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The Affordable Care Act: Implementation Update for local governments Virginia Municipal league Annual conference October 14, 2013. Jessica Rogers, Esquire Sands Anderson PC 1111 E. Main Street, Suite 2400 Richmond, Virginia 23219 j rogers@sandsanderson.com. Implementation Delay.
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The Affordable Care Act: Implementation Update for local governments Virginia Municipal league Annual conferenceOctober 14, 2013 Jessica Rogers, Esquire Sands Anderson PC 1111 E. Main Street, Suite 2400 Richmond, Virginia 23219 jrogers@sandsanderson.com
Implementation Delay • On July 2, 2013, the Administration announced that the employer penalties, along with many employer reporting requirements, would be delayed until 2015. • The delay is meant to allow for time to simplify these reporting requirements, and to allow employers more time to prepare for full implementation. • This delay will NOT affect the implementation of the health insurance exchanges (now called Marketplaces), or the subsidies available to individuals through these exchanges.
Notice to Employees/COBRA Notice • Notice of the health insurance exchange must be provided to ALL existing employees by October 1, 2013. • Thereafter, notice must be given within 2 weeks of hire to new employees. • Model Notices are available at www.dol.gov/ebsa/healthreform/; one for employers who offer coverage and one for employers who do not. • COBRA notification requirements have changed to include this information. Model COBRA notice is also available at www.dol.gov/ebsa/healthreform/ • No penalty under the Act for not complying; but compliance makes sense for business reasons.
Medicare Tax • Employers are responsible for withholding an additional 0.9% Medicare tax on any wages in excess of $200,000. • This requirement is effective beginning in 2013. • The employee’s individual tax liability will vary based on filing status, but employers withhold on earnings over $200,000 regardless.
Health Insurance Marketplaces • On October 1, a new health insurance Marketplace (formerly referred to as an exchange) opened in each state. • Individuals can now enroll for coverage that will be effective beginning on January 1, 2014. • Virginia’s exchange is run by the federal government, and can be accessed at www.healthcare.gov. • Open enrollment is October 1, 2013 through March 31, 2014. • Individuals may also begin applying for tax credits and subsidies through this same website.
Individual Shared Responsibility Payments • “Individual Mandate”: Requires most citizens and legal residents to have “minimum essential coverage” or pay a penalty. • Exemptions for people for whom bronze-level coverage is unaffordable, those with incomes below the income tax filing level, prisoners, those not lawfully present, members of recognized Indian tribes, members of recognized religious sects or health care sharing ministries, those residing outside the US, and anyone the Secretary of HHS determines has suffered a hardship. • Individuals with incomes up to 138% of the federal poverty level who reside in states that do NOT expand Medicaid will also be exempt.
Individual Shared Responsibility Payments, cont’d • The individual shared responsibility payment for each adult without coverage will be the greater of: • $95 in 2014, $325 in 2015, and $695 in 2016; or • The following percentage of income that is greater than the federal income tax filing threshold ($9,350 for singles and $18,700 for couples): 1 percent in 2014, 2 percent in 2015, 2.5 percent in 2016 and thereafter. • The amount for children is half that for adults, but total household penalty is capped at 3 times the adult penalty or the national average premium for a bronze level plan for the household. • No criminal penalties. • Transition rules for 2014.
Premium Assistance Tax-Credit and Cost-sharing Subsidies • In order to qualify for subsidies, applicants will need an income between 100 – 400% of the federal poverty level (and must not be eligible for any other minimum essential coverage – including Medicaid, Medicare, TRICARE, etc.). • In 2013, 400% of the federal poverty level for a family of four is $94,200. • Subsidies are calculated on a sliding scale, with more assistance for lower-income earners. • Individuals can only receive subsidies by purchasing health insurance through the new Marketplace.
Fiscal Year Health Plans • Employers who offer health insurance on a fiscal year plan year, where coverage begins on July 1 or October 1 instead of January 1, will still have to offer coverage by the first day of their 2014 plan year. • The transition relief originally granted for 2014 was not extended when the delay in employer penalties was announced. • All employers have until 2015 to comply with the employer reporting requirements.
Incentives for Non-Discriminatory Wellness Plans • HIPAA prohibits health plans from treating individuals differently based on a health factor. The ACA amended HIPAA to allow plans to provide premium discounts, rebates, and cost sharing (including copayments, deductibles, or coinsurance) to employees who participate in wellness programs. • The maximum permissible reward under a health-contingent wellness program will be • 30 percent of the cost of coverage; or • 50 percent for programs designed to prevent or reduce tobacco use. • The plans must be non-discriminatory, which means that they must be available to employees regardless of health status. Modifications must be made available for employees with a disability.
Medicaid Expansion • The Medicaid expansion will be effective January 1, 2014, for the states that choose to accept it. • There is no deadline for agreeing to this expansion; Virginia has created a Medicaid Innovation and Reform Commission that will decide if VA will expand, based on reforms to the existing Medicaid program. • In states that choose to expand, any adult with an income of up to 138% of the federal poverty level will be eligible for Medicaid. The federal share for this expanded eligibility group is 100% through 2016. • An employer has no duty to make health insurance affordable for an employee who is eligible for Medicaid.
Employer Reporting Requirements • Proposed regulations detail the employer reporting requirements that will go into effect in 2015. • The IRS asks employers to begin voluntarily reporting as soon as the regulations are finalized, in order to ensure a smooth transition. • Information that employers will report to the IRS on Form 1094C: • Employer identifying information and contact person; • Whether the employer offers minimum essential coverage to full-time employees and dependents; • Number of full-time employees each month; • For each full-time employee, the months coverage was available; • Employees’ share of the premium for the lowest-cost plan that meets the Act’s requirements; and • Identifying information for each full-time employee and the months each was covered under employer’s plan.
Report to Employees (1095C) • For each full-time employee whose information is required to be reported on Form 1094C, the employer must also send a report to the employee (1095C). • The report must include: • Employer’s identifying information; and • The information about the employee that was submitted to the IRS (as part of 1094C). • The first 1095C forms will be due on or before January 31, 2016 (same schedule as W-2s).
Employer Shared Responsibility Payments • The Act requires large employers, with 50 or more full-time employees, to either (i) offer affordable health care coverage with minimum value to all full-time employees and their dependents, or (ii) pay a penalty. • There are two penalty scenarios: • A penalty for offering NO coverage; and • A penalty for offering coverage that is deemed unaffordable or of inadequate value. • Both penalties are triggered by an employee applying for health insurance through the Marketplace and receiving a subsidy for such coverage.
Variable Hour Employee Analysis: Timeframe for Measuring Hours • Employer plan year: July 1 – June 30 • Standard Measurement Period: May 15 — May 14 • Administrative Period: May 15 — June 30 • Stability Period: July 1 — June 30 (same as plan year) • For coverage beginning January 1, 2015, employer would begin measuring employee hours on May 15, 2013. • Accurate records of hours of service will protect employers from wrongful penalties beginning in 2015.
Auto-enrollment • Employers with 200 or more employees who offer coverage must automatically enroll/re-enroll employees, with ample opportunity to opt-out. • This provision has been delayed until further guidance is released. • It is unclear if it will go into effect sometime in 2014, or later.
Non-discrimination rules • The Act requires full-insured health plans to follow rules “similar to” rules in place for self-funded plans that prohibit discrimination in favor of highly compensated employees. • Regulations interpreting this provision have yet to be promulgated; until they are, it will not be enforced. • Once rules are finalized, the penalties for non-compliance are steep: $100 per person affected per day.
Controlled and Affiliated Service Groups • The Act says that any employer treated as one employer under IRC § 414(b)(c)(m) or (o) will be treated as one employer for purposes of the Act. • IRC 414 has to do with entities that are under common ownership and control. • IRC 414 is generally applied to private entities; the proposed regulations say that guidance for its application to local governments is forthcoming. In the meantime, local governments and school boards should use a good faith interpretation of the statute.
Thank You Jessica Rogers, Esquire Sands Anderson PC 1111 East Main Street, Suite 2400 Richmond, Virginia 23219 (804) 783-7260 jrogers@sandsanderson.com
