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The information contained in this presentation has been collected from multiple documents and presentations. It is not intended to contain any legal advice. Please consult with your legal advisors for specific information that may apply to you and your company. AN. EDITORIAL. MOMENT.

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The information contained in this presentation has been collected from multiple documents and presentations. It is not intended to contain any legal advice. Please consult with your legal advisors for specific information that may apply to you and your company.






Insurance Companies

Who’s to Blame?





The law

The Law

The President signed the health care legislation into law on March 23, 2010.

The regulations defining the law are being written by HHS, DOL and IRS.

IRS & OSHA have monitoring responsibility.

CMS has responsibility for most of the implementation, including that of the Marketplace.

You can keep your insurance

You Can Keep Your Insurance

Grandfathered Plans

Grandfathered plan benefits of retaining status

Grandfathered PlanBenefits of Retaining Status

Exemption from rating restrictions based on age variation.

Ability to continue coverage based on class.

Exemption from implementing Essential Health Benefits (e.g. pediatric dental).

A grandfathered plan

A Grandfathered Plan

Increase Deductible up to 15%.

Increase Copays up to 15%.

Increase Coinsurance more than 15%.

Decrease employer contributions by more than 5%.

Grandfathered plan

Grandfathered Plan

Most plans have lost “Grandfather” status.

Those who have retained status must provide a statement to participant that it believes it is a “Grandfathered” plan.

Do you have your documents?

Dependents coverage

Dependents Coverage

Age 26

Age 26

Coverage for children must be available until the child reaches age 26.

Do you have proof of the notice to employees? (Penalty up to $100 per day).

Minimum loss ratio mlr 2011

Minimum Loss Ratio MLR (2011)

The MLR is 85% for large group plans and 80% for individual and small group plans (50 and below).

Carriers will have to issue a premium rebate to individuals for plans that fail to meet the minimum MLR requirements.   

Large groups

Large Groups

51 or More Full-Time Employees

Play or pay

Play or Pay

Employer responsibility

Employer Responsibility

Effective starting January 1, 2015.

Employer must count all full-time employees and part-time employees on a full-time equivalent basis in determining if they have 50 or more employees.

Play or pay penalties beginning in 2014

Does the employer have

at least 50 full-time employees?




Play or Pay Penalties Beginning in 2014

Does the employer offer coverage to all full-time employees?

Did at least one full-time employee receive a premium tax credit or cost-sharing subsidy through an Exchange?


$2,000 x number of full-time employees minus 30







Is the employee’s required premium contribution for single coverage for the employer’s lowest-cost plan 9.5% or less of the employee’s household income?


Do any employees purchase coverage in an exchange and receive a premium tax credit or cost-sharing subsidy?


Lesser of $3,000 x number of employees receiving premium tax credits, or $2,000 x number of employees minus 30







Does the employer-sponsored plan provide minimum value?



Calculating full time equivalent employees

Calculating Full-Time Equivalent Employees

Total number of full-time employees = 30.

Part-time employees = 40.

Total hours worked by each part-time employee in a calendar month = 20 hrs / week x 40 = 3,200 hrs.

3,200 / 120 = 27 Full-time-equivalent employees.

Total full-time and full-time-equivalent employees = 57.

Play or Pay penalties apply.

Affordable coverage example

Affordable Coverage Example

Employee hourly wage $9.50 per hour

$9.50 x 40 hours = $380.00

$380 x 9.5% = $36.10 per week

Employee cost of health insurance $156.43

Tracking time

Tracking Time

Start tracking part-time hours now.

Start tracking full-time hours now.

Learn about the safe harbor for seasonal employees.

Miscellaneous requirements

Miscellaneous Requirements

If employee is covered by spouse’s plan there is no penalty to employer unless 50+ and employer does not provide coverage or provides unaffordable coverage.

Employers are not required to cover spouses. Definition of a dependent does not include the spouse.

Small groups

Small Groups

1 to 50 Full-Time Employees

Ppaca metal plans

PPACA “Metal” Plans

Minimum value standards

Minimum Value Standards

Minimum value - actuarial value threshold of 60%.

Small group plans in the bronze level of coverage meet minimum value requirements.

Beginning in 2014, summaries of benefits and coverage must indicate whether the plan meets applicable minimum value requirements.

Minimum essential coverage

Minimum Essential Coverage

  • The type of coverage an individual needs to have to meet the individual responsibility requirement.

    • Individual market policies

    • Job-based coverage

    • Medicare, Medicaid, CHIP, TRICARE

  • The law does not specify the details of what this coverage has to be, other than it has to cover preventive care with no cost-sharing and can’t be dental-only or vision-only (limited benefit).

Minimum value calculator

Minimum Value Calculator

Essential health benefits

Essential Health Benefits

  • The 10 categories of benefits individual and small employer plans have to provide:

    • Outpatient care

    • Emergency room

    • Treatment in the hospital

    • Maternity

    • Mental health and substance use disorder services

    • Prescription drugs

    • Rehabilitative and habilitative services.

    • Lab tests

    • Preventive services

    • Pediatric dental and vision

Age rated small group

Age Rated Small Group

Censuses must provide every dependent’s date of birth and the quotes will be lined out with a rate for each belly button.  So a quote (and the eventual billing) might look like this on a 3-person group:

John Brown$328.95Employee

Joe Smith$358.23Employee/Spouse/Children

Jane Smith (wife)$429.29

Danny Smith (12)$158.77

Jennifer Smith (14)$158.77

Joey Smith (22)$253.97

Susie Smith (24)$260.09

Bobby Jones$598.98Employee/Spouse

Anna Jones (wife)$555.23

Health insurance marketplace

Health Insurance Marketplace

(The Exchange)

Community rating

Community Rating

  • Primary component of the law affected by

    • Age band limitations (7:1 goes to 3:1).

    • No health underwriting.

    • Cost-sharing limits (e.g. $2,000 ded).

    • Essential health benefits.

    • No pre-existing conditions.

Health insurance marketplace the exchange

Health Insurance MarketplaceThe Exchange

Smaller provider networks.

Smaller hospital network.

No out of network benefits on some plans.

Gatekeeper plans (no open access).

Health insurance marketplace the exchange1

Health Insurance MarketplaceThe Exchange

  • Federal subsidies (only available through the Exchange) are based on:

    • The premium cost of the second-lowest silver Exchange plan.

    • The household income of the applicant.

    • The number of people in the tax household

Federal subsidies

Federal Subsidies

2013 federal poverty level

2013 Federal Poverty Level

Individual mandate penalties

Individual Mandate Penalties

  • For individuals (whichever is greater)

    • 2014: $95 or 1% of income above tax filing threshold ($9,500 in 2011).

    • 2015: $325 or 2% of income above tax filing threshold.

    • 2016: $695 or 2.5% of income above tax filing threshold.

    • Note: Penalty for dependents under age 18 is one half of the individual amount.

  • For families (whichever is greater)

    • 2014: $285 or 1% of income above tax filing threshold.

    • 2015: $975 or 2% of income above tax filing threshold.

    • 2016: $2085 or 2.5% of income above tax filing threshold.

Community rating1

Community Rating

  • Real Life Examples

    • Family of three – 63 male, 59 female, 18 son

      • Current $2500 deductible plan $819.32

      • 2014 $2500 deductible plan $1,397.29

    • Family of four – 49 male, 50 female, 14 son, 12 daughter

      • Current $5000 deductible plan $423.93

      • 2014 $2500 deductible plan $965.51

Small business marketplace shop

Small Business Marketplace(SHOP)

  • For a small business to qualify to purchase coverage on a SHOP they must:

    • Be in a SHOP service area.

    • Have at least one common-law employee (not owners).

    • Have 50 or fewer total FTE employees.

    • Pay a consistent percentage or amount toward the premium (at least 50%).

    • Receive tax credit.

    • An employer can use a defined contribution to pay for an employee to purchase individual coverage only if that coverage is purchased through a SHOP plan.

Planning is essential

Planning is Essential

Increasing premiums 3 to 4

Increasing Premiums 3% to 4%



PCORI Tax-$2.00 per covered individual-Self Admin HRA, per each employee and each dependent.

Reinsurance Tax-$63.00 per year per each employee and each dependent. Funds large claims in the individual market.

HIT Tax- $8B divided by premiums collected in prior year 2014. $15B 2015, $18B 2016- Paid by insurers to help fund health care reform.

All are pass through taxes.

January 1 2013

January 1, 2013

Medicare Tax increase for high income earners an additional 0.9 to employees earning over $200,000 ($250,000 joint filers).

Miscellaneous requirements1

Miscellaneous Requirements

Government initiative

Government Initiative

DOL ran a contest for the best software to inform employees about labor laws.

Award winner announced on November 4.

$14M effort to educate employees.

1099 independent contractors

1099 Independent Contractors

Many employers have said they will move employees to 1099 status.

The IRS is on to this and will be conducting audits.

An employee can contact IRS and ask about their status and you could receive an audit notice.

Engage an independent contractor for a year or more.

Be very careful with this!!

Independent contractor

Independent Contractor

You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

January 1 2014

January 1, 2014

Guaranteed Issue.

State Exchanges/Federal Exchange.

Modified Community Rating (Groups 50 or fewer).

Redefines Small Group at 1-100 in 2016.

Employer Mandate.

Waiting Periods 90 Days Max.

Miscellaneous requirements2

Miscellaneous Requirements

Full Time Employee for health insurance purposes-30 hours per week.

There is no requirement to pay the health insurance for part time employees.

W 2 reporting

W-2 Reporting

Employers who issue 250 or more W-2s are required to list the value of the health insurance on the W-2.



Employers will report employees and the hours worked each month. 2015.

Exempt employees can be calculated at 8 hours per day, 40 hours per week, or actual hours worked.

Form 1095-C.

Information must also be provided to each employee.

Flexible spending accounts fsa

Flexible Spending AccountsFSA

Flexible Spending Accounts (FSA)-Over the counter drugs are not eligible. $2,500 cap.

Required notices

Required Notices

Summary of benefits and coverage sbc

Summary of Benefits and CoverageSBC

  • Uniform Explanation of Benefits.

    • Maximum 4 pages.

    • Minimum 12 point font.

  • Penalty up to $1,000 per affected individual.

Summary of benefits and coverage sbc1

Summary of Benefits and CoverageSBC

Developed and provided by the insurance company.

Delivered during Open Enrollment.

At a Qualifying Event.

60 days prior to a plan change during the plan year.

When an employee qualifies for coverage during the plan year.

Upon request.

Health insurance marketplace exchange notice

Health Insurance Marketplace(Exchange) Notice

Employee Notice Requirement.

Employers must issue a notice to employees about the Health Insurance Marketplace (Exchanges) availability and premium assistance by October 1, 2014.

No penalty.

Medicare creditable coverage notice

Medicare Creditable Coverage Notice

Distributed by October 15.

Distributed to all employees age 65 and older.

States the company health plan has drug coverage equal to or better than Medicare Part “D”.

Online verification to CMS within 60 days of renewal.

Health reimbursement arrangement hra

Health Reimbursement Arrangement (HRA)

No stand alone, except for retirees.

Possible strategies

Possible Strategies

Will employers drop coverage to save cost

Will employers drop coverage to save cost?

Some will and force their employees to the Exchange.

In some cases, the penalties are lower than the cost of coverage, but what about the soft cost of competition?

Early renewals

Early Renewals

Keeps current plan design in place until December 1, 2014.

Avoids age rated plans for all groups under 50.

Avoids community rates.

Avoids PPACA plan designs.

Level funded partially self funded

Level Funded Partially Self-Funded

Employer liability limited to the monthly premiums.

Monthly claims reports.

If plan develops a surplus the employer can receive a refund.

If plan runs in a deficit, no deficit recovery.

Defined contribution

Defined Contribution

Places the insurance buying decision in the hands of the employee.

Must still comply with affordability.

Wide range of options for the employee.

Must be equal to all.

Defined contribution1

Defined Contribution

Employer Allowance$300








You will be exposed to every concept you can imagine.

Some old concepts, some new.

Some will survive, and some will cause the employer bigger problems.

Caveat Emptor (let the buyer beware).

Select a trusted advisor.












CMS.gov-search “minimum value calculator”



Thank you

Thank You

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