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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 Slide 2 Questions? Just stop me and ask. this is more fun when you participate. Slide 3 Deadlines & Regulations 20102011201220132014 Slide 4 Timeline 2010: Grandfathered Status, Dep Children, SB Tax Credit 2011: MLR, Trend Increases2012: SBC, W-2 Reporting 2013: FSA, Tax Increases for highly-comp individuals 2014! Exchanges, Mandates Slide 5 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 pending with private employers related to the mandate and religious freedom Likely headed to Supreme Court 2010 Slide 6 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: its not how your group does its how that carriers 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 2011 Slide 7 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 2011 Slide 8 Receive Rebate? Determine % from EE Contributions ER Keeps their Portion EE Portion Former EEs/Participant s $20 or More Send Check, W-2 Less than $20 Add to current EE Share COBRA Continuants $20 or MoreSend CheckLess than $20 Add to current EE Share Current EEs Return their share at renewal with lower EE contributions Slide 9 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 2011 Slide 10 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 2012 Slide 11 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 2012 Slide 12 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 EEs) 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 2012 Slide 13 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. 2012 Slide 14 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 2012 Slide 15 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 subsidized coverage through the HIM Not eligible if employer offers coverage to their employees Employer info to assist with applying for coverage in the Marketplaces Enforced by USDOL Wage & Hour Division 2013 Slide 16 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. 2013 Slide 17 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 2013 Slide 18 2014 is Nearly Here Slide 19 Individual Mandate All American citizens and legal residents to purchase qualified health insurance coverage. Exceptions (which really arent 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 2014 Slide 20 Individual Mandate Were you insured for the whole year through a combination of any of the following sources? Medicare Medicaid or the Childrens Health Insurance Program (CHIP) TRICARE (for service members, retirees, and their families) The veterans 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 2014 Slide 21 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. 2014 Slide 22 Individual Mandate But it could be even higher 2014 Slide 23 Health Insurance Marketplaces 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 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) 2014 Used to be known as Exchanges officially changed 1/16/13 (couldnt translate into Spanish) Slide 24 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 2014 Slide 25 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. 2014 Slide 26 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 2014 Slide 27 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 Coverage Levels Metal TierActuarial Value Target* Platinum90% Gold80% Silver70% Bronze60% Tax credits and subsidies are tied to the Silver plan More expensive Less expensive 2014 Richer benefits Less Rich Benefits Slide 28 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 Well provide you language for this purpose 2014 Slide 29 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 2014 Slide 30 Premium Subsidy/Advance Tax Credit 2014 Slide 31 Who falls where? Family size Expanded Medicaid Health-care exchange Monthly costs for Household Coverage 1 Up to $15,320$15,320 - $45,960$25.53 - $363.85 2 Up to $20,679$20,679 - $62,040$34.46 - $491.15 3 Up to $26,039$26,039 - $78,120$43.40 - $618.45 4 Up to $31,399$31,399 - $94,200$52.33 - $745.75 5 Up to $36,759$36,759 - $110,280$61.26 - $873.05 6 Up to $42,119$42,119 - $126,360$70.20 - $1,000.35 7 Up to $47,479$47,479 - $142,440$79.13 - $1,127.65 8 Up to $52,839$52,839 - $158,520$88.06 - $1,254.95 To see what the subsidy amounts look like: http://healthreform.kff.org/SubsidyCalculator.aspx 2014 Slide 32 Role of Employer Information Employers will have to provide information to Marketplaces to assist in determining an employees 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? 2014 Slide 33 Small Employer Options New Market Options AHB Marketplace SHOP Marketplace Small Group Market 2014 Slide 34 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 2014 Slide 35 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 2014 Slide 36 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 2014 Slide 37 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 whats the real impact? 2014 Slide 38 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 Dont ignore the gotcha dates weve already seen December 27, 2012 May 3, 2013 Our advice: No simple answers well 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. 2014 Slide 39 Employer Mandate There is no true requirement to buy: Pay or Play Dont offer coverage: pay a penalty If you do offer coverage, then Employees cant 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 2014 Slide 40 If over 50 FTEs Really only one question: Well get there in a second 2014 Slide 41 Applicable Large Employer? 2014 Common Ownership/Control Employer 1Employer 2Employer 3 30+ Hours 1-29 hours FTEs Slide 42 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 0-20% Rarely found to have common ownership 20-50% Assumed to not have common ownership Burden on employer to show why there is common ownership 50-80% Assumed to have common ownership Burden on employer to show why there is NOT common ownership 80-100% Common ownership 2014 Slide 43 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 2014 Slide 44 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 2014 Slide 45 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: 2014 Vacation Holiday Illness Incapacity/disabi lity Layoff jury duty military duty leave of absence Slide 46 Owner All other employees Work same number of hours each week Work 30 or more Work less than 30 hours Work different number of hours each week Seasonal Partial Year Employees Independent Contractors Temporary Employees Sorting employees 2014 Salary or Hourly 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 cant use for purpose of avoiding coverage) Slide 47 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 2014 Slide 48 Measurement Period Stability Period Administrative Period 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 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 2014 Slide 49 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... 2014 Slide 50 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 2014 Slide 51 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 thats a giveaway the persons an employee. 2014 Slide 52 Independent Contractors Other giveaways They dont have a business license They dont 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 theyre independent contractors, and IRS/DOL disagree: Penalties for not offering coverage Penalties and interest for not paying your share of FICA Workers compensation liability 2014 Slide 53 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 Cant use temp firm to split time either to avoid hitting hours limit Employed by outside temp agency (and no common ownership) Temps wont 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 dont have control over the employee client does Carefully read the language that they arent trying to transfer responsibility to provide coverage 2014 Slide 54 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 2014 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 Slide 55 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 2014 Slide 56 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 2014 Slide 57 Were over 50, now what? 2014 Offer health benefits to EEs who work 30+ hours Dependent children under 26 Not required: Spouses What counts as health benefit? Minimum Benefit Value Plan Fully-insured or self-funded But not Slide 58 What doesnt 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 2014 Slide 59 If I dont offer coverage? 2014 Credit for 30 $2,000 per FT Employee Nothing for PT EEs Pay a Penalty Slide 60 If I dont offer coverage? 2014 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 Slide 61 If I dont 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 it and then pay $20,000 2014 Slide 62 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? Doesnt matter what employee might have to pay to cover their dependents Does it pass any one of the three safe harbors? 2014 Slide 63 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 employees 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 didnt pass any of the tests but could be fixed 2014 Slide 64 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 2014 Slide 65 Unaffordable Coverage Penalties if unaffordable coverage $3,000 per affected employee annual penalty (no reduction) Capped at the employers 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 2014 Slide 66 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 employers 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 2014 Slide 67 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 dont comply with minimum benefit value standard Plan must cover 2014 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 Slide 68 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 2014 Slide 69 MBV: 72.3% Slide 70 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 an employee 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. 2014 Slide 71 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 2014 Slide 72 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 health coverage through the exchange 2014 Slide 73 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 2014 Slide 74 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 doesnt eliminate reporting mandates Weaken unionization efforts 2014 Slide 75 What if I dont currently offer benefits? A time to talk strategy Can I offer a benefit plan that meets minimum benefits and contribution limits that is less expensive than penalty? 2014 I offer to some but not all I dont offer to anyone today Offer 60% Plan $4,000 deductible No Copays 100% Coinsurance EEs pay $90/mo Some will waive to not pay for coverage Others bc benefits not rich enough Net: Less than Penalty Penalty after deduction vs. excise tax after paying income taxes Slide 76 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 doesnt complete paperwork, then there is no violation by the group 2014 Slide 77 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 employees 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 employees period of employment immediately preceding their last period of time without some hours of service 2014 Slide 78 So now what? Slide 79 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 Slide 80 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 Slide 81 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 well 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 Slide 82 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 youre 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. Slide 83 Questions? Chris Harrison csharrison@ebenconcepts.com csharrison@ebenconcepts.com David C. Smith dcsmith@ebenconcepts.com dcsmith@ebenconcepts.com