Federal regulators have delayed a health

care reform law provision requiring all employers subject to the Fair Labor Standards Act to provide all employees with a written notice about health insurance Exchanges (known in our state as Covered California).

The new deadline for distributing these notices will be late summer or fall of 2013, which will coordinate with the open enrollment period for the

Exchange.

It's expected that regulators will provide model, generic language on their website for employers to download. The notice will include:

• A description of the state health insurance Exchange, including contact information for the Exchange;

• A statement that employees may qualify for a tax credit to help pay for Exchange coverage if the employer’s plan does not p

rovide minimum value (i

.e., if the plan’s share of benefit costs does not equal or exceed 60% of the slots costs of coverage); and

• A statement regarding the financial and tax consequences of purchasing

coverage through the Exchange (i.e., that the employee will forego the employer-paid portion of the premium (if any) and the tax exclusion for the employer-sponsored coverage).

Download the FAQs that have been prepared by the Departments of Labor, Health and Human Services (HHS), and the Treasury.
http://www.dol.gov/ebsa/faqs/faq-aca11.html

As soon the requirements and model notice language are released, we’ll let you know so that your groups have adequate time to distribute them to their employees.

The Employer Mandate
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Large employers with 50 or more full-time or full-time equivalent employees must offer full-time employees and their dependents (i.e., children up to age 26) coverage that is affordable and provides minimum value beginning in 2014 or face penalties if any full-time employee purchases coverage on an Exchange and receives a federal premium subsidy.

IRS issues proposed rules on Employer Mandate –

Large employers with 50 or more full-time or full-time equivalent employees must offer full-time employees and their dependents (i.e., children up to age 26) coverage that is affordable and provides minimum value beginning in 2014 or face penalties if any full-time employee purchases coverage on an Exchange and receives a federal premium subsidy.

On January 2, 2013, Treasury and the Internal Revenue Service (IRS) issued proposed regulations and questions and answers on Shared Responsibilities for Employers, commonly known as the “employer mandate” of the Patient Protection and Affordable Care Act (PPACA).
Comments are due by March 18, 2013 and a public hearing is scheduled for April 23, 2013. Although these regulations are not final, the guidance indicates that employers may use the proposed regulations in making coverage and plan design decisions for 2014.

The proposed regulations include the following changes and clarifications:

Transitional Relief for Non-1/1 Effective Date Plans
Although the law states that the “employer mandate” applies beginning January 1, 2014, the regulatory guidance includes the following exceptions for employers whose plan year does not begin on January 1:
• For full-time employees who were eligible for coverage (whether or not actually covered) on December 27, 2012, the employer will not pay a penalty if they are offered affordable, minimum value coverage on the first day of the 2014 plan year.
• If the plan (a) was offered to at least one-third of all employees (full-time and part-time) at the most recent open enrollment period prior to December 27, 2012 or (b) covered one-quarter of employees (full-time and part-time) as of December 27, 2012, the employer is not subject to the penalty for any full-time employees provided they are offered affordable, minimum value coverage on the first day of the 2014 plan year.
Employers cannot now change their plan year to take advantage of this transitional relief for non-calendar year plans.

Requirements for Offering Coverage to Full-Time Employees and Dependents
Full-time employees are employees who average 30 hours of service per week or 130 hours per month. Hours of service include hours worked as well as hours for which an employee is paid such as vacation, holidays and paid leaves of absence.
Employers will meet the requirement to offer coverage to “substantially all” full-time employees if they offer coverage to 95% of full-time employees and their dependents. No penalties will apply for any month in which an employer offers coverage to all but 5% of its full-time employees (or five full-time employees, if greater).
If an employer does not currently offer dependent coverage, no penalty is due for

the plan year beginning in 2014 if the employer takes steps to offer dependent coverage during the 2014 plan year. For plan years beginning in 2015 or later, employers must offer coverage

to full-time employees and their dependents to avoid penalties.
Dependents are defined as children up to age 26. Spouses are not included in the definition of dependents in this guidance, so employers are not required to offer coverage to spouses.

Determining if an Employer Has 50 or More Employees
Employers will use information about the number of employees they have in 2013 to determine whether they have 50 full-time employees and are a “large employer” subject to the employer mandate in 2014.

Employers can use any period of at least six consecutive months in 2013 to measure the number of full-time employees. For example, an employer could measure during the period from January 1, 2013 through June 30, 2013 and then use the rest of the year to establish a plan and enroll employees.
• Only employees working in the United States are counted in determining whether an employer has 50 full-time employees or full-time equivalents.
• Companies that have a common owner are combined for purposes of determining whether they are subject to the mandate. However, any penalties would be the responsibility of each individual company.
• If a business hires seasonal workers and the workforce exceeds 50 full-time employees for 120 days or less during a calendar year, the employer is not considered to have 50 full-time employees.
• Teachers and other employees of educational organizations who work full-time during the academic year are considered full-time employees and cannot be treated as seasonal.

Determining if Coverage is Affordable and Provides Minimum Value
Coverage is considered “affordable” if employee contributions for single coverage do not exceed 9.5% of the employee’s wages. The regulations provide three safe harbors that employers can use to determine if employee coverage is affordable:
• 9.5% of an employee’s W-2 wages for the year
• 9.5% of an employee’s monthly wages determined by multiplying the employee’s hourly rate by 130 hours per month
• 9.5% of the Federal Poverty Level for a single individual

This regulation did not include any additional guidance about how “minimum value” will be determined. We are still awaiting the Minimum Value Calculator and safe harbor checklists.

Penalties
If a full-time employee receives subsidized coverage through an Exchange, the employer will be notified and given an opportunity to respond before the IRS requires payment of the penalty.

Response from Anthem Blue Cross:
fast custom essay writing serviceThe rate increases in the small group market are not unique to Anthem Blue Cross Life and Health Insurance Company (“Anthem”), but rather represent an economic reality faced throughout the entire industry as healt

h care costs continue to escalate faster than our state’s economy as a whole. In an effort to offer the most affordable health care coverage possible, we have reduced our estimate of 2013 medical cost trend to its lowest levels in years and are raising premiums an annual average of just 6.5 percent. This increase is lower than what one of our non-profit competitors have filed for.
We are a heavily regulated industry, and our profit on this portion of this business was just 1.2 percent in 2012. Under the law, Anthem must spend the vast majority of what we charge in premiums to pay medical claims. In the unlikely event our estimates of medical costs are not accurate, refunds are given to our customers.

Fast Facts:
• Over 24 months, the average increase, including benefit changes, is approximately 13 percent.
• The medical loss ratio (percent of premiums spent on medical benefits) for this filing is forecast to be above the federally-mandated minimum of 80 percent.
• The profit on the portion of Anthem’s Small Group business regulated by the Department of Insurance in 2012

is projected to be just 1.2 percent. Compare this to pharmaceutical profit margins of at least 13 percent, or Medical Device & Equipment

Manufacturers which average approximately 16 percent.
• Anthem’s Small Group administrative costs are far below our competitors. For example, our administrative costs are roughly half that of our closest competitors based on their recent filings.
• Anthem’s rate change at 6.5 percent is at the low end for any major player in the small group market for rate changes going into effect in the first quarter of 2013 (among insurers with more than 40,000 members and according to the Department of Insurance Web site, accessed 12/31/2012). In fact, another large health plan filed for a 9.7 percent increase for approximately 250,000 members.
• For this filing, the ACA fees account for approximately 75 cents per person per month, or $9 per year.

Return on Equity vs. Profit:

Return on Equity is NOT the same as profit. Generally speaking, profit is defined as revenue minus expenditures. Return on equity is a measure of efficiency, but they are not the same or even similar. To use a football analogy, profit could be considered similar to the final score of the game. Return on equity could be considered how many passing yards a team had. They are both statistics relating to the game, but they are

not interchangeable.

Anthem’s Profit
• According to the California Health Care Foundation, Anthem had a profit of approximately 4 percent in 2010, the most recent report available.
• Our parent company’s profit margin was approximately 4.5 percent

Forbes Online Magazine – Pharma & Healthcare |12/18/2012 @ 1:32AM

Last week, Aetna, the third-largest private health insurer in the U.S., held its annual investor conference in New York, in which company executives laid out their detailed assessme

nt of the post-election environment for health insurance. Aetna’s comments, and those of its peers in similar settings, illustrate how Obamacare will dramatically drive up the cost of health insurance in the United States. “In some markets,” said Aetna CEO Mark Bertolini, increases in premiums could “go as high as 100 percent. And we’ve done all that math. We’ve shared it with all the regulators. We’ve shared it with all the people in Washington that need to see it. And I think it’s a big concern.”

Bertolini made his comments in response to a question from Scott Fidel, the managed-care analyst at Deutsche Bank. Fidel noted that Frank McCauley, Aetna’s executive vice president of commercial (non-government) business, had earlier noted that Aetna did not expect many small businesses to participate in the exchanges, because the cost of insurance on the exchanges would be quite high.

2014 non-group premiums to increase 20-50 percent on average

“Premium rate shock for 2014,” responded Bertolini, “absent subsidies and everything else, is going to be in the neighborhood of 20 percent to 50 percent. And we’re going to see some markets [and] in sub-segments in some markets go as high as 100 percent.”

As I’ve noted before, there are a number of ways in which Obamacare drives up the cost of insurance in the individual market—the market for people who buy insurance for themselves, instead of getting it through the government or their employer.

Most important of these are: (1) the “minimum actuarial value” requirement that forces insurers to provide more financially generous coverage with fewer co-pays and deductibles; (2) the “community rating” provision that forces younger beneficiaries to pay far more for insurance in order to partially subsidize older beneficiaries; (3) the “guaranteed issue” provision that forces insurers to take all comers, even if they are already sick; and (4) the “essential health benefits” mandate that forces insurers to cover health-care services that many customers wouldn’t otherwise want to pay for.

“Just one piece alone, more than half of the U.S. public [in the individual insurance market] is in a plan at 50 percent or lower actuarial benefit. If you go up to 60 percent, as required by law, you’ve got a huge bump already,” Bertolini noted. “And this is the reason why you’re seeing such pressure between the states and the federal government on exchanges. Whose exchange do you want pokies online to show that price increase on? And surely, the federal government doesn’t want to show that. So I think this is going to be a big debate. And as Frank mentioned earlier, we’re putting these things through into rate increases and we’re getting them through the regulators. So I think that is going to be the big story for 2014, as these rates start going to the market, probably the latter part of this year, 2013.”

Will Democrats water down Obamacare’s costly mandates? Unlikely

Bertolini expressed hope that the fiscal cliff negotiations in Washington would yield “some interesting ways to try and address that rate shock issue.” Good luck with that. Democrats have plenty of incentive to install Obamacare’s blizzard of mandates and regulations, and then try to blame greedy insurers for the resultant premium hikes, so as to increase the political viability of single-payer health care.

Congress could delay the rollout of the exchanges by a year or two, which would save some money within the ten-year budget window, but Democrats will not want to do that either, because it will make the law more vulnerable during the 2016 election. Remember that, under the projections of the Congressional Budget Office, 25 million Americans are to be enrolled in the exchanges by 2021.
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Without a delay, it’s quite possible that private insurers will choose not to participate in Obamacare’s exchanges in many parts of the country. Aetna said that it plans to participate in exchanges in “up to” 15 states in 2014, representing 65 to 70 percent of the exchange-eligible population, but that the company would “approach exchanges with caution” until it

is “confident they represent a rational and stable marketplace…After a transition period, if Aetna cannot earn its cost of capital on exchanges, we will exit market areas.”

The big concern for the insurers is whether or not the state and federal exchange bureaucracies will regulate the insurance markets in a competent manner. “What are the regulators going to allow for rates when you file them?” asked Bertolini. “How are the ‘three R’s’ [the risk adjustment, reinsurance, and risk corridor programs] actually going to work?”

Believe it or not, Aetna’s involvement in the exchanges is more aggressive than its peers. UnitedHealth Group stated that it would only get involved in a “few” states; Humana said that it would get involved in ten.

Obamacare’s exchanges may underpay doctors and hospitals

Bertolini also elaborated on the type of insurance that Aetna would provide on Obamacare’s exchanges. “It’s about having the right products at the right cost structure, [with] narrow networks, low-cost networks,” he said. That is to say, Aetna’s exchange products will aggressively steer patients to low-cost doctors and hospitals so as to keep premiums low. That’s, indeed, what insurers are rightly incentivized to do when individual consumers are shopping for their own insurance.

Within its exchange products, Aetna expects to reimburse hospitals and doctors at rates akin to government programs, rather than the much higher rates reserved for traditional commercial insurance. “We’re contracting…at a rate normally between Medicare and Medicaid for the exchange population,” said Frank McCauley.

McCauley’s counterparts at Humana don’t think that insurers will be able to get away with ultra-low Medicaid rates on the exchanges. “If you go down to Nashville and you ask [hospital chain] HCA about that, they’ll laugh you out of the room,” said Humana executive Bruce Perkins at Humana’s November analyst meeting. “This idea that it’s going to be Medicaid rates—that’s a joke.”

Obamacare’s exchanges need serious reforms in order to function

If exchange rates do end up in between Medicare and Medicaid, Americans who enroll in the exchanges will have the worst of both worlds: a costly insurance product that doesn’t grant them access to a wide range of doctors and hospitals, making it difficult to get access to needed care.

There’s plenty of evidence that Obamacare’s exchanges are set up for failure. The Obama administration will do itself a huge favor if it certifies Utah’s more market-oriented exchange as an alternative to the ACA exchanges. “I respectfully request that you instruct HHS to declare the Utah exchange model as the minimum federal standard,” wrote Utah Gov. Bob Herbert in a December 10 letter to the President. “I am confident that if you make this change, several other states will join Utah and request certification for ‘state-based exchanges’ based on our model.”

Ideology may blind the President to this more flexible approach. But if he wants his signature health law to succeed, it would behoove him to see if Utah’s health insurance clearinghouse could help him achieve it.

Employer clients filing 250 or more W-2 forms are required to report to employees the total cost of their employer-sponsored group

health plan coverage under the Patient Protection and Affordable Care Act. The W-2 reporting requirement begins with th

e 2012 W-2 forms furnished to employees in January 2013.
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At this time, employers filing fewer than 250 W-2 forms do not need to report cost of coverage on W-2 forms. This transition relief will continue until further guidance is issued.

Keep in mind that this requirement is informational only and does not mean that employer-sponsored coverage is subject to income tax.

Ultimately, it is the employer”s responsibility to accurately determine which employees should receive cost of coverage information. Your clients are encouraged to consult with their legal counsel or tax preparer for advice on what should be reported to meet the W-2 Reporting requirement.

Finding Cost of Coverage Data for Employees
Suggestions for your clients to find the data to calculate the cost of coverage include:

1. Review the 2012 bills from your carrier.
2. Talk to payroll vendor and request data for each employee.
3. Fully insured clients may log on to Employer eServices to view monthly invoices to find the premium costs per employee.
4. Self-funded clients should contact their COBRA vendor for a COBRA rate, if applicable.

What Not to Report
Health Insurance Portability and Accountability Act (HIPAA) “excepted benefits” plans (accident, disability income, supplemental liability, workers’ compensation insurance) are not subject to the W-2 reporting requirements.

Health flexible spending accounts (FSA) funded solely through employee salary reductions are not reportable. Employers are required to report the FSA value when it exceeds

the employee’s cafeteria plan election for all tax favored benefits. In addition, coverage under a health reimbursement account/arrangement (HRA) may be reported on the W-2 at the option of the employer.

W-2 Reporting Recap
The W-2 Reporting: IRS Recap of What to Report chart outlines what coverage should and should not be reported on the W-2 form.
For More Information visit the W-2 Reporting provision page on the IRS website.