the first three years of the Exchanges’ operation (2014-2016). The impact of the Transitional Reinsurance Fee, based on the government rule and industry analysis, is about $5 to $6 per member per month for the first year. – A Risk Adjustment Fee of about $1 per member per year is assessed on issuers of risk-adjusted plans in the nongrandfathered individual and small group markets, whether in or out of the Exchanges. The permanent fee helps fund the administrative costs of running the Risk Adjustment Program. The program is intended to protect health insurance issuers of risk-adjusted plans, such as UnitedHealthcare, against adverse selection by redistributing premiums from plans with low-risk populations to plans with high-risk populations. The Risk Adjustment Fee begins in 2014.
What’s Coming in 2014
Employer Mandate, Requirements and Penalties
Beginning in 2014, employers with 50-plus full-time employees and full-time equivalents may be subject to a penalty if they do not offer affordable Minimum Essential Coverage (MEC). The penalty is calculated as follows:
- Employers Not Offering Coverage: If an employer does not offer MEC and one or more full-time employees receive a premium credit or cost-sharing subsidy through the Exchange, the penalty is $2,000 per year per full-time worker. When calculating the penalty, the first 30 full-time workers are subtracted from the payment calculation.
- Employers Offering Unaffordable Coverage: If an employer offers MEC but the employee contribution exceeds 9.5 percent of household income, and one or more full-time employees receive a premium credit or cost-sharing subsidy through the Exchange, the penalty is $3,000 per employee who receives a premium credit or cost-sharing subsidy.
In 2014, most individuals who can afford coverage will be required to purchase health insurance or pay a penalty. The penalty for 2014 will be $95 or 1 percent of the individual’s income, whichever is greater and will rise for 2015 and 2016. Individuals who earn up to 400 percent of the federal poverty level may be eligible for federal subsidies to help them purchase insurance from the Exchange.
Adjusted Community Rating
Adjusted community rating (ACR) rules will apply to non-grandfathered individual and small group insurance markets effective for plan years (policy years in the individual market) beginning on or after Jan. 1, 2014. Under the ACA provision, the use of actual or expected health status or claims experience to set rates for premiums is prohibited. Other rating factors such as age, geographic area and tobacco use may be used to vary premiums, within certain limits. The only groups not affected by the rating changes are self-funded groups and grandfathered plans along with large fully insured groups in most states.
Removal of Preexisting Conditions
For plan/policy years beginning on or after January 2014, the health reform law will remove any restrictions on preexisting conditions for individuals of all ages. Therefore, coverage may not be denied for preexisting conditions nor will individuals with preexisting conditions be charged more. This is an update to the provision from 2010 that did not allow exclusions for children under the age of 19 with a preexisting condition. This applies to grandfathered and non-grandfathered plans; however, grandfathered individual health plans are exempt from this requirement.
Questions employers may want to discuss with their tax adviser or legal counsel with the employer mandate in mind:
- 1. How does our product portfolio measure up to the minimum value requirements that will become effective in 2014?
- 2. Do we offer affordable health care according to the definition in the employer mandate?
- 3. How is our prescription drug coverage?
- 4. Should we continue to offer coverage but change what we offer to suit the ACA’s guidelines?
- 5. Does it make more sense to pay the penalty of $2,000 per full-time employee per year minus the first 30 full-time employees than to offer employer-sponsored health coverage?
We Can Help
It’s important to help your employees understand the health reform changes that affect them now. Take advantage of UnitedHealthcare’s online tools to communicate changes or create programs for your employees: Health Care Lane,SM Healthy Mind Healthy Body® e-newsletter, member portals, videos from the award-winning “Health Care Reform Demystified” video series and the interactive health and wellness communications plan builder.
Talk with your broker or account representative, who can address your specific concerns. We’re here to help you:
- Stay updated on ongoing policy changes through our e-newsletters and special websites dedicated to health reform news
- Find the most affordable health benefit plans
- Talk about health reform with your employees
- Refer to the United for Reform Resource Center for updates and more detailed information at uhc.com/reform.
The content provided is for informational purposes only and does not constitute medical advice. Decisions about medical care should be made by the doctor and patient. Always refer to the plan documents for specific benefit coverage and limitations or call the toll-free member phone number on the ID card.
This communication is not intended, nor should it be construed, as legal or tax advice. Please contact a competent legal or tax professional for legal advice, tax treatment and restrictions.
Federal and state laws and regulations are subject to change.
Insurance coverage provided by or through UnitedHealthcare Insurance Company or its affiliates. Administrative services provided by United HealthCare Services, Inc., or its affiliates.
As one of the largest participants in the health care system, we know firsthand the significant challenges our nation faces in improving access to quality care and managing costs for all Americans. We are actively working across the nation with states and the federal government to support broader access to health care coverage while lowering health care costs for our customers and helping to improve delivery of care.[/box]
UnitedHealthcare is committed to moving toward a modernized care delivery system, ensuring that changes in health care are made as effectively as possible for the health of the American people. Please refer to the United for Reform Resource Center for updates and more detailed information at uhc.com/reform.
©2013 United HealthCare Services, Inc.