ARE YOU PREPARED? June 2013porkcdn.s3.amazonaws.com/sites/all/files/documents/ConferencesA… ·...

ARE YOU PREPARED?

June 2013

Leah M. Wurth,

Gallagher Grace/Mayer

Employee Benefits Consultant

2 ©2012 Gallagher Benefit Services, Inc. 2 ©2013 Gallagher Benefit Services, Inc.

• Ten PPACA Traps for the Unwary

• 2013 PPACA Requirements

• Preparing for 2014 » Upcoming 2014 Requirements

» Spotlight on Fees

• Understanding the Individual Mandate

• 2014 Exchanges » The Marketplace, Open Enrollment, Rates, Federal VS State Exchange

• Employer Shared Responsibility » Applicable Large Employer

» Transition Rules

» Definition of Minimal Value & Affordable Coverage

» Penalties & How to calculate

• Medicaid Expansion

» Potential employer Impact

• Preparing for the Financial Impact – Action Plan


Not Planning For The Potential Financial Impact In 2013 Can Cost You In 2014

- Large Employers (50 + FTE) who do NOT offer “affordable” health insurance that provides “minimum value” to all employees working on average over 30+ hours/ week will face potential penalties

- It is key to determine your potential impact and develop a plan and strategic approach to offer or modify how you currently offer health insurance


Failing To Plan For The 2014 Mandate Plan Design Changes Required Under PPACA

- Beginning in 2014 PPACA requires certain plans changes including limiting employee waiting periods to no more than 90 days, eliminating annual dollar limits on Essential Health Benefits, mandatory coverage of clinical trials for cancer & life threatening diseases and eliminating pre-existing condition exclusions for all enrollees


Not Amending You Healthcare Flexible Spending Account Plan Documents

- Effective for plans starting on or before Jan 1, 2013, employee salary reduction contributions to health flexible spending accounts will be limited to a maximum $2,500 limit. Any plan amendment to conform a cafeteria plan to the $2,500 limit must be adopted on or before Dec 31, 2014 and may be effective retroactively, provided it acts in accordance with this guidance for plans after Dec 31, 2012


Failing To Amend Your Cafeteria Plan Documents For A One-time Special Change In Status

- Within the cafeteria plan change in status regulations, an employer may amend

one or more of its written cafeteria plans to permit either or both of the following changes in salary reduction elections:

(1) Permit an employee who elected to pay for coverage under a health plan with a fiscal plan year beginning in 2013 to prospectively revoke or change his or her election once, without a change in status

(2) Permit an employee who failed to make a salary reduction election through the employer’s cafeteria plan to make a prospective salary reduction election for accident and health coverage on or after the first day of the 2013 plan year, without regard to a change in status

Such a change would permit employees to drop employer-sponsored coverage mid-year to obtain coverage through an Exchange or add coverage under the employer’s plan to comply with requirements under the “individual mandate.”


Overlooking The Need To Plan For Distribution Of The New Exchange Notice

- Originally employers were slated to issue a notice to ALL employees about the new state and federal Health Insurance Exchanges by March 1, 2013, guidance has provided a delay until a date closer to the October 2013 open enrollment


Forgetting About Grandfather Status

- If your organization offers a group health plan that has been able to retain Grandfathered status there are certain PPACA requirements that may begin in 2014 for you as well; such as non-discrimination rules for fully-insured plans, quality of care reporting, preventative care mandates and patient protections, including applicable notice rules


Ignoring The Potential Impact Of New Wellness Regulations Under PPACA

- As more and more employers look for ways to control health plan cost, increasing numbers are turning to wellness and health management programs to improve employees’ health and responsibility for the health to thus lower plan cost and improve over wellbeing. Under the proposed PPACA regulations employers can change existing contribution limits to incent employees to maintain good health


Waiting To Develop Measurement And Stability Periods Under PPACA

- Employer may face penalties under PPACA beginning Jan 1, 2014 for failure to offering affordable coverage and provide minimum value health insurance to all full-time (avg 30+ hrs/ week).

Regulations issued in late 2012 provide safe harbor methods for determining whether employees are seasonal or variable hour employees and which employees constitute that of a “full-time” employee for purposes of the employer shared responsibility


Disregarding New Fees And Taxes Under PPACA

- PPACA introduced a number of new fees and taxes with varying due dates and calculation methods, most notably

- Patient Centered Outcomes Research Fees (or Comparative Effectiveness Research Fee) PCORI or CER; established to advance comparative effectiveness research related to patient-centered outcomes

- Transitional Reinsurance Fee meant to provide excess coverage for high risk individual in the exchanges

- Payroll Tax on High Income Earners there is an additional payroll tax for compensations in excess of $200,000 single/ $250,000 married filing jointly


Failing To Provide Required Notices Under PPACA

- PPACA has created over a dozen new notice requirements covering areas from new appeals procedures to grandfather status to information about Exchanges, not all new notices apply to all employers, but some do. And Properly providing the correct notices is crucial to avoid audit penalties


• Summaries of Benefits & Coverage – Patient Protection and Affordable Care Act (PPACA) require accurate description of benefits and coverage

• Annual contributions to FSA limited to $2,500 » UPDATE: Effective with plan years

beginning on or after January 1, 2013

» UPDATE: Cafeteria plan documents must be amended by December 31, 2014

• Employers must amend cafeteria plan documents to reflect this change

• Additional Medicare Payroll Tax = 0.9% on high-income workers*


• Employer notice explaining Exchange

» Beginning 10/1/13, state and government run exchanges begin, PPACA requires employers to provide notice to employees late summer/fall 2013

• W-2 Reporting Requirements

» Employers filing over 250 W-2s from the preceding year must be reporting the cost of employer-sponsored healthcare coverage

• Grandfathered Plan Determinations

• Begin measurement periods for determining full-time employee status “Counting Hours”


6/23/10 9/23/10 1/1/11 1/1/12 1/1/13 1/1/14+

•OTC drug reimbursements

•HSA penalties

• Employee notification requirements

• Coverage expansion mandates

• Patient protections

• Early retiree reinsurance

•High-risk pools

• Employer and individual mandates

• Insurance exchanges

• Patient protections

• Automatic enrollment?

• “Cadillac” excise tax (2018)

• Annual Health Insurer Fee

• Transitional Reinsurance Fee

• W-2 Reporting (begin implementation for 2012 W-2s)

• Internal and External Claims and Appeals Procedures

• “CLASS” LTC Program (suspended)

• SCOTUS Decision

• Women’s Preventive Services (plan years beginning on or

after August 1, 2012; certain exemptions apply)

• Medical Loss Ratio Rebate Distributions (August 2012)

• Summary of Benefits and Coverage (open enrollments

beginning on or after 9/23/2012)

• Quality of Care Reporting (guidance was due March 2012)

• Comparative Effectiveness Research Fee

• FSA limit to $2,500

• Itemized medical expense deduction changes

• Medicare tax increase

• Part D drug subsidy deduction eliminated

• Employee Exchange notification


• No waiting periods longer than 90 days

• Elimination of Pre-existing Condition Exclusions

• No Annual Limits for Essential Benefits

• Non-grandfathered plans:

» Cannot deny participation in a clinical trial

» Cannot discriminate based on health status

• Small group insured plans

» Must provide essential benefits

» Deductibles must not exceed limits for qualified high deductible health plans ($2,000 individual/$4,000 family in 2014);


• Out-of-pocket limits cannot exceed applicable limits for qualified high deductible health plans ($6,250 individual/$12,500 family for 2013)

• Automatic Enrollment » Employers with over 200 full-time employees must

automatically enroll employees in employer-sponsored group health plan coverage beginning in 1/1/14 (effective date TBD)

• Employer Shared Responsibility » Beginning in January 2014, applicable large employers

who average 50+ Full-Time Equivalents (FTE) during the preceding year will be required to offer affordable group health coverage or pay a penalty


• Comparative Effectiveness Research Fee (“CER” Fee) » Due by July 31 of following year » Effective for plans with plan or policy years ending after 9/30/12 » First payment due 7/31/2013 » Report on Form 720 » Amount of fee

• $2 per participant/enrollee annual fee

• $1 for fiscal year 2013 » Finances Patient-Centered

Outcomes Research Institute • Fee also referred to as

“PCORI” Fee » Fee ends in 2019

• Plan years ending after 9/30/19 are not included

» Guidance issued April 2012 » UPDATE: final regulations issued December 2012


• Transitional Reinsurance Fee

» Intended to stabilize premiums by partially offsetting claims for high-cost individuals in non-grandfathered individual market plans

» Insured and self-funded plans • Fee paid by TPA in case of self-funded plans, but plan responsible

for funding payment

» Payments due annually (submit enrollment count by 11/15, HHS responds by later of 15 days later or 12/15, payment due 30 days later; e.g., 1/15/2015, but could be as early as 12/31/2014)

» Payment amount proposed regulations set fee amount at annualized rate of $63/member annually


OR OR

Exception

Penalty

Minimum Essential Coverage

Premium Assistance


Year

• 2014

• 2015

• 2016

• After 2016

Flat Dollar Amount** (max of 300 % for family)

• $95

• $325

• $695

• $695, indexed for inflation in $50 increments

% of Household Income

• 1.0

• 2.0

• 2.5

• 2.5

*Capped at the national average of the annual cost of a bronze level health insurance plan, for the family size, offered through the state exchange. **Halved for dependents under age 18 (but do not halve when determining 300% cap on dollar amount for those NOT insured by taxpayer)

Penalty amount is the greater of*:

Penalty


Bronze Plan

Silver Plan

Gold Plan

Platinum Plan HEA

LTH

INSU

RA

NC

E EX

CH

AN

GE

Catastrophic Plan

Value of Benefits

& Household

Income

Medicaid

Spouse

Employer

With/Without Premium

Assistance


Employer Notice Call Center

Website Navigator


PR

OV

IDER

S

CH

OIC

E P

OO

L

Bronze Plan

Silver Plan

Gold Plan

Platinum Plan

Catastrophic Plan

CO

NSI

STEN

T M

AR

KET

RU

LE B

ASE

Large Group > 100 employees

Government Subsidy

Individuals

Small Group < 100 employees


To qualify for premium assistance credit, an individual must: • NOT be eligible for an employer-sponsored plan that is

affordable and has a minimum value

• Have a household income between 100% and 400% of the Federal Poverty Level

• NOT receive benefits through Medicare, Medicaid, CHIP, TRICARE, VA or other coverage as determined by HHS

• Be a citizen or legal immigrant

• Be a resident of the state where the Exchange is located

• NOT be claimed as a dependent on anyone’s tax return

• Purchase a qualified health plan through the Exchange (not including a catastrophic plan)

Premium Assistance


Initial open enrollment period from October 1, 2013 - February 28, 2014

In following years, annual open enrollment from October 15-December 7

Coverage effective January 1

HIPAA special enrollment rights apply


Charge the same premium as plans purchased outside of the Exchange

Rates will vary only by:

• Individual vs. Family Coverage

• Geographic area

• Age (no more than 3 to 1)

• Tobacco use (no more than 1.5 to 1)

Actual rates won’t be determined until closer to 2014

Exchange will determine eligibility for premium assistance credit to help pay premiums


No penalty applies!

Lesser of: • $3,000 per full-time EE

receiving tax credit*

Or • $2,000 per full-time EE

(minus first 30)

$2,000 penalty per full-time EE (minus first 30) if at least

one full-time EE receives the tax credit

No penalty applies!

Is coverage affordable?

Plan provides minimum required value?

Offering Minimum Essential Coverage?

* Only applies to full-time employees s with household incomes of between 100% and 400% of FPL

Have at least 50 FTEs?


• Transition Rules – Employers can utilize any 6-12 month period in 2013 to determine applicability for 2014 Employer Shared Responsibility

• Controlled Group Rules – Rules are similar to retirement plan testing utilized to aggregate ownership and avoid abuse

• How to determine if you are an Applicable Large Employer

» Aggregate the number of full-time employees and full-time equivalents (to determine FTE; total number of hours worked by variable hour employees, divided by 12, divided by 130) if sum is greater than 50 = Applicable Large Employer


• Full-Time Employee – Any employee working 30 hours or more per week or 130 hours per month

• Full-Time Equivalent (FTE) – Combination of employees who separately do not constitute full-time employees, but who constitute a full-time employee when aggregated

• Hourly Employees – Use actual hours of service and for which payment is owed

• Non-Hourly Employees – use (1) actual hours of service (2) days worked or (3) weeks-worked


• Non Citizen Employees

» Non citizen employees are considered common law employees and who are lawfully present must be counted for purposes of the employer shared responsibility rules in determining whether the “lawfully present” noncitizen employee is entitled to be offered coverage as a “full-time” employee

» Must be counted if they are (or are reasonably expected to be) present noncitizen employees for the entire enrollment period of an exchange

» Some may qualify as seasonal workers


• Penalty for failure to offer coverage

» If an employer is determined to be and Applicable Large Employer, such employer must offer and the opportunity to enroll all of it’s full-time employees and dependents (up to age 26)

» Spouses NOT listed as a requirement

• When is a penalty triggered

» Failure to offer minimum essential coverage to “substantially” all full-time employees (5% buffer) and ONE or more full-time employees subsequently acquires and receives premium assistance from an exchange


• Calculation for penalty for failure to offer coverage

» Penalty is assessed on a monthly basis

» Rate of 1/12th of $2,000 per full-time employee employed by the employer

» Less 30 “free” full-time employees

» Penalty to be indexed for cost of living adjustments

» Penalty is based on ALL full-time employees, not just those not offered coverage


• Penalty for failure to offer affordable coverage » Applicable large employer may be subject to a separate

penalty if coverage does not provide both “minimum value” and is not “affordable”

» Penalty triggered if coverage is either unaffordable or does not provide minimum value, and if one or more full-time employees are certified by an exchange to receive a premium tax credit or cost sharing reduction

» Affordable coverage is determined by the employee contribution for employee only coverage, which cannot exceed 9.5% of employees annual box W-2 wage for the calendar year

» Rate of Pay Safe Harbor Method – use employee’s computed monthly wages (multiply hourly rate of pay for each hourly employee by 130 hours per month)


• “minimal value” – Health coverage that fails to meet a 60% actuarial plan value (sharing 60% of the total allowed cost of benefit) will incur a penalty assessed to the employer only for each employee for whom is granted a subsidy on the governmental exchange.

• The penalty is calculated as 1/12 of $3,000 per month per employee for whom offered coverage was either unaffordable or did not meet minimal value standards, limited to a maximum penalty equal for failure to offer coverage (full-time employees less 30 * 1/12 of $2,000 per months)


• Upheld constitutionality of individual mandate

• Government has limited ability to penalize states for not expanding Medicaid

» 100% of Federal Poverty Level = Medicaid Eligible

» PPACA would have required states to expand Medicaid eligibility up to 133%* of FPL

» It is now effectively optional for states

*138%, with an adjustment allowed by federal law


Source: The Advisory Council, www.advisory.com, as visited January 15, 2013

Expand

http://www.advisory.com/


• Impact on employers where states say no » PPACA provides premium credits to eligible individuals and

families with incomes 100% - 400% of FPL to purchase insurance through the Exchanges

» Individuals with incomes 100% - 133%/138% of FPL (who might otherwise have been Medicaid beneficiaries pre-SCOTUS ruling) can buy federally subsidized coverage on the exchanges potentially triggering a penalty for employers (if affordability and/or actuarial value requirements are not met)

» Total federal subsidy spending could be greater than originally forecast

» Could result in increased number of employees who could potentially trigger an employer shared responsibility penalty under PPACA


Opportunities • Insurance carriers

restructure plans and networks

• State exchanges open in 2014

• Small business get tax credits beginning in 2014

• Employees become more knowledgeable about healthcare


Forecast impact of “Cadillac” tax 2018

Model “play”

scenario

Model “pay”

scenario

Model “play limited”

scenario

Estimate impact on EEs 2014

Estimate cost effect of near-term mandates on current plan

Project trend on current plan to 2014 and 2018 Now


Areas of Impact What Employers Must Do

FINANCIAL Forecast impact 1

Build a plan 2 STRATEGIC

Execute & communicate 3 OPERATIONAL


1. Forecast financial impact

2. Re-examine how benefits and compensation relate to organizational objectives, market position and reputation; what effect benefits have on productivity

3. Set up administrative process to identify and track employees for status as full-time, part-time, and variable. Also identify seasonal employees; Start counting hours NOW!

4. Set measurement and stability periods

5. Revise plan document eligibility language to cover applicable employees through the stability period


6. Focus on total rewards; communicate

7. Follow “Cadillac” tax developments to assess if change in strategy is needed in future

8. Reevaluate strategy and options once the reformed marketplace is in place and rules have been finalized

9. Continue current strategy of aggressively managing healthcare cost while increasing employee engagement and productivity; implement wellness and risk management programs to sustain total rewards costs.


Thank you!

The intent of this presentation is to provide you with general information regarding the status of, and/or potential concerns related to, your current employee

benefits issue. It does not necessarily fully address all your specific issues. It should not be construed as, nor is it intended to provide, legal or tax advice. Questions

regarding specific issues should be addressed by the client's general counsel, tax advisor, or an attorney

who specializes in this practice area.

ARE YOU PREPARED? June 2013porkcdn.s3.amazonaws.com/sites/all/files/documents/ConferencesA… ·...

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