The Los Angeles Firemen’s Relief Association (LAFRA) will continue to see an impact to the health coverage we offer our members, as a result of the upcoming changes under the Affordable Care Act (ACA). Recognizing that there is much information (and confusion!) surrounding ACA, we want to provide you with a brief summary that covers several of the important provisions and health plan changes.
Overview of Fees
The ACA contains a number of fees and taxes that will affect the cost of health care during the next several years. The two fees that may impact the cost of our plans in the near future are the Patient Centered Outcomes Research Institute Fee and the Transitional Reinsurance Fee.
Patient-Centered Outcomes Research Institute Fee (PCORI)
Beginning with plan years that ended after Sept. 30, 2012, the ACA imposed a new fee of $1 per member for the first year, $2 per member for the second year and indexed to medical inflation thereafter. This federally-mandated fee will be used to establish an independent non-profit corporation dedicated to studying patient outcomes. The purported rationale is that with better data outcomes, doctors, patients, purchasers and policymakers can make evidence-based decisions about the best ways to diagnose, prevent and treat health conditions. The PCORI fee began in October 2012 and ends in 2019.
Transitional Reinsurance Fee
For years 2014 to 2016, the LAFRA plans will be required to pay the Transitional Reinsurance Fee. The stated purpose of this program is to stabilize individual-market premiums by supporting payments to individual-market issuers that cover high-cost individuals. The fee for 2014 is $63.00 per covered individual per year.
Both the PCORI and TRP fees will impact the cost of our Plan in 2014 and, consequently, Member premiums. There is some discussion that self-funded plans may be exempt from the TRP fee in 2015 and 2016 but, this has not been confirmed to date.
Individual Mandate
One of the most significant changes ACA enacts is the requirement that all individuals must have health insurance or pay an annual penalty (the “individual mandate”). As of now, the individual mandate will apply in 2014.
Health Insurance Exchanges
The Health Insurance Exchanges are mandated to take effect in 2014, with Enrollment beginning in October 2013. The Exchanges will create an online marketplace through which individuals and small businesses can purchase coverage. Each State can decide whether to implement its own exchange, run an exchange in partnership with the federal government, or use a federally sponsored exchange.
Three types of assistance are available to help certain lower-income individuals:
1. Medicaid expansion – states may choose to expand Medicaid to people with incomes of up to 138% of the Federal Poverty Level (FPL). Some states are choosing to forgo this federal funding.
2. Tax credits (“Premium Subsidies”) – People with incomes between 100% and 400% of the FPL (approximately $94,200 for a family of four) may be eligible for tax credits to help pay insurance premiums for coverage purchased through an Exchange.
3. Reduced cost sharing – people with incomes up to 250% of the FPL will have access to coverage with lower deductibles and co-payments.
Written Notice of Exchanges
The City of Los Angeles provided written notice to current active employees by Oct. 1, 2013 to inform them of their coverage options available through the new Exchanges (also called Health Insurance Marketplaces).
Please refer to the Written Notice of Exchange, provided by the City of Los Angeles.
Employer Mandate (“Pay or Play”) for Active Employees
Beginning in 2015, the City could be subject to a penalty if it does not offer medical coverage to full-time employees (working 30 or more hours per week) that is affordable and meets “minimum value requirements”, as defined in the ACA. If the City offered health plans do not meet these requirements, full-time employees may obtain health insurance through an Exchange and depending upon income level, possibly qualify for a premium
credit or subsidy. To satisfy the Mandate requirements, an employer-sponsored health plan must:
- Be affordable to the employee, whose premium should not exceed 9.5% of household income. The household income qualification is met if the employee ’s contribution for individual coverage does not exceed 9.5% of the employee ’s W-2 wages.
- Provide minimum value, which means the plan must cover at least 60%, on average across the plan, of an employee ’s health care costs in a given year. For example, if an employee incurs $1,000 in health care expenses, the plan must cover at least $600, with the employee responsible for the balance through a combination of deductibles, co-pays and coinsurance.
The Relief (LAFRA’s) benefit plans meet the mandate requirements of minimum essential coverage, affordability and minimum value. Therefore, individuals eligible for the LAFRA benefits plans will not be eligible for premium subsidies through the Exchanges.
If you elect into the Exchange, the City is not required to provide you with a contribution toward the cost of coverage you obtain through the Exchange.
Other ACA Changes
W-2 Reporting
ACA requires that the total premium of group health coverage appear on your W-2 form, providing you with information on the cost of your health benefit plans. The requirement is informational only and coverage is not subject to income tax.
The City will continue to report the total value on employee W-2s.
Summary of Benefits and Coverage (SBC)
On or after Sept. 23, 2012, group health plans offering health insurance coverage were required to use standards in compiling and providing a Summary of Benefits and Coverage (SBC) that accurately describes the benefits and coverage under our plan. SBCs for group health plans, beginning on or after Jan. 1, 2014, will include a statement on whether the plan meets minimum essential coverage and minimum value.
A Summary of Benefits and Coverage (SBC), including the 2014 requirements, is available here on our website.
Out-of-Pocket Maximum Changes
Starting with the Plan Year beginning in 2014, all cost sharing, including flat-dollar co-payments, toward services that are defined as Essential Health Benefits must accumulate to a plan’s out-of-pocket maximum ($6,350 self-only/$12,700 family).
The Relief (LAFRA’s) current Out-of-Pocket maximums meet the federal required guidelines.
Prohibition of Pre-existing Condition Exclusions
Beginning in July of 2014, pre-existing condition exclusions must be removed for all members, not just those under age 19.
The Relief (LAFRA’s) plans do not contain pre-existing conditions exclusions.
This is a summary of the regulations under ACA. Please refer to the Department of Labor (www.dol.gov) or www.healthcare.gov for more detailed information.