Presentation to be used in conjunction with AAHSA's May 20, 2010, Health Reform Town Hall on Employer Provisions.

1. Health Care Reform Town Hall
Update
What Does It Mean For You As An Employer?
Thursday, May 20
2:00 – 3:00 p.m. ET
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2. Speakers
Barbara Gay, Director of Advocacy Information,
AAHSA
Dave Sanders, National Tax & Erisa Practice, Aon
Consulting
Thora Johnson, Partner, Employee Benefits and
Executive Compensation, Venable, LLP
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3. Structure of Today’s Program
Introduction: Barbara Gay
Key Employer Provisions Overview: Dave Sanders
Timeline Implementation: Thora Johnson
Questions and Closing: Barbara Gay
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4. Implementation of Health Reform
Implementation Challenges
 Complex and challenging law to implement
 2,400 pages plus 153 page reconciliation bill
 HHS (Health and Human Services) on point for
implementation
 Date of enactment was 3/23/10, with 6 month effective date
for some provisions (9/23/2010)
 Plans in existence on 3/23/10 are exempt from many rules,
if remain unchanged ("grandfathered" plan)
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5. Key Employer Issues – Market Reforms
Dependent Coverage Annual and Lifetime Maximums
 Coverage of adult children up to  No lifetime maximums permitted
age 26, regardless of marital or for overall benefits (annual/
student status lifetime limits on specific benefits
permitted)
– If not eligible for other group plan
(this condition expires 12/31/13) – Effective 6 months after
– Applies even if the child is not a enactment (1/1/11 for CY plans)
tax dependent  Complete elimination of annual
 Effective 6 months after limits beginning January 1, 2014
enactment (1/1/11 for CY plans)  Restrictions on annual limits prior
to 2014 TBD by regulation
– Effective 6 months after
enactment (1/1/11 for CY plans)
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6. Key Employer Issues – Market Reforms
Pre-existing Conditions Exclusions Waiting Periods
 Not permitted for children under  Waiting periods greater than 90 days
age 19 are not permitted
– Effective 6 months after  Effective 1/1/2014
enactment (1/1/11 for CY plans)
 Not permitted for all plan enrollees
– Effective 1/1/2014
Preventive Benefits
 Must provide first dollar coverage for
evidence based preventative care
 Effective 6 months after enactment
(1/1/11 for CY plans)
 Grandfathered plans exempt
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7. Key Employer Issues – Impactful Provisions
Free Rider Provision Employee Voucher
 Applies to employees working 30+  Applies to employees working 30+
hours/week hours per week
 Employer pays $3,000 for each  Employers would convert health
EE with coverage <60% of coverage subsidy to cash for any
allowed costs or if EE pays >9.5% employees who would pay
of their household income for between 8% and 9.8% of their
health coverage household income for health
coverage and opts out of
 Employers not offering health employer sponsored coverage for
coverage pay $2,000 per EE coverage in an Exchange based
 First 30 employees not included in plan
calculation of assessment  Effective 1/1/2014
 Effective 1/1/2014
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8. Key Employer Issues
Auto Enrollment Health Accounts
 Applies to new hires  OTC drugs no longer
 Employees can opt-out reimbursable under FSA,
HRA or HSA, unless prescribed by
 Employer can choose plan for physician
auto enrollment
– Effective 1/1/2011
 Effective 1/1/11 or issuance of
regulations by DOL, if later  Penalty on withdrawal of HSA
funds for non-medical expenses
Employee Notification increased to 20%
 Employers must notify employees – Effective 1/1/2011
at time of hire of the availability of  Annual contributions to health
Exchanges and their potential FSAs limited to $2,500 annually
eligibility for a subsidy
– Effective 1/1/2013
 Effective 3/1/2013
– Indexed to CPI as of 1/1/2014
 No requirement to offer same
coverage as Exchange plans
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9. Key Employer Issues
W-2 Reporting Uniform Explanation of Coverage
 Employers required to report the  Annual distribution of summary of
“value” of health benefits provided benefits and coverage
to each employee
– Not to exceed 4 pages
– Value defined as COBRA cost
 Uniform Explanation is in addition
 Effective 1/1/2011 to the SPD required by ERISA
 Effective 3/23/2012
Transparency Requirements
 Same HHS transparency Small Employer Tax Credit
requirements as Exchange based
plans  Employers with <25 employees
 Claims payment policies and data earning < $50,000 each are eligible
for tax credit
 Information on cost sharing and
payment for OON  Applies to employer contributions
 Information on rating policies toward cost of health insurance
 Effective 1/1/2014  Available for 2010-13 tax years
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10. Key Employer Issues
Wellness Incentives Appeals Process
 Employers permitted to increase  Employer plans must have HHS
employee reward for participation in approved external review process
wellness programs to 30% of total
plan cost  Effective 1/1/2011
– HHS may increase to 50%  Grandfathered plans exempt
 Effective 1/1/2014
 Grandfathered plans exempt Cost Sharing Limitations
Nondiscrimination  Out of pocket expense cannot
exceed HSA related coverage
 Insured plans are subject to same  Deductibles cannot exceed $2,000
nondiscrimination rules as self- single & $4,000 family as indexed
funded plans
 Effective 1/1/2011
 Effective 1/1/2014
 Grandfathered plans exempt  Grandfathered plans exempt
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11. Key Employer Issues
CLASS Act
 Voluntary federal LTC insurance program
 EEs can purchase via payroll deductions
 All auto enrolled EEs can opt-out
 Lifetime benefit payments
 5-year vesting period
 Eligible for benefit if at least 2 ADLs for 90 days
 Estimated revenue: $71 billion
 Effective 1/1/2011
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12. Other Key Provisions
2010  Adoption assistance plan dollar limit
increased from $12,170 to $13,170
 Nursing mothers entitled to unpaid breaks
and private lactation room
2014  Medicaid expansion to 133% of FPL
 Individual Mandate begins with penalties in
2015
 State-based Insurance Exchanges are
operational
2017  Employer plans of any size can participate
in Exchanges (state approval)
2018  High cost excise tax with revised thresholds
of $10,200/individual and $27,500/family
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13. Other Key Provisions
New Taxes on High Income Individuals
 Adjusted gross income >$200k for individuals
and >$250k for couples
 Additional Medicare payroll tax on wages of
0.9% (employee-share only)
 New surtax on investment income of 3.8%
 New taxes on higher income individuals
replaces lost revenue from delayed enactment
of high cost plan excise tax (estimated $210
billion)
 Effective 1/1/2013
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14. Impact on Post-Retirement Health Plans
 Taxation of Medicare Part D retiree drug subsidy
 Temporary reinsurance program for pre-Medicare retirees (at least age 55)
– Re-insurance for claims covering 80% of costs between $15,000-
$90,000 for pre-65 retirees
– Only funded up to $5 billion
 Cutbacks to Medicare FFS providers and Medicare Advantage plan funding
 Closure of Medicare Part D “donut hole”
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15. Timeline for Next Steps
Applies to
Effective Grandfathered
Date Action Items Plans?
Now If you have 25 or fewer FTEs, work with your

Finance Department to evaluate whether you are
eligible for the small employer tax credit and if so,
apply for credit
 If you offer retiree coverage and apply for the
Medicare Part D subsidy, work with your Finance
Department and auditors to evaluate the current
impact on your financial statements under the
FASB rules because the Medicare Part D subsidy
will effectively become taxable in 2013
6/23/2010  If you offer retiree coverage for retirees ages
55-65 who are not eligible for Medicare, apply
for the retiree reinsurance program, work with your
Finance Department and obtain claims data from
your insurance company/TPA and consider
appropriate plan design changes
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16. Applies to
Effective Grandfathered
Date Action Items Plans?
1/1/2011  Evaluate what plans you are going to offer, and
for determine whether any plans need to be
calendar
restructured
year plans
• Determine what grandfathered plans you have
• Determine whether you have any dental and
vision coverage that you want to convert to
“stand-alone” plans so that they are exempt from
the new rules on annual and lifetime limits
• Determine whether you have any fully-insured
plans that need to be restructured to comply with
the nondiscrimination coverage rules, such as
executive-only plans
• CLASS Act (voluntary long-term care program)
• New wellness programs (grants available for
small employers).
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17. Applies to
Effective Grandfathered
Date Action Items Plans?
1/1/2011 Amend medical plan documents
for 
calendar
year plans
• Remove lifetime maximum limits for essential
health benefits (and define what those are)
• Revise annual limits for essential health benefits
to reflect HHS standards
• Remove pre-existing condition limits for children
under age 19
• Limit right to rescind coverage only to fraud or
intentional misrepresentation of a material fact
• Expand dependent eligibility to cover adult
children up to age 26 (applicable to grandfathered
plans only if the dependents are not eligible for
coverage under another employment-based plan)
• Remove cost sharing, and implement first-dollar
coverage, for preventive care (deductibles,
copays, and co-insurance can't apply)
• Permit designation of any participating primary
care provider
• Remove restrictions on emergency care
• Update internal and external appeals procedures
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18. Applies to
Effective Grandfathered
Date Action Items
Plans?
1/1/2011 for Amend medical plan documents (cont’d)
calendar
year plans • Any additional design changes that may be
made to offset some of the anticipated
increases in costs due to limits on annual and
lifetime maximums, removal of pre-existing
conditions, etc.
 Amend medical FSA plan documents
• Eliminate reimbursement for OTC drugs
• If small employer, consider establishing
“Simple” cafeteria plan
 Provide notice of changes to participants (by
11/1/2010)
• Give at least 60 days’ advance notice of
changes (SMMs or new SPDs)
 Negotiate insurance costs or stop-loss
coverage, as applicable
• Removal of annual, lifetime, and pre-existing
condition limits, and cost sharing, the addition
of other restrictions, and expansion of
dependent eligibility could create more expense
to employers, in terms of premiums for fully-
insured plans and stop-loss
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19. Applies to
Effective Grandfathered
Date Action Items Plans?
1/1/2011 for  Update contracts with TPAs/claims
calendar administrators
year plans
• Compliance with new internal and external
claims processes
● Determine who will prepare HHS reporting on
medical loss ratios
● Determine who will handle transparency
disclosures to HHS (and public)
 Implement auto enrollment (depending on
effective date)
 Work with payroll to implement changes
● Payroll withholding to implement any “Simple”
employer cafeteria plan; voluntary CLASS Act
plan
● W-2 reporting of employer-provided health
coverage
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20. Applies to
Effective Date Grandfathered
Action Items Plans?
1/1/2011 for  Provide required notices to HHS
calendar year
plans
● Reporting to HHS on medical loss ratios
• Reporting to HHS (and public) to comply
with transparency provisions
 Apply for available grants for small
employer wellness program
1/1/2012 for  Amend medical plan documents
calendar year
plans
• Coordination with Medicare
 Provide new required (uniform) plan
summaries
 Update contracts with TPAs/claims
administrators
• Put systems in place to enable quality of
care reports to HHS
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21. Applies to
Effective Date Grandfathered
Action Items Plans?
1/1/2013 for  Amend Medical FSA plan documents
calendar year
plans
• Impose cap on contributions
 Work with payroll to implement
changes
• Medical FSA caps
• Increased Medicare taxes on earned
income
 Work with Finance
• Taxation of Medicare Part D subsidy
• Payment of per-participant fee
(premium tax)
 Provide required notices by 3/1/2013 to
employees regarding availability of
insurance exchanges
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22. Applies to
Effective Grandfathered
Date Action Items Plans?
1/1/2014 for  Evaluate what plans you are going to offer
calendar
year plans
• Small employers have access to state
insurance exchanges
• Large employers are subject to play or pay
penalties, opt-out penalties, and “free
choice” vouchers
• Permitted increase in employee reward to
30% for participation in wellness program
 Amend medical plan documents
• Grandfathered plans must expand
dependent eligibility for adult children, even
if eligible for other employer-provided
coverage
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23. Applies to
Effective Date Grandfathered
Action Items Plans?
1/1/2014 for Amend medical plan documents
calendar year (cont’d)
plans
• Remove waiting periods exceeding 90
days
• Remove all annual limits on essential
benefits
• Remove all pre-existing conditions (can
no longer impose on individuals age 19
and over)
Mandated cost-sharing limits
• Add coverage for clinical trials for cancer
or life threatening diseases
• Any additional design changes that may
be made to offset some of the
anticipated increases in costs due to
changes on annual limits, removal of
pre-existing conditions, and limits on
cost-sharing
 Negotiate insurance costs or stop-loss
coverage, as applicable
• Removal of annual and pre-existing
condition limits, cost sharing and other
restrictions, and expansion of dependent
eligibility could create more expense to
employers, in terms of premiums for
fully-insured plan and stop-loss
 Reporting to IRS on employer-provided
coverage 22

24. Applies to
Effective Date Grandfathered
Action Items Plans?
1/1/2014 for  Provide required notices regarding
calendar year employer-provided coverage and
plans wellness programs
1/1/2017 for  Evaluate what plans you are going to
calendar year offer
plans
• Large employers have access to state
insurance exchanges
1/1/2018 for  Evaluate what plans you are going to
calendar year offer
plans
• Work with Finance and with insurance
company or actuarial firm to determine if
you offer a "Cadillac" plan subject to
penalty tax, or whether you can
restructure your plans to minimize or
avoid penalty
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25. Questions?
Questions will be addressed by emailing:
townhall@aahsa.org.
If we cannot get to your question we will
respond via email or by providing
information on the AAHSA Health Reform
Hub located on aahsa.org:
http://www.aahsa.org/healthreform
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26. Resources
AAHSA Health Reform Information Hub
www.aahsa.org/healthreform
AON Consulting Microsite
www.aon.com/healthcarereform
Venable, LLP
www.venable.com
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27. Speaker Contact Information
Barbara Gay, Advocacy, AAHSA
(202) 508-9489
bgay@aahsa.org
Dave Sanders, National Tax & Erisa Practice, AON
Consulting
(410) 547-5989
dave.sanders@aon.com
Thora Johnson, Employee Benefits and Executive
Compensation, Venable, LLP
(410) 244-7747
tajohnson@venable.com
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