AFFORDABLE CARE ACT 2015 UPDATEDonna LivelyManaging Director, Insurance PlansGuideStone Financial Resources

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AgendaACA Update

Health Care Update Premium Reimbursement Individual Mandate and Exchange Small Group/Large Group Rating Changes Employer Mandate ACA Reporting Cadillac Tax Final Thoughts Q&A

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Health Care Costs are RisingACA Update

CMS says four main factors • ACA insurance expansion• Improving economy• Aging population• Expensive new drugs

Carriers preparing 20% to 40% 2016 rate increases

Enrollment in the exchanges has come up short

Unsustainable pools of higher risk individuals without enough healthy individuals to balance out costs

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Health Care Costs are RisingACA Update

Explosion of specialty drugs fueling an industry-wide rise in prescription costs. • “While specialty drugs account for less

than 1% of all prescriptions, they comprise more than 25% of total prescription drug costs trends”*

Actual RX trend increased from 5.5% to 10.7% from 2013 to 2014

2016 projected RX trend 11.7% RX Plan Strategies• Specialty RX provider• Step therapy• Expand prior authorization• Intensify pharmacy management

programs*The Segal group, a research organization in their annual Health Plan Cost Trend Survey,

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Coming in 2016: Expensive Specialty RxACA Update

PCSK9 Inhibitor Specialty Rx• Similar to a statin (such as Lipitor), but

extremely safe & more effective• Trials show reduces LDL cholesterol by

50% to 70% beyond statins alone• Costs range from $7,000 - $15,000

annually per user• FDA just approved Praluent, and others

like Repatha, ready to market • Will be available by early 2016 at latest• Step-therapy and pre-authorization will be

required• At GuideStone, statins are #2 prescribed

Rx

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Coming in 2016 ACA Update

Increased Interest in Telemedicine Wellness incentives Greater use of HSA Qualified plans Small group rating for large group (50-

100) Reporting and employer mandate

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Employer ReimbursementMethods

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Premium Reimbursement ProhibitionsACA Update

Series of rulings from the DOL, HHS, IRS began in January 2013

Declared Employer Payment Plans (EPP) (RR 61-164) and stand-alone Health Reimbursement Arrangements (HRA) (105(h)) to be group health plans

Under Affordable Care Act (ACA) a group health plan required to:• Provide benefit coverage with no annual

dollar maximums• Provide preventive care at no charge

EPP and HRA cannot comply and are therefore prohibited to reimburse tax-free non-group medical plans and HRA’s

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EPP and HRAACA Update

Ruling applies exclusively to individual medical plans

Group sponsored medical plans may continue tax-free employer contributions

IRS considers denominational benefit boards to be group plans

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EPP and HRAACA Update

An EPP (EPP-RR 61-164) may not be used to reimburse individual medical coverage premium • Can increase salary only• Cannot provide taxable benefit

A stand-alone HRA (Section 105(h)) may not be used to reimburse individual medical premium or payment for medical service • Not allowed to increase salary• May not use at all for individual coverage

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Coverage through spouse’s employerACA Update

Coverage under a spouse’s group plan• OK if employer is offering a group health

plan and employee waives• Spouse cannot pre-tax contribution

through Section 125 premium plan through employer

• Need substantiation (Summary of Benefits and Coverage) from spouse plan proving it is a true group plan

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Other exceptions?ACA Update

Medigap coverage is considered an excepted benefit under the ACA

Premium can be paid tax-free Medicare Part B and Part D premiums

can only be employer paid tax-free if a group health plan is in place; otherwise prohibited

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Fines After 06/30/2015ACA Update

Significant penalty if employer provides tax-favored reimbursement for individual policies• $100 a day per employee excise tax

penalty• $36K a year per employee

Excise tax must be paid with pretax dollars and is not a deductible business expense

Fines double if it is determined employer was willful in ignoring the law

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Small Group Rating Moves to Large Group

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Commercial Market Small Group Rating for Groups 50 to 100 Lives

ACA Update

Current small group rating defined as groups with 1 to 49 employees

Due to ACA, beginning 01/01/2016 small group will be defined as 1-100

Why is this important? Changes rate structure Changes benefits offered Changes guarantee issue Increases rates

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Commercial Market Small Group Rating for Groups 50 to 100 Lives – Rating Changes

ACA Update

Moves from current rating methodology for large group:• Claims history – experience rated• Industry• Location• Gender• Composite four-tier rates

To – small group ACA methodology• Community rated• Age-banded• Family size• Geography• Tobacco use – only rate up – 50%

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Commercial Market Small Group Rating for Groups 50 to 100 Lives – Benefit Differences

ACA Update

Guaranteed issue and renewability – good/bad

Coverage for 10 essential health benefits – will increase cost

Addition of MOOP maximums – will increase cost

Calculation to determine employer size is same as used to determine if you are an Applicable Large Employer (ALE)• Count full-time employees (FTEs) (30

and greater hours)• Add hours of employees working fewer

than 30 and divide by 120 (for month calculation)

• Add to number of FTEs• If 100 or less you will be considered

small group

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Commercial Market Small Group Rating for Groups 50 to 100 Lives – Political Pressure

ACA Update

Congress just approved and President signed October 1st the PACE ACT• Repeals Federal implementation of the

large group transition to small group • Allows states to make decision on a state

by state basis• Currently 6 states have regulations on

books moving large group to small group 01/01/2016

• California passed A.B. 1083 in 2012 expanding definition of small employers to 100 for effective dates on, or after, 01/01/2016

• Unless CA legislators act quickly or extend effective date, legislation will take place

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Individual Mandate and Marketplace Exchanges

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Individual Shared Responsibility (Mandate)ACA Update

Effective 01/01/2014 most Americans required to have Minimum Essential Coverage (MEC)

Without MEC, penalties apply MEC is:• Coverage through the government

‐ Medicaid, Tricare, CHIP, Medicare• Coverage through an exchange• Coverage through an employer• Coverage through the individual insurance

market

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Individual Mandate PenaltyACA Update

2015: Greater of $325 per uninsured person or 2% of household income

2016: Greater of $695 per uninsured person or 2.5% of household income

2017: Going forward, the penalties will be increased by the cost-of-living adjustment

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Exchanges/MarketplacesACA Update

Annual open enrollment

• 11-01-2015 to 01-31-20169.1 million enrolled in marketplace

• Down from 9.9 million spring 2015Rate increases expected for 2016 enrollmentSome (60%) enrollees have government subsidy to pay portion of premiumIf you are OFFERED employer sponsored coverage regardless of whether you choose it, you are not eligible to receive a subsidy from the Exchanges

• If you go to Exchange, purchase coverage and are provided a subsidy, you will have to pay back the subsidy if you have employer sponsored coverage offered.

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Applicable Large Employer

and the Employer Mandate

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2015 Impact: Applicable Large EmployerACA Update

Applicable Large Employer (ALE) if:• You have 50 or greater full time

equivalent employees• IRS Control Group rules apply

‐ 80% control of money, board or business and you include all entities in your count

• Count all full-time, part time, seasonal workers, and seasonal employees

• Count hours worked AND earned hours, such as sick time, vacation time, holidays, jury duty, etc.

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2015 Impact: Applicable Large EmployerACA Update

Employer Mandate effective for ALE beginning 2015:• All employers with 50+ FTEE must:

– Offer coverage to all persons working 30 or greater hours

– Coverage offered must be affordable and adequate

– Report coverage annually under IRC Section 6056 on IRS forms 1095-C and 1094-C

– If the above rules are not met penalties apply

• Groups 50-99 may meet transitional rules in 2015, moving effective date of mandate to 2016

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2015 Impact: Applicable Large EmployerACA Update

In 2015 ALE’s with 100 or greater employees or 50-99 who do not meet transitional relief must :• (a) Offer coverage to at least 70% of

employees working 30 hours or greater‐ In 2016 moves to 95% offer

coverage • (b) Coverage must be affordable and

ofminimum value

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2015 Impact: Applicable Large EmployerACA Update

Affordable – Contribution limits for Employee Only coverage • 9.5% of household income is maximum

contribution an employee can make to the “employee only” coverage

• Contribution can be determined by one of the below safe harbors ‐ W-2 wages‐ Employee’s hourly rate‐ Federal poverty level

• Safe harbor employed certified on “C” forms

Adequate - Plan provides Minimum Value coverage• Plan pays an actuarially equivalent 60%

of required health care expenses

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2015 Impact: Applicable Large EmployerACA Update

No Offering Penalty (a): $2,000 penalty assessed for all FT employees if not offering coverage to all 30-hour workers and one receives a subsidy • In 2015 first 80 workers will not count

toward penalty calculation• In 2016 moves back to first 30

workers do not count toward penalty calculation

Affordable/Adequacy Penalty (b): $3,000 per employee who receives a subsidy because coverage is not affordable and not of minimum value

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2015 Impact: Transition Relief RulesACA Update

50-99 FTEE Since February 9th, 2014 employer has not• Eliminated or materially reduced any

health coverage offered and• Didn’t reduce size of work force or

overall hours of work to qualify for the transition relief

Employer certifies on 1094-C report that it satisfies these requirements

IF transitional relief rules are met, groups 50 to 99 FTEE can delay the offering and coverage mandate until 2016 renewal

They may not delay reporting requirement

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Section 6055 & Section 6056 Reporting Requirements

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2015 Impact: Reporting for Individual MandateACA Update

IRC Code 6055 – Applies to medical plans providing fully-insured or self-funded coverage to employers of all sizes

Provider of coverage will complete the IRS forms • Fully insured insurance carrier• Self-insured employer

Coverage provider sends report to IRS and to individual policyholder• Substantiates Individual Minimum Essential

Coverage• Prevents Individual Mandate penalty

GuideStone is completing the 1095-B forms for our participants and will send out in January

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2015 Impact: The “B” FormsACA Update

Form 1095-B (participant) and 1094-B (IRS transmittal)

Report in 2016 for 2015 coverage Follows W-2 reporting timelines Participant keeps 1095-B with tax documents Coverage provider may contact you for

missing SS# If you have 1-49 employees according to ACA

counting methods, you DO NOT HAVE TO COMPLETE ANY FORMS, unless you are self-insured

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2015 Impact: Reporting for Employer MandateACA Update

IRC Code 6056 applies to all Applicable Large Employers with 50 or greater Full-Time Employee Equivalent

Annual report to IRS to substantiate employer mandate compliance • Offered to all 30 hour plus FTE • Of minimum value: 60% or greater plan

value• Affordable: Employee-only contribution is

not greater than 9.5% of household wage (safe harbor)

• IRS will determine Employer Mandate penalty liability based on information reports

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2015 Impact: The “C” FormsACA Update

Form 1095-C (participant) and 1094-C (IRS transmittal)

Applies ONLY ALE - 50 or greater FTEEs Report to individual participant and IRS to

substantiate Employer Mandate compliance Employer completes the forms Report in 2016 for 2015 coverage Follows W-2 reporting timelines Each control group with employees must

complete the forms and adhere to Employer Mandate provisions

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2015 Impact: The “C” FormsACA Update

Who do I report on?• Full time employees covered• Full time employees not covered• Part time employees covered• Do not report on part time employees

not covered

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Penalty for 6056 ReportingACA Update

Fail to File in a timely fashion with IRS • $100 per return…WAIT! Increased to $250

in June of 2015!• Maximum $1.5 million…WAIT! NOW $3

million First year transition grace• No penalty if you made a good faith effort

to comply but filed incorrect or incomplete information

• No grace or transition relief for failure to timely file

Important tax forms with potentially serious financial consequences

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2015 Impact: Filing TimelineACA Update

2015 – Form 1095 (B and C)• Due February 1, 2016

2015 – Form 1094 (B and C)• Due February 29, 2016 if filing paper• Due March 31, 2016 if filing electronically

– Greater than 250 reports must be filed electronically

• Same due dates as Forms W-2 and W-3

Cadillac Tax

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Cadillac Tax - 2018ACA Update

New guidance July 30, 2015• Who will be liable to pay the excise tax?• How will the tax be allocated among

taxpayers?• How the tax will be paid?• Who is the employer in control groups?• Comments on proposed accepted till

10/1/15 Tax applies if aggregate cost of applicable

employer-sponsored coverage exceeds an annually adjusted statutory dollar limit• Tax on excess benefit above statutory

limits• 40% non-deductible Excise Tax - IRC

49801

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Cadillac Tax - 2018ACA Update

2018 tax threshold• $10,200 for self-only coverage• $27,500 for “other than self-only” coverage

Aggregation of the dollars spent for:• Medical coverage for active employees• Medical coverage for former employees,

including COBRA and retirees• Flexible Spending Account employer

contribution• Health Savings Account, or MSA, employer

contribution• HRA employer contribution– still waiting

regulatory explanation If the above adds up to less than $10,200 – No

tax Greater than $10,200 – 40% tax on portion

above the threshold

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Cadillac Tax - 2018ACA Update

Who pays tax?• Coverage provider

‐ Fully insured plans - Insurer (carrier) pays

‐ HSA – Employer pays‐ Self-insured plans - Not clear whether

TPA or employer pays in SI plans How is tax paid?• Employer advises coverage provider of

persons with excess benefit and amount in excess of threshold for tax calculation

• Coverage provider pays tax

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Cadillac Tax - 2018ACA Update

Very unpopular Still a lot of comments to be received and

regulation to be written Currently Congress has passed bills to

repeal and Presidential hopefuls are lining up in agreement

Likely repeal before 2018 Election year!

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Final Thoughts

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Legislative Work to Repeal or Replace the ACAACA Update

Bill before Congress allowing HRA reimburse premium/medical service payment tax-free

Eliminate entire reimbursement vehicle prohibition and return to former rules

Support to repeal the Cadillac Tax House Republicans lawsuit against ACA

moves forward 10/01 – Congress passed bill repealing the

ACA provision expanding small group employer definition to 100 lives (per ACA applicable large employer FTEE counting)• Saves 50-99 size employer money• Continues current medical plans

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Website BookmarksACA Update

GuideStone.org/HealthReform Health care reform section of website:• Health Care Reform Videos!• FACT Sheets• Employer calculator for counting

employees• Reimbursement vehicle section• Individual Mandate and exchange

sections• Updated ACA Overview• Sign up for email alerts as materials

continue to be modified

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Website BookmarksACA Update

IRS.gov/aca• http://www.irsvideos.gov/ACAInformati

onReportingLargeEmployersIRC6056/‐ Webinar explaining how to

complete the forms• http://

www.irs.gov/Affordable-Care-Act/Employers/Information-Reporting-by-Applicable-Large-Employers‐ Information Reporting by ALE

• http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Reporting-of-Offers-of-Health-Insurance-Coverage-by-Employers-Section-6056‐ 6056 Reporting Q&A

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Serving Those Who Serve the Lord

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ACA UPDATE

The preceding information is general in nature and is intended to keep you apprised of certain important developments and is not intended to be legal advice.This information may be subject to interpretation or clarification over time, so we cannot guarantee its accuracy or how it might be determined to apply in certain situations.However, we hope it will provide you a useful frame of reference as you endeavor to carry out your responsibilities and serve your employees.

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QUESTIONS?

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