Key Issues for Large Employer Health Plan Sponsors From Senate-Passed Bill (H.R. 3590) as Revised

Free Rider penalty (which is not deductible by employers)

• If no coverage offered, and at least one full-time employee (30+ hours per week, assessed on a monthly basis) receives a tax credit to buy insurance through the Exchange, penalty is $750* X total number of full-time employees*
• Applies to employers with over 50 full-time employees*, no exemption for seasonal workers
• If coverage offered to an individual with family income up to 400% of FPL but either the actuarial value is less than 60% or any employee’s required premium is greater than 9.8%* of income (thus entitling the employee to a tax credit), penalty is lesser of:

§        $750* X total number of full-time employees, or

§        $3,000 X number of employees receiving the tax credit 

Sec. 1513; MA Sec. 10106(f) (See also new Code Section 36B for 60% and 9.8% requirements)

Wyden free choice vouchers

• An employer that provides and contributes to health coverage for employees must provide free choice vouchers to each employee who is required to contribute between 8% and 9.8%* of the employee’s household income toward the cost of coverage, if such employee’s household income is <400% FPL and the employee does not enroll in a health plan sponsored by the employer
• 8% and 9.8% are to be indexed to the rate of premium growth
• Employees may use the vouchers to purchase coverage through the Exchange and employers will pay amounts directly to the Exchange
• If the cost of the Exchange coverage costs less than the voucher, the difference will be paid to the employee 
• The amount of the voucher must be equal to the amount the employer would have provided toward such employee’s coverage (individual vs. family based on the coverage the employee elects through the Exchange) with respect to the plan to which the employer pays the largest portion of the cost 
• The cost of the plan is to be determined under rules similar to COBRA, except that they will be adjusted for age and category of enrollment (e.g., employee-only, employee+1, family) in accordance with regulations to be established
• Amounts paid toward the cost of coverage under the Exchange are excluded from the employee’s income and the employer receives a tax deduction for the amount of the voucher
• No free rider penalty will be imposed with respect to employees who receive vouchers

Per participant fee on employer plan-sponsors for comparative effectiveness research

• $1 per participant for the first plan year ending after 9/30/2012 (2012 for calendar year plans); $2 per participant for the following year; multiply by “national health expenditures” through 2019 (fee sunsets after 2019)

The Secretary of Labor must study and report to Congress on whether the employees fees and assessments would result in a reduction in employee wages

• Determination is based on Bureau of Labor Statistics National Compensation Survey

Sec. 1201 (adds PHSA Sec. 2707(b)); see also Sec. 1302(c)(1)

Effective plan years beginning on or after Jan. 1, 2014, but grandfather applies

Deductibles may not exceed $2,000 for individual coverage or $4,000 for family coverage

May be increased by the maximum reimbursement available from a health FSA

Amounts are indexed to inflation of average health premiums

Sec. 1201 (adds PHSA Sec. 2707(b)); see also Sec. 1302(c)(2)

Effective plan years beginning on or after Jan. 1, 2014, but grandfather applies

Group health plan must implement an effective internal appeals process; provide notice to participants of available internal and external appeals processes and the availability of any applicable office of health insurance consumer assistance or ombudsman established under the bill to assist such enrollees with the appeals processes; and allow participants to review their files, present evidence and testimony as part of the appeals process, and to receive continued coverage pending the outcome of the appeals process

Self-funded group health plans must implement an external review process in accordance minimum standards to be created by the Secretary

Insured plans will have to satisfy external review requirements mandated by the state, which will be binding, or by the Secretary, but only if the state doesn’t have procedures

Requires that a plan enrollee be allowed to select their primary care provider, or pediatrician in the case of a child, from any available participating primary care provider

Precludes the need for prior authorization or increased cost-sharing for emergency services, whether provided by in-network or out-of-network providers

Plans are precluded from requiring authorization or referral to Ob-Gyn

Prohibits rescission of group health plan coverage without prior notice

Grandfather:

• Grandfather available for individuals enrolled in a plan on DOE, subsequently-enrolled family members, and new hires
• Applies to coverage mandates, but not free rider
• Unclear what would cause grandfather to end
• Collectively bargained plans are grandfathered until the date on which the last of the collective bargaining agreements relating to the grandfathered coverage in effect on DOE terminates

• Reimburses employers for 80% of claims between $15,000 - 90,000 (indexed for inflation)
• Ends on January 1, 2014

Excise tax on high-cost plans

• 40% nondeductible tax
• Applies to insurance company or administrator (or employer that makes HSA or MSA contributions); expected to be passed directly to employers
• The threshold is $8,500* for individual coverage, $23,000* for family coverage; thresholds for retirees over age 55 and individuals in high-risk professions are $9,850* for individual coverage, $26,000* for family coverage
• Annual threshold amounts and tax are calculated monthly
• Includes employer and employee contributions made on a pre-tax or after-tax basis
• Includes all health coverage (e.g., medical, dental*, vision*, FSA, HRA, HSA, on-site clinics; appears that wellness programs that qualify as ERISA health plans are included); accident, disability, long-term care, and after-tax indemnity or specified disease coverage are excluded
• Indexed to CPI-U + 1%*
• Applies to active and retired participants*; employer has the option to combine pre-65 and post-65 retirees groups when calculating “value”
• Employer must calculate value of coverage on an individual basis and report to insurance companies/Treasury, subject to mandatory failure-to-report penalties
• 3-year transition for the 17 highest-cost states, to be determined each year*

Tax on health insurance industry

• Annual fee imposed on companies that insure U.S. health risk, prorated by market share
• Fees are $2* billion in 2011 phased up to $10* billion in 2017
• May apply to reinsurance (disability, long-term care, accident, specified disease, and hospital indemnity are exempt)
• Fees associated with coverage for individuals who are U.S. citizens, U.S. residents, or located in the U.S. are all taken into account

Establishes an Independent Payment Advisory Board

Binding Medicare Recommendations:

• Board must make recommendations to Congress to reduce Medicare spending and improve quality
• If Medicare costs projected to be unsustainable (unless growth is below the targeted growth rate), and Congress does not pass alternative act that achieves same level of savings, recommendations automatically take effect
• Proposals do not have to consider the cost-shifting or other impact on employer-sponsored plans

Non-binding Private Sector Recommendations:

• The Board must make annual recommendations to the President, Congress, and private entities on actions they can take to improve quality and constrain the rate of cost growth in the private sector

Binding Recommendations Regarding Overall Health Spending:

• Beginning in 2020, the Board must make binding biennial recommendations to Congress if the growth in overall health spending exceeds growth in Medicare spending
• Such recommendations would focus on slowing overall health spending while maintaining or enhancing beneficiary access to quality care under Medicare

• States may allow employers with more than 100 employees to purchase coverage through the Exchanges beginning Jan. 1, 2017

• Penalty is the greater of $95 in 2014, $495* in 2015 and $750* in 2016, or up to 2%* of income by 2016, up to a cap of the national average bronze plan premium
• Penalties are 50% for children up to a cap of $2,250* for the entire family
• After 2016, index to CPI

Premium tax credits are available to individuals with family income up to 400% of FPL

• Employer must provide adequate notice and opportunity to opt out

• Employers are expected to automatically enroll employees and facilitate payroll deductions
• Employers may choose not to participate

• Currently only applies to non-corporate service providers

• Must report whether employees were offered coverage, length of waiting period, lowest cost option, actuarial value, etc.
• Secretary has the authority to review for accuracy, particularly the amount of the large employer’s share of the total allowed costs under the plan (presumably for purpose of determining whether the plan had an actuarial value of more or less than 60%) 

• Information about the state Exchanges
• If plan’s share of total allowed costs of benefits is less than 60%
• Availability of a tax credit
• Availability of free choice vouchers

• Claims payment policies and practices
• Periodic financial disclosures; data on enrollment, disenrollment, the number of claims that are denied, and rating practices
• Information on cost-sharing and payments with respect to any out-of-network coverage
• Information on enrollee and participant rights under the bill
• Other information required by the DOL/HHS

Information must be provided to HHS and the public

• The extent to which self-insured group health plans can offer less costly coverage and, if so, whether lower costs are due to more efficient plan administration and lower overhead or to the denial of claims and the offering very limited benefit packages
• Claim denial rates, plan benefit fluctuations (to evaluate the extent that plans scale back health benefits during economic downturns), and the impact of the limited recourse options on consumers
• Any potential conflict of interest as it relates to the health care needs of self-insured enrollees and self-insured employer’s financial contribution or profit margin, and the impact of such conflict on administration of the health plan

The study may require collection of information from employers

• GAO shall consider samples of data concerning denials of coverage and the reasons for such denials, and will include data concerning denials that are subsequently approved

The study may require collection of information from employers

• States will be eligible for grants to test alternatives to civil tort litigation that emphasize patient safety, disclosure of health care errors, and early resolution of disputes
• Patients will be able to opt-out of these alternatives at any time Alternatives will be evaluated to determine their effectiveness