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Innovative Solutions in the Era of Health Care Reform An Educational Workshop . San Luis Obispo Community College District Presented by: Kathey Scott, Service Consultant April 11, 2013. Legislative History. Name: Patient Protection and Affordable Care Act (PPACA)

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San luis obispo community college district presented by kathey scott service consultant

Innovative Solutions in the Era ofHealth Care ReformAn Educational Workshop

San Luis Obispo Community College District

Presented by:

Kathey Scott, Service Consultant

April 11, 2013


Legislative history

Legislative History

  • Name: Patient Protection and Affordable Care Act (PPACA)

  • Common Name: Affordable Care Act (ACA)

  • Enacted: March 23, 2010

  • Because of ACA, California enacted California PPACA to form the California Health Benefit Exchange:

    • California Senate Bill Number 900

    • California Assembly Bill Number 1602


Healthcare reform timeline 2010

Healthcare Reform Timeline – 2010

  • Grandfathered Plans Established Medical Loss Ratio

  • Early Retiree Reinsurance Program (ERRP)

  • Coverage for Adult Children

  • Insurance Coverage Limits

  • Rescission of Coverage

  • Pre-existing Conditions


Healthcare reform timeline 2010 cont

Healthcare Reform Timeline – 2010 (cont.)

  • Claims and Appeals Procedures

  • Emergency Services

  • Preventive Services

  • Access to Care


Healthcare reform timeline 2011

Healthcare Reform Timeline - 2011

  • Medical Loss Ratio Rebates

    • Large group insurers must spend at least 85 percent of premium dollars on claims and activities to improve health care quality.

    • Beginning Aug. 2012, health plans must provide rebates if their medical loss ratio does not meet the minimum standards for a given plan year.

  • Cafeteria Plan Safe Harbor

  • Over-the-Counter Medicines

  • Excise Tax


Healthcare reform timeline 2012

Healthcare Reform Timeline - 2012

  • IRS W-2 Requirement

  • Uniform Summary of Benefits

  • Notice of Material Change

  • Quality of Care/Cost Reporting

  • Comparative Clinical Effectiveness Research Fee


Healthcare reform timeline 2013

Healthcare Reform Timeline - 2013

  • Health Reimbursement Plans

  • Individual Income Tax

  • Payroll Tax

  • Notice of Exchanges, Subsidies


Principles of the aca

Principles of the ACA

  • We will review the four principles of the Affordable Care Act (ACA) and provide an overview of the California Exchange

    • The Individual Mandate

    • ACA definition of Full-Time Employee (AFTE)

    • The Employer Shared Responsibility

    • Federal Government Subsidies of AFTE’s?


Principles of the aca1

Principles of the ACA

  • Principle One: The Individual MandateEvery individual must have “Minimum Essential Coverage” (MEC) starting in 2014 or pay a tax penalty.

    • Questions for consideration:

      • What is “Minimum Essential Coverage” (MEC)?

      • Are there any exceptions to the Individual Mandate?

      • How is the tax calculated?

      • What is the amount of tax?

      • How will the government know if an individual has MEC?


Principles of the aca2

Principles of the ACA

  • Principle One: The Individual Mandate

    • What is Minimum Essential Coverage?

      • Government-Sponsored Programs such as Medicare, Medicaid, CHIP, TRICARE, VA Health Care and Peace Corps Health Care

      • Employer-Sponsored Plans such as government plans, church plans, grandfathered plans and large and small group health plans

      • Individual plans purchased in the individual market

      • Individuals residing outside of the U.S. are deemed to have MEC


Principles of the aca3

Principles of the ACA

  • Principle One: The Individual Mandate

    • How is the tax calculated?

      • The tax is based on either (i) the number of adults and children in a household who do not have Minimum Essential Coverage; or (ii) the Household Income of all members of the household

      • The tax is the greater of (i) a flat dollar amount multiplied by the number of household members; or (ii) a fixed percentage of Household Income above an amount called the Filing Threshold (i.e., the amount of income that requires you to file a tax return)


Principles of the aca4

Principles of the ACA

  • Principle One: The Individual Mandate

    • What is the amount of tax?

      • For 2014 through 2016, the tax is limited to:

        • 2014: the greater of (1) $95 per household adult ($47.50/child) up to $285, or (2) 1% of Household Income above the Filing Threshold

        • 2015: the greater of (1) $325 per household adult ($162.50/child) up to $975, or (2) 2% of Household Income above the Filing Threshold

        • 2016: the greater of (1) $695 per household adult ($347.50/child) up to $2,085, or (2) 2.5% of Household Income above the Filing Threshold


Principles of the aca5

Principles of the ACA

  • Principle One: The Individual Mandate

    • How will the government know that I have MEC?

      • Employers are required to report on IRS Form W-2 the aggregate cost of your health coverage. Moreover, for 2014, employers will be required to report to the IRS your name and the types of group health coverage that you have elected.


Principles of the aca6

Principles of the ACA

  • Principle Two: ACA Full-Time Employee (AFTE)An ACA Full-Time Employee (AFTE) is an employee who earns, on average, 30 “Hours of Service” in a week, or 130 “Hours of Service” in a month.

    • Questions for Consideration:

      • What does it mean to be an ACA FTE?

      • What does it mean to earn 30 “Hours of Service” “on average”?

      • A client defines full-time employees differently. Does that make a difference?

      • A client has salaried employees. How do they determine whether a salaried employee is an AFTE?


Principles of the aca7

Principles of the ACA

  • Principle Two: ACA Full-Time Employee (AFTE)

    • What does it mean to be an ACA FTE?

      • An employer may be subject to a tax penalty if it does not provide every AFTE with MEC (i.e. affordable group health coverage with a minimum value).

      • An AFTE is not the same as a regular full-time employee because:

        • Overtime rules do not change for AFTEs

        • Work rules do not change for AFTEs


Principles of the aca8

Principles of the ACA

  • Principle Two: ACA Full-Time Employee (AFTE)

    • A client defines full-time employees differently. Does that make a difference?

      • No. For purposes of providing MEC (i.e. affordable group health coverage with a minimum value), the full-time employee workforce must be viewed as those who earn, on average, 30 hours of service per week (130 hours per month).


Principles of the aca9

Principles of the ACA

  • Principle Two: ACA Full-Time Employee (AFTE)

    • “Hours of Service” is new. No longer “hours worked”

    • Use actual Hours of Service for salaried employees or daily/weekly equivalents (e.g., One Day = 8 hours) but must be representative of actual hours

    • For other possible definitions of FTE (e.g., education) use a reasonable good faith method. Example, adjunct faculty.

    • Definition is important because:

      • It identifies who should be covered

      • It is used to calculate the tax

    • Requires monthly tracking unless IRS Safe-Harbors are used


Principles of the aca10

Principles of the ACA

  • Principle Two: ACA Full-Time Employee (AFTE)

    • FTE is a misleading definition

    • FTE really means eligible for Affordable group health coverage that provides Minimum Value

    • ACA FTE does not impact:

      • Overtime

      • Cost of benefits as compared to a real FTE

      • Work rules

      • Other collective bargaining definitions

      • Other benefits which are not group health plans


Principles of the aca11

Principles of the ACA

  • Principle Two: ACA Full-Time Employee (AFTE)

    • FTE status is a month-to-month determination

    • A PTE who works overtime in a month could be an FTE for that month

    • Tax on employees is calculated on a monthly basis ($3,000/12 = $250)

    • IRS Look-Back Stability Safe Harbor

      • Look back for a prior period between three and 12 months

      • Identify FTEs for that Look-Back Period

      • Look-Back FTEs will be FTEs for a future period


Principles of the aca12

Principles of the ACA

  • Principle Three: Employer Shared ResponsibilityAn employer is responsible to provide Minimum Essential Coverage to its ACA Full-Time Employees (AFTE) starting in 2014 or pay a tax.

    • Questions for Consideration:

      • What does Minimum Essential Coverage mean for Employers?

      • Are any employers exempt from the requirement?

      • How is the tax calculated?


Principles of the aca13

Principles of the ACA

  • Principle Three: Employer Shared Responsibility

    • What does Minimum Essential Coverage mean for Employers?

      • An employer is required to provide group health coverage that is both “affordable” and has a “minimum value”. If the employer does not provide affordable coverage of a minimum value with respect to an AFTE, then it is not Minimum Essential Coverage for that AFTE

        • Group health coverage is “unaffordable” when it costs the AFTE more than 9.5% of Household Income for employer’s lowest cost single-only coverage

        • Group health coverage has a “minimum value” when the plan has an actuarial value of 60% or more


Principles of the aca14

Principles of the ACA

  • Principle Three: Employer Shared Responsibility

    • How is the tax calculated?

      • There are two methods of calculating the tax depending on whether the employer provides employees with group health coverage. If just one AFTE purchases health coverage on the Exchange and receives a Federal Subsidy, then:

        • Employer offers no health coverage: Annual penalty of $2,000 times the number of AFTEs

        • Employer offers health coverage: Annual penalty equal to the lesser of (i) $3,000 for each AFTE who purchases coverage on the Exchange and receives a Federal subsidy; or (ii) $2,000 for each AFTE in excess of 30 AFTEs regardless of whether they purchase coverage on the Exchange or receive a Federal subsidy


Principles of the aca15

Principles of the ACA

  • Principle Four: Government Subsidies to AFTEsAn AFTE whose employer does not provide Minimum Essential Coverage may purchase coverage on the Exchange and receive a subsidy from the Federal Government.

    • Questions for Consideration:

      • Is every AFTE eligible for a government subsidy?

      • What is the amount of the government subsidy?

      • How does the AFTE receive the government subsidy?


Principles of the aca16

Principles of the ACA

  • Principle Four: Government Subsidies

    • Is every AFTE eligible for a government subsidy?

      • No. In order to be eligible for a government subsidy:

        • The AFTE must have a Household Income of less than 4 times the Federal Poverty Level; and

        • With respect to the AFTE, the employer’s coverage is not MEC; and

        • The AFTE must purchase coverage on the Exchange


Exchange key issue 1

Exchange – Key Issue #1

  • Purchasing coverage on the Exchange may be attractive to some employees

    • Exchange coverage may provide an economic advantage to an employee:

      • Government subsidies toward the purchase of Exchange coverage

      • Cash-in-lieu – employer incentive to buy Exchange coverage

      • Less expensive than employer coverage

      • Get more for the money

    • Unlike employer coverage, each year, employees will be able to select (customize) a health plan from a larger number of health plans to meet their individual health needs.


Exchange key issue 2

Exchange – Key Issue #2

  • When employees purchase coverage on the Exchange, the purchase

    • Creates a potential tax penalty for the employer

    • Impacts the risk characteristics of the group (adverse selection)


What must districts prepare to do

What must Districts prepare to do?

  • Evaluate the potential for tax penalties based on current health benefits and workforce

  • What is the maximum potential tax penalty for 2014 using today’s workforce census and 2012 health benefits?

    • Identify employees eligible for Federal subsidies based on Household Income

    • Calculate the employer penalty tax – worst case


What must districts prepare to do1

What must Districts prepare to do?

  • Evaluate the adverse selection impact that the Exchange will have on your existing benefits programs

  • What is the impact of employees going to the Exchange rather than using employer coverage?

    • Younger, healthier employees who move to the Exchange may cause upward demographic and cost pressure on employer plans

    • Greater costs over time may result in Cadillac Tax liability in 2018


What must districts do

What must Districts do?

  • Evaluate the collective bargaining implications

  • Do collective bargaining agreements prevent planning for the Exchange. Can they be modified?

  • Are some employees better off, economically, purchasing Exchange coverage

  • Are active employees subsidizing retiree health coverage? Is the Exchange a better alternative for early retirees?


San luis obispo community college district presented by kathey scott service consultant

Responsibilities of Employer

To

Health Benefit Exchange


Responsibilities of employer

Responsibilities of Employer

  • Questions for consideration

    • What is an employer’s role with respect to the Exchange?

    • What will the Exchange expect from employers?

    • What is the Exchange’s role with respect to employers?


Responsibilities of employer1

Responsibilities of Employer

  • What is an employer’s role with respect to the Exchange?

    • Employers are required to:

      • Provide the Notice of Exchange to employees in Late Summer/Early Fall

    • The Affordable Care Act does not require employers to report to the Exchange for purposes of verifying information about employer-sponsored coverage, but information about employer-sponsored coverage must be submitted to the IRS which, in turn, could share information with the Exchange


Responsibilities of employer2

Responsibilities of Employer

  • What will the Exchange expect from employers?

    • In order to verify information about the employee and the employer’s health coverage, for 2014 and 2015 employers will be asked to:

      • Voluntarily submit employer information on Exchange forms or into Exchange data base

      • Assist employees who are applying to the Exchange with employer information and health coverage information

      • Recognize that the Exchange will use information based on other data sources available to the Exchange

    • In 2016, Exchange will be seeking real-time access to employer information from a data base yet to be determined


Responsibilities of employer3

Responsibilities of Employer

  • What is the Exchange’s role with respect to employers?

    • The Exchange must notify an employer about:

      • An employee’s eligibility for a premium tax credit

      • The identity of that employee

      • The employer’s liability to pay a tax penalty

      • Employer has the right to appeal this determination


Thanks for your participation

Innovative Solutions in the Era ofHealth Care Reform

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