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Health Care Reform Patient Protection and Affordable Care Act (PPACA). Chris Harrison, President EBENCONCEPTS David Smith, Vice President EBENCONCEPTS. Version 50 July 24, 2013. Questions?. Just stop me and ask…. this is more fun when you participate. . Deadlines & Regulations.

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health care reform patient protection and affordable care act ppaca

Health Care ReformPatient Protection and Affordable Care Act (PPACA)

Chris Harrison, President

EBENCONCEPTS

David Smith, Vice President

EBENCONCEPTS

Version 50

July 24, 2013

questions
Questions?
  • Just stop me and ask…. this is more fun when you participate.
deadlines regulations
Deadlines & Regulations

2010 2011 2012 2013 2014

preventative service mandates

2010

Preventative Service Mandates
  • Controversy over birth control pills mandate – final version
    • Must be a religious employer (includes all houses of worship and their affiliated organizations e.g. church-affiliated hospitals, daycares)
    • No mandate to provide coverage for contraceptives (object on moral grounds) but must notify insurer or TPA of objection
    • Insurer/TPA must provide written notice of the right to free contraceptives for any participant, and the cost of those contraceptives will be paid through the ACA program
  • Litigation
    • All over the place – lots of cases pendingwith private employers related to the mandate and religious freedom
    • Likely headed to Supreme Court
minimum medical loss ratio

2011

Minimum Medical Loss Ratio
  • Carriers who spend less than…
    • 85% for large group plans
    • 80% for small group and individual
  • …must rebate the amount spent below minimum loss ratios back to purchaser (group or individual)
    • Remember: it’s not how your group does… it’s how that carrier’s entire market segment performs
    • Also, self-funded plans are not subject to these rules
  • What counts toward HC Expenses?
    • Reimbursement of clinical services
    • Activities that improve health care quality
    • All other non-claims expenses excluding state and federal taxes, licensing or regulatory fees
minimum medical loss ratio1

2011

Minimum Medical Loss Ratio
  • Estimated to have saved over $4B in premiums directly and indirectly though MLR program
    • 2011 Rebates: $1.1B
    • 2012: $500M
  • So what if you got a rebate?
    • Employer paid 100% of premiums for employees and dependents: they keep it
    • Employees paid for a part of the cost of coverage, fiduciary duty to “give” a portion “back”
    • Former employees or COBRA continuants: eligible for a portion to be returned as well
minimum medical loss ratio2

2011

Minimum Medical Loss Ratio
  • What are we doing?
    • Excel spreadsheet to assist employers with determining what portion of the rebate could be owed to participants and to assess the economic cost of doing so
    • Corporate resolution form so that the employer can, on behalf of the Plan, show how the funds are being handled:
      • Returned to current and/or former participants
      • Rebates kept in the Plan and applied toward future participant premium payments and/or benefit enhancements
    • Draft letters to give to current and former plan participants to reduce confusion about what is being done with the “sizeable” rebate they think they are receiving
w 2 reporting

2012

W-2 Reporting
  • Applies to all businesses for 2013 Reporting
    • Make sure your payroll provider is ready to do this!
  • Reporting the aggregate cost of employer-sponsored health benefits
    • Not taxable, and is informational only
    • Reported in Box 12 via Code DD on W-2
    • Not required to include HRA spending, separate dental and vision plans
w 2 reporting1

2012

W-2 Reporting
  • What is the employer reporting
    • Entire Health Insurance Premium Amount
      • portion paid by EE and ER
      • Unique to each employee
      • Will be different for different tiers of coverage (EE, ES, EC, EF)
    • Employer Contributions to FSA (but not HSA contributions)
    • Wellness Programs and/or Onsite Medical Clinics that are COBRA-eligible
  • How to determine what to report
    • If insurance coverage: Premium charged
    • If self-funded: core COBRA rates
    • Should reflect cost changes during the year
pcori fee

2012

PCORI Fee
  • Why?
    • To provide information regarding the effectiveness, risks and benefits of various medical treatments
  • How Much?
    • First year: $1 x average number of covered lives (not just EE’s) for year that begins 10/1/12 and ends 9/30/2013
    • Second and subsequent years: $2 per covered life
  • Who pays? (Included in COBRA rates too)
    • Insured: carrier
    • Self-funded: employer (TPA cannot pay on behalf of group)
  • Plan assets may not be used to pay fee, but is a business expense
  • Must be paid by July 31 on IRS Form 720
pcori fee1

2012

PCORI Fee
  • Some twists and turns:
    • If separate HRA from health plan and
      • Health plan is fully-insured – must collect fee twice
        • Once for health insurance plan, for each plan participant (including dependents)
        • Again for the HRA, but only for the number of employees covered
      • Health plan is self-funded, and HRA plan year runs concurrent with insurance plan – must only collect fee once
    • FSA is exempt if
      • the employer offers group health coverage to their employees the reimbursement max is capped the greater of two times the employee contributions or employee contributions plus $500.
      • If not, then they must pay the PCORI fee.
notice of material modification

2012

Notice of Material Modification
  • If you change benefits mid-year (off renewal), you must provide 60 days notice of the change
    • Modified “Notice of Material Modifications”
      • Must be provided when there is change in benefits which an “average participant” to be an “important change in covered benefits, or other terms of coverage”
        • Enhancements or reductions in benefits such as deductible, copays, or the plan now covering a previously excluded benefits
        • Increases in cost-sharing
        • Change in health insurance carrier or administrator
      • How? SBC and additional information if relevant
notices on marketplaces

2013

Notices on Marketplaces
  • All employers must provide notice to employees of the existence of Health Insurance Marketplaces by late summer or fall of 2013
    • Draft Model Notices have been released, to communicate:
      • Health Insurance Marketplaces exist
      • You may be eligible for subsidizedcoverage through the HIM
      • Not eligible if employer offers coverage to their employees
      • Employer info to assist with applyingfor coverage in the Marketplaces
    • Enforced by USDOL Wage & Hour Division
notices on marketplaces1

2013

Notices on Marketplaces
  • Who gets the notice?
    • Yes: Full- and part-time, eligible or not eligible in the health plan, enrolled or not enrolled in the health plan and “independent contractors” and contract and leased workers may need to receive the notice depending on the nature of their relationship to the employer, based on FLSA “economic reality test”
    • No: dependents or others who may become eligible for coverage but are not employees and former employees even if enrolled retiree or on COBRA
  • There are some folks exempt from sending out notice
    • If you are not covered under FLSA: Receipts of less $500K annually and have no interstate commerce.
notices on marketplaces2

2013

Notices on Marketplaces
  • Other requirements:
    • Provide to new employees hired on/after October 1, 2013
    • Distributed by first class mail or electronically
    • EbenConcepts will work with our clients to have these notices available for distribution by August, when finalized by USDOL
  • Also modifying COBRA notices to include information about the Health Insurance Marketplaces
    • Will actually encourage former employees or their dependents who lost coverage to seek subsidized coverage through the Marketplace
    • Overall positive changes
individual mandate

2014

Individual Mandate
  • All American citizens and legal residents to purchase qualified health insurance coverage.
    • Exceptions (which really aren’t exceptions):
      • religious objectors
      • individuals not lawfully present
      • incarcerated individuals
      • taxpayers with income under 100 percent of poverty, and those who have a hardship waiver
      • members of Indian tribes
      • those who were not covered for a period of less than three months during the year (if coverage gap is greater than 3 months, each month in the gap is subject to penalty)
      • People with no income tax liability
      • Undocumented workers
individual mandate1

2014

Individual Mandate
  • Were you insured for the whole year through a combination of any of the following sources?
    • Medicare
    • Medicaid or the Children’s Health Insurance Program (CHIP)
    • TRICARE (for service members, retirees, and their families)
    • The veteran’s health program
    • A plan offered by an employer
    • Insurance bought on your own that is at least at the Bronze level
    • A grandfathered health plan in existence before the health reform law was enacted
    • If so – no penalty to be paid…
individual mandate2

2014

Individual Mandate
  • “Individual Responsibility Penalty”
    • 2014:
      • $95 per adult and $47.50 per child (up to $285 for a family) or
      • 1.0% of family income

…whichever is greater.

    • 2015
      • $325 per adult and $162.50 per child (up to $975 for a family) or
      • 2.0% of family income

…whichever is greater.

    • 2016 and beyond
      • $695 per adult and $347.50 per child (up to $2,085 for a family) or
      • 2.5% of family income

…whichever is greater.

individual mandate3

2014

Individual Mandate
  • But it could be even higher…
health insurance marketplaces

2014

Health Insurance Marketplaces
  • SHOP Marketplace for Small Employers
  • Open to individuals who are employed by employers with less than 50 FTEs
  • No premium subsidies – employer receives 50% tax credit for the non-elective costs of coverage
  • Some provisions delayed until 2015 (e.g. employee choice)
  • AHB Marketplaces for Individual Purchasers
  • Open to individuals whose:
    • employers do not offer coverage
    • employer-sponsored coverage is deemed inadequate or unaffordable
    • are ineligible for Medicaid
  • The only place where premium subsidies can be received

Used to be known as Exchangesofficially changed 1/16/13 (couldn’t translate into Spanish)

health insurance marketplaces1

2014

Health Insurance Marketplaces
  • State-based or Federal or some Combination?
    • 18 states are setting up their own Marketplaces
      • Six more will have a “partnership” HIMs
    • All other states will fall under the federally-facilitated state HIMs meaning run by the US Government and its contractors
health insurance marketplaces2

2014

Health Insurance Marketplaces
  • Carriers have submitted rates and plans
    • Most states have more than one carrier in the individual exchange, less in SHOP
  • Sebelius: Administration Is Negotiating Rates In Federal Exchanges
    • “Negotiations are underway and we will be negotiating rates across the country.”
    • Impact: Who knows? No one until mid-September.
health insurance marketplaces3

2014

Health Insurance Marketplaces
  • Main purposes
    • Marketplace where individuals and small employers will be able to shop for insurance coverage.
    • Facilitate the sale of qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit “CO-OP” plans
    • Determine if non-Medicaid eligible individuals can receive a premium credit based on a sliding scale
    • Will also direct people to Medicaid if they're eligible
    • Must have a website for comparative data about health plan options and create a common enrollment form
    • Premium Subsidy/Advance Tax Credit…
metal levels

2014

Metal Levels
  • Estimate of the overall financial protection provided by a health insurance plan – how measured?
    • Four level of benefits, based on percentage of benefits that the insurance plan pays for (vs. what those covered would pay)
    • Flexibility allowed +/– 2% of actuarial value
    • Deductible and Out-of-Pocket Maximums
      • Deductible: $2,000/$4,000 — OOP Max: $6,350/$12,700

Richer benefits

More expensive

Less Rich Benefits

Less expensive

premium subsidy advance tax credit

2014

Premium Subsidy/Advance Tax Credit
  • For individual coverage only
    • Estimated 26 Million American Estimated to be eligible for a premium credit under ACA
  • Can only if not eligible for other “minimum essential coverage” through group or government-sponsored health plans
  • AHB Marketplace will determine amount of premium subsidy based on household income
    • Will look at last tax year, or most recent information available
    • Using new “simplified” form to collect the income information
    • If a taxpayer/household gets too much – will pay it back on their taxes
      • Advise new employees to notify exchange about new salaries
      • We’ll provide you language for this purpose
premium subsidy advance tax credit1

2014

Premium Subsidy/Advance Tax Credit
  • Amount of premium subsidy will vary based on three factors:
    • Household income (total household income)
    • Household size (# of family members)
    • Age of the participant(s)
  • Then amount of premium subsidy then set based on:
    • Premium of “second lowest Silver plan”
      • Not required to buy Silver plan though – will pay difference to higher plans
    • Defined % of Household income relative to FPL
who falls where

2014

Who falls where?

To see what the subsidy amounts look like:

http://healthreform.kff.org/SubsidyCalculator.aspx

role of employer information

2014

Role of Employer Information
  • Employers will have to provide information to Marketplaces to assist in determining an employee’s eligibility for subsidy
    • Making changes?
      • What are they? When are they effective?
      • How will they effect EE contributions?
    • Offer benefits today?
      • EE eligible?
      • Meet benefits standards?
      • How much does EE pay per pay period?
    • EE information
      • How much do they earn in wages?
      • How many hours do they work each month?
small employer options

2014

Small Employer Options
  • New Market Options

AHB Marketplace

SHOP Marketplace

Small Group Market

taxes and fees

2014

Taxes and Fees
  • Imposes annual premium taxes on health insurers based on net premiums
    • Estimated to raise $101.7B over 10 years
    • Self-Funded Plans are exempt from this premium tax
  • Transitional Reinsurance
    • Fee will be charged to cover reinsurance for the individual market: $25B to be collected from 2014-16
      • A federally-established amount will be collected during first 3 yrs designed to spread risk among carriers in individual market
    • How much?
      • 2014: $63 per participant (employees and dependents)
        • How do you determine the number? Insured: monthly average; self-funded: 5500 counting method
        • Reducing the next two years: 2015: $42 and 2016: $26
      • Example: 220 employee group that also covers 25 dependents: $15,435 in 2014
    • Applies to all fully-insured and self-funded plans, including those on COBRA as well as government employees
      • Does not apply to FSAs, HSAs, HRAs, dental or vision plans
    • Will be collected by insurers and TPAs
rating changes

2014

Rating Changes
  • Strict modified community rating standards for pricing all small group and individual products
    • Premium variations only allowed for age (3:1), tobacco use (up to 50%), family composition and geography
      • Age bands: 0-20, 21-63, 64 or older
        • One-year bands for 21-63 – above and below will have a single rate for everyone falling in those age ranges
    • Wellness discounts are allowed for group plans under specific circumstances.
    • Grandfathered groups are exempt from these changes
    • Cost of transition felt in 2014 – will reduce factors increasing costs for small businesses annually for 2015 and beyond
employer mandate

2014

Employer Mandate
  • Requires Applicable Large Employers to offer coverage to their eligible employees and that those benefits meet certain minimum standards and maximum contribution levels
    • Two Important Notes
      • Does not require you to provide coverage to employees who work less than 30 hours a week
        • They are likely eligible for subsidized coverage in Marketplace
      • Does not apply to Small Employers who have less than 50 FTEs
        • No Mandate, but can still offer coverage, or employees can go to Marketplace for subsidized coverage
    • Exceptions?
      • No – applies to all employers regardless of if they are for-profit, nonprofit (including churches) or governmental entities
employer mandate1

2014

Employer Mandate
  • DELAYED but not really delayed.
    • Announced on July 2 – Why?
      • Reporting requirements for employers were taking longer to figure out than expected
      • Employer groups were lobbying on strongly on the issue
      • 98% of employers with 50 or more employees already offer health coverage to their employees
  • DOES NOT CHANGE REQUIREMENT to offer coverage, only the penalties for noncompliance
    • By delaying reporting, also delayed employer penalties
    • So what’s the real impact?
employer mandate2

2014

Employer Mandate
  • DELAY is actually a little tricky on how to handle
    • Makes early renewal process less important
    • Likely eliminates the transition rule provisions – will have to be compliant no later than January 1, 2015
    • Don’t ignore the “gotcha” dates we’ve already seen
      • December 27, 2012
      • May 3, 2013
  • Our advice: No simple answers – we’ll look at each situation on a one-on-one basis
    • Remember – the other requirements for 1/1/2014 still go into effect and do not change from this delay.
employer mandate3

2014

Employer Mandate
  • There is no true requirement to buy:
    • “Pay or Play” – Don’t offer coverage: pay a penalty
    • If you do offer coverage, then…
      • Employees can’t pay too much for EE only coverage, or the employer pays a penalty
      • The plan must meet the minimum benefit levels, or the employer pays a penalty
if over 50 ftes

2014

If over 50 FTEs…
  • Really only one question:
  • We’ll get there in a second…

Who do I have to

offer coverage to?

applicable large employer

2014

Applicable Large Employer?

FTEs

30+ Hours

1-29

hours

common ownership

2014

Common Ownership
  • What if there are multiple employers which are commonly owned?
    • Common Law Test
    • Control Group rules apply (IRC §414(c))
      • Look at percentage of ownership
common ownership1

2014

Common Ownership
  • Multiple owners at different shares of different businesses
    • Look at the common percentage of ownership among the various businesses
  • Why does this matter?
      • Business 1: 20 employees
      • Business 2: 40 employees
      • Business 3: 5 employees
    • On their own, none have the mandate
    • Under common ownership, all three must offer coverage to their respective employees
common ownership2

2014

Common Ownership
  • If multiple entities
    • Considered as one to determine whether the employer mandate applies
    • Each entity responsible for their share of the penalty for either not offering or for other penalties
      • Focusing penalty on noncompliant instead of entire group of companies
slide45

2014

FTEs
  • Once you get everyone into one “group” of employees… or if you are just one employer:
    • Are we an “Applicable Large Employer”?
      • FTEs: How many hours do each employee work?
    • What is an Hour?
      • An hour paid: Any time that you pay someone, regardless of whether they are at work or out of work but entitled to payment:
  • Vacation
  • Holiday
  • Illness
  • Incapacity/disability
  • Layoff
  • jury duty
  • military duty
  • leave of absence
sorting employees

2014

Sorting employees

Owner

  • not counted if a sole proprietor, a partner in a partnership, a shareholder owning more than 2% of an S corporation or an owner of more than 5% of other businesses(but can’t use for purpose of avoiding coverage)

Salary or Hourly

variable hour employees

2014

Variable Hour Employees
  • Someone who, as of his/her start date, you cannot tell whether that employee is reasonably expected to work an average of at least 30 hours per week
    • Should look at the number of hours worked during “initial measurement period” to determine if eligible
      • Facts and circumstances determination
    • Cannot take into account the likelihood that an employee will terminate employment before the end of their probationary period
ongoing variable hour employees

2014

Ongoing “Variable Hour” Employees
  • Track number of hours worked by all employees to determine FTE count and who is working 30+ hours and now eligible
  • Can measure every 3 months up to every 12 months

Administrative Period

  • Counting: How hours worked by “variable hour” employees during measurement period
  • Notify and Enroll: Get those newly eligible enrolled on health plan
  • Can last 30-90 days
  • Employees who work 30+ hours in measurement period must be covered during stability period
  • Must remain covered for at least six months (or length of measurement period, whichever is longer) regardless of number of hours worked in stability period
  • Limited exceptions for those who work 30+ hours during MP
seasonal employees

2014

Seasonal Employees
  • Most will not be counted toward FTE count or eligible for benefits
    • A seasonal employee is defined in the context of whether the employer is subject to the shared responsibility requirements
    • These requirements indicate that a seasonal employee is works 120 days or less during the calendar year
      • However, it does NOT appear that an employee working more than 120 days automatically would lose seasonal status
      • Labor is performed on a seasonal basis where, ordinarily, the employment pertains to or is the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carries on throughout the year
    • Employer must make a “good faith interpretation” of whether employees are or are not seasonal
    • Further guidance is definitely needed...
independent contractors

2014

“Independent Contractors”
  • Will not count toward FTE or be eligible for benefits since they are not “common law employees”
  • However… be careful about what you call an independent contractor
    • More than just because you pay them via 1099
    • IRS/DOL have been closely scrutinizing this issue
    • Look to 11-point test from IRS
    • EbenConcepts has developed a tool to help our clients “figure out” whether or not they are truly independent contractors
independent contractors1

2014

“Independent Contractors”
  • Three types of Control
    • Behavioral control.
      • If you have the right to control or direct not just what work needs to be completed, but how it gets completed, the worker is most likely an employee.
    • Financial control.
      • Two financial signs:
        • has a significant personal investment in the work, or
        • can incur a profit or a loss
    • Type of relationship.
      • If the person receives benefits — like insurance, a pension or paid leave — that’s a giveaway the person’s an employee.
independent contractors2

2014

“Independent Contractors”
  • Other giveaways
    • They don’t have a business license
    • They don’t have their own place of business
    • They lack their own equipment
    • They are solely dependent on your business, or
    • They perform the same work as those classified as employees.
  • You say they’re independent contractors, and IRS/DOL disagree:
    • Penalties for not offering coverage
    • Penalties and interest for not paying your share of FICA
    • Workers compensation liability
temporary employees

2014

Temporary Employees
  • Temporary employees – short-term assignments or staged hiring
    • Will be considered your employees – waiting periods could start being counted from day #1 of temp assignment
    • Can’t use temp firm to “split time” either to avoid hitting hours limit
  • Employed by outside temp agency (and no common ownership)
    • Temps won’t count toward FTEs or be eligible for your health coverage
  • Be careful with staffing firm agreements
    • Some are arguing that they are not the common law employer bc they don’t have control over the employee – client does
    • Carefully read the language that they aren’t trying to transfer responsibility to provide coverage
do the math

2014

Do the Math…
  • 30 or more hours per week (work regular hours or variable)
    • Each employee 30+ hours/week = 1
  • Less than 30 hours per week
    • Each employee is a fraction of one: # hours paid per week / 30
      • Works 25 hours per week = 0.8333
  • Add it up…
    • If they add to 50 or more, mandates apply
      • Limited Exception: If over 50 for not more than four months in the prior calendar year – no mandate
ftes doing the math

2014

FTEs: Doing the Math
  • Example:
    • Work more than 30 hours a week
      • 30 employees
    • Work less than 30 hours a week, but a consistent number of hours each week
      • 40 employees who work 20 hours/week (on average)
    • Variable hour employees
      • 5 employees
        • two over 30 hours
        • three work average of 25 hours/week
ftes doing the math1

2014

FTEs: Doing the Math
  • Now add it up
    • Group 1: 30
    • Group 2: 26.667
    • Group 3: 2 + 2.5
    • TOTAL: 61+ FTEs
  • Conclusion
    • Employer Pay or Play Mandate applies
      • Only required to cover those employees who work 30 or more hours a week
      • Adding two variable hour employees who worked over 30 hours for a stability period
what doesn t count as offering coverage

2014

What doesn’t count as offering coverage
  • “Defined Benefit Plans”
    • Employer cannot provide cash or reimbursements to help employees buy individual coverage
      • Specifically prohibited:
        • Using HRA dollars to buy individual coverage or purchase through the exchange
        • Limiting HRA contribution amounts for stand-alone HRAs
      • Employer payments will keep an employee from being eligible for a subsidy
  • This rule applies to small group too…
if i don t offer coverage

2014

If I don’t offer coverage?

Credit for 30

Pay a Penalty…

$2,000 per FT Employee

Nothing for PT EEs

if i don t offer coverage1

2014

If I don’t offer coverage?

…which is an Excise Tax

$$$

  • Companies taxed as a partnership will have the penalty paid by their owners in accordance with their percentage of ownership
if i don t offer coverage2

2014

If I don’t offer coverage?
  • Example:
    • 75 FTEs - only 40 employees working 30+ hours per week
      • Do not offer coverage to any employee
    • The math:
      • 40 FTs x $2,000 = $80,000 – $60,000 (credit for 30 FT EEs)
      • $20,000 penalty
    • Reminder: Excise tax
      • Must pay with after-tax dollars
      • Increases “real” value of the penalty by the effective tax rate
      • Means you have to earn $34,000, pay taxes on itand then pay $20,000
unaffordable coverage

2014

Unaffordable Coverage
  • Coverage is deemed “unaffordable” if the employee spends more than 9.5% of their household income
    • Problems with the rule…
      • Do you know your employees’ household income?
        • Do you want to know?
      • What about paying for dependent coverage?
  • Revised Rule:
    • What employee pays for employee only coverage?
      • Doesn’t matter what employee might have to pay to cover their dependents
    • Does it pass any one of the three safe harbors?
unaffordable coverage1

2014

Unaffordable Coverage
  • EXAMPLE: Employee earns $9.50/hour, but monthly cost of employee only coverage is $148.75
    • W-2 Safe Harbor:
      • EE earns $19,750, but $1,785 on a pre-tax basis = Box 1: $17,975
      • 9.5% of Box 1 income: $142.30/mo
      • FAILS: $148.75 is 9.93% of employee’s Box 1 income
    • Pay Safe Harbor:
      • Hourly rate of pay ($9.50) x 130 hours/mo = $1,235.00
      • 9.5% of $1,235: $117.32
      • FAILS: $148.75 is 12.04% of pay safe harbor
    • FPL Safe Harbor:
      • Federal Poverty Level: $11,170
      • 9.5% of FPL: $90.96 (based on 2013 FPL level)
      • FAILS: $148.75 is 15.98%of federal poverty level
  • FAILS Affordability Test for this employee because didn’t pass any of the tests but could be fixed…
unaffordable coverage2

2014

Unaffordable Coverage
  • Could adjust EE contributions by discriminating in favor of lower-paid employees
    • Lower EE contributions to $140/mo for some
    • Raise EE contributions to $152 for everyone else
  • Two other issues:
    • Employee contributions fall below 9.5% for EE only coverage, but what about covering family?
      • Very few good options – not eligible for subsidized coverage
    • Wellness differences
      • Smoking – ok
      • Not involving smoking – only if in place as of 5/3/13
unaffordable coverage3

2014

Unaffordable Coverage
  • Penalties if “unaffordable” coverage
    • $3,000 per affected employee annual penalty (no reduction)
      • Capped at the employer’s maximum penalty for not offering coverage
    • Example:
      • 75 FTEs within group, but only 40 FT employees
      • 5 employees spend more than 9.5% of their income for EE only coverage
      • Penalty: $15,000 Excise Tax
        • Capped at $20,000
      • However if no employee goes to exchanges and receives subsidized coverage – no penalty
inadequate benefits

2014

Inadequate Benefits
  • If benefits are not “minimum level”
    • Each plan must have benefits at or above the actuarial value of the “bronze” level benefit or 60% actuarial value
    • If benefits do not meet that level, $3,000 per employee excise tax penalty
      • Capped at the employer’s maximum penalty for not offering coverage
    • Who is responsible for actuarial determination?
      • There are standard calculators available
        • Also created “safe harbor” plan designs that meet minimum benefit value required under the law
        • Employer ultimately responsible
essential health benefits ehb

2014

Essential Health Benefits (EHB)
  • The law requires health plans offered in the individual and small group markets offer a comprehensive package of items and services
    • EHB requirements do not apply to large group or self-funded, but may not meet employer mandate requirements if they don’t comply with minimum benefit value standard
  • Plan must cover
  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services (MHPA)
  • Prescription drugs
  • Rehabilitative services and devices
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care
essential health benefits ehb1

2014

Essential Health Benefits (EHB)
  • Cost sharing and deductible limits
    • Annual max out-of-pocket – align with HSA limits
      • $6,350 self only
      • $12,700 family coverage
    • Employer contributions to HSA and HRA reimbursements can “lower” deductibles in risk-sharing model
how caught

2014

How caught?
  • Not offering coverage:
    • One employee gets subsidized coverage from Exchange would cause employer to pay penalties for everyone not covered
  • How will they know?
    • Must send in information when anemployee seeks subsidized coverage
      • HIMs will obviously review tax information for each applicant and therefore they find employers not offering coverage
    • W-2 Reporting
    • Employer Reporting to IRS
      • Waiting on regulations for Section 6056 Reporting: Requires large employers to file an informational return that reports and certifies certain information about health care coverage offered to employees.
whistleblower protections

2014

Whistleblower Protections
  • An employer may not fire or retaliate against an employee if:
    • Provided information relating to any violation of ACA to:
      • Employer
      • Federal or state Agencies
    • Testified, assisted, or participated in a proceeding concerning a violation of ACA, or is about to do so
    • Objected to or refused to participate in any activity that he or she reasonably believed to be in violation of ACA
    • Received a premium subsidy/tax credit or a cost sharing reduction under ACA
  • If employer takes retaliatory action against an employee, employee can file a complaint with OSHA
could employee waive coverage

2014

Could employee waive coverage?
  • Employer has less than 200 FTEs: Yes
  • Employer has more than 200 FTEs: Generally no.
    • Employee must be covered on employer plan
      • Only way for employee to waive coverage is to prove that they have other coverage
        • Other group coverage
        • Medicaid or Medicare
  • If employee does waive coverage and seeks to buy subsidized coverage through AHB Marketplace
    • Employer meets mandates: no penalty
    • Employee cannot get subsidized healthcoverage through the exchange

Delayed to 2015

what are larger businesses considering

2014

What are larger businesses considering?
  • Drop employer coverage completely
    • Pay the $2,000 penalty and absorb productivity issues
  • Keep coverage on management carve-out and not add those employees who are currently not eligible
    • Treated as “unaffordable coverage” and would pay $3,000 per non-covered employee penalty
    • Could also be considered discrimination under IRC 105(h)
  • Reduce number of hours worked by certain employees to stay below 30 hours each week
    • Commonly discussed strategy by restaurants and other hospitality industry employers
    • New study says on 2.3M will be affected by this strategy
  • Pay employees more to cover their costs and penalty
    • Of course they forget quickly why you did that…
the option most employers are taking

2014

The option most employers are taking…
  • Continue employer-based coverage
    • Employee recruitment and retention
    • Keeping tax advantages of employer based coverage
    • Retain flexibility with plan design, risk and cost
    • Cheaper to provide benefits than pay employees more
    • Not offering coverage doesn’t eliminate reporting mandates
    • Weaken unionization efforts
what if i don t currently offer benefits

2014

What if I don’t currently offer benefits?

I don’t offer to anyone today…

I offer to some but not all…

  • A time to talk strategy…
    • Can I offer a benefit plan that meets minimum benefits and contribution limits that is less expensive than penalty?
waiting periods

2014

Waiting Periods
  • Waiting periods in excess of 90 days are prohibited
    • Restriction applies to both grandfathered and non-GF plans
    • REMEMBER: 90 days is not three months
      • First day of employment counts as day 1
      • Waiting periods can be shorter than 90 days
      • Cannot do first of the month after 90 days
    • If employee doesn’t complete paperwork, then there is no violation by the group
re hires

2014

Re-Hires
  • Two proposed approaches based on length of absence,
    • determine if a rehired employee is a new employee or for purposes of determining the employee’s status as a full-time employee.
    • Been gone for 26 weeks or longer:
      • Rehired employee is treated as if terminated employment and is rehired as a new employee.
    • Less than 26 weeks (the "rule of parity")
      • Rehired employee is treated as a new employee (and new waiting period) if “absence period” is at least 4-weeks long and is longer than the employee’s period of employment immediately preceding their last period of time without some hours of service
regulatory process goes on
Regulatory Process goes on…
  • Numerous federal agencies in charge of drafting rules for implementing law
    • Still some questions outstanding
  • States have certain things they should do to…
    • Some are, others are not
    • Some work by Legislatures, Governors, and/or Insurance Commissioners
preventative maintenance
Preventative Maintenance
  • Your team will work with you at renewal to identify issues that need to be resolved now
    • Taking steps now to avoid issues for 2014
educating employees
Educating Employees
  • Why?
    • 75 percent said they believe they will receive education regarding health care coverage under reform
    • 13 percent of employers say educating employees about health care reform is important.

AFLAC Employee Survey, May 2013

  • What we’ll be doing…
    • Making sure employees understand their benefits and any changes that may be coming as a result of health care reform
      • Important to keep them happy and feeling that their employer is taking care of them – a critical aspect of retaining valued workers
    • Working with employees not covered on employer health plans to find the best options in the Marketplaces
educating employees1
Educating Employees
  • What we know the feds and allies will be doing:
    • Spread the word about the subsidy — without inflating expectations
    • Convince young invincibles that they are not
      • Will emphasize financial impact of uninsured medical expenses in the event of an accident or disease
      • Interesting stats:
        • 64% of employees under 30 take coverage when offered vs. 76% over 30
        • if all eligible workers enrolled in their workplace health plans, each employee could expect to pay 14% less in premiums
        • “If you’re an employer, in the long run, to keep premiums down, you want to have the young people as well as the older people participating,” he says.
questions1

Questions?

Chris Harrisoncsharrison@ebenconcepts.com

David C. Smithdcsmith@ebenconcepts.com