Employer Tactics:
Affordable Care Act
in 2014 and Beyond
Consumer Perceptions
Consumer Perceptions
Overview
Employer Mandate
Fees/Plan Design Changes
Reporting and Disclosure
Strategies and Cost Containment
Employer Mandate
“Pay or Play”
Three important questions:
1) Are we subject to the mandate and have to offer
insurance?
– Do we have more than 50 FT + FTEs?
2) To whom do we have to offer coverage?
– Full-time employees
– Part-time employees
– Variable/seasonal employees
– Leased/temporary staffing employees
3) What kind of coverage do we have to offer?
– Minimum value
– “Affordable”
Question #1 – Are we a large employer?
FT + FTE
=
Total employees for that calendar month
Total PT hours
120
=
# of Full-Time Equivalents (FTEs) for
that calendar month (no rounding)
=
Average # of FT employees for that year
(round down)
Add 12 month totals
12
Question #1 – Are we a large employer?
Company A has 75 employees; 25 full-time employees and
50 part-time employees. The part-time employees each
work three six-hour shifts a week (18 hours/week), for a
total of 3,600 hours in May (18 X 50 X 4).
3,600 / 120 = 30 FTEs
25 FT + 30 FTE = 55 total full-time employees (for PPACA)
Question #1 – Are we a large employer?
“Hour of Paid Service”
“For employees paid on an hourly basis, employers must calculate actual hours of
service from records of hours worked and hours for which payment is made or due for
vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or
leave of absence.”
“For employees not paid on an hourly basis, calculate under any of the following three
methods:
(1) counting actual hours of service [same as above];
(2) using a days-worked equivalency method whereby the employee is credited with
eight hours of service for each day for which the employee would be required to be
credited with at least one hour of service under these service crediting rules; or
(3) using a weeks-worked equivalency of 40 hours of service per week for each week
for which the employee would be required to be credited with at least one hour of service
under these service crediting rules.” - 29 CFR 2530.200b-2(a)
We are still awaiting guidance on issues with varying pay structures
(i.e. – piece rate, commission, per-mile)
Question #1 – Are we a large employer?
Remember!
Seasonal Employee Exception
26 USCA § 4980H(c)(2)(B)
(i) In general.--An employer shall not be considered to employ more than 50
full-time employees if-(I) the employer's workforce exceeds 50 full-time employees for
120 days or fewer during the calendar year, and
(II) the employees in excess of 50 employed during such 120day period were seasonal workers.
Definition of seasonal workers - labor is performed on a seasonal basis
where, ordinarily, the employment pertains to or is of the kind exclusively
performed at certain seasons or periods of the year and which, from its
nature, may not be continuous or carried on throughout the year – employers
may used “reasonable good-faith interpretation” of seasonal until further
guidance is issued
Question #1 – Are we a large employer?
Remember!
Seasonal Employee Exception
Controlled Group Rules
(1) Parent-subsidiary controlled group - One or more chains of
corporations connected through stock ownership with a common parent
corporation if-(B) the common parent corporation owns stock possessing at
least 80 percent of the total combined voting power.
(2) Brother-sister controlled group - Two or more corporations if 5 or
fewer persons possessing more than 50 percent of the total combined
voting power of all classes of stock entitled to vote
(3) Combined group of parent-subsidiary and brother-sister
26 USCA § 414
26 USCA § 1563
Question #1 – Are we a large employer?
Remember!
Seasonal Employee Exception
Controlled Group Rules
Transitional Relief – 6 Month Look Back for 2015
Temporary/Leased Employees
Union Employees
1099 Contractors
When do we have to comply?
Question #1 – Are we a large employer?
2015 “Mid-Size” Employer Exemption
•
Applicable large employers that have fewer than 100 full-time employees will have an
additional year, until 2016, to comply with the pay or play rules. Provided that:
1) The employer must employ a limited workforce of at least 50 full-time employees
(including full-time equivalent employees, or FTEs) but fewer than 100 full-time
employees (including FTEs) on business days during 2014;
2) During the period beginning on Feb. 9, 2014, and ending on Dec. 31, 2014, the
employer may not reduce the size of its workforce or the overall hours of service
of its employees in order to satisfy the workforce size condition; and
3) During the coverage maintenance period (that is, the period ending Dec. 31,
2015, or the last day of the plan year that begins in 2015), the employer may not
eliminate or materially reduce the health coverage, if any, it offered as of Feb. 9,
2014.
In addition, the employer must provide an appropriate certification
stating that it meets all of the eligibility requirements.
Employer Mandate
“Pay or Play”
Three important questions:
1) Are we subject to the mandate and have to offer
insurance?
– Do we have more than 50 FT + FTEs?
2) To whom do we have to offer coverage?
– Full-time employees
– Part-time employees
– Variable/seasonal employees
– Leased/temporary staffing employees
3) What kind of coverage do we have to offer?
– Minimum value
– “Affordable”
Question #2 – Who gets offered coverage?
To fall within the PPACA safe harbor, you are required to set a
specific schedule of when you will
(1) measure employee hours,
(2) review measurements, and
(3) offer insurance regardless of hours worked during that period.
Question #2 – Who gets offered coverage?
Full-time Employees
Employees expected to work more than 30 hours/week must be
offered coverage and cannot have more than a 90-day waiting
period before coverage takes effect.
- Standard Measurement Period (look-back)
- Administrative Period
- Stability Period
Your Insurance Cycle
Ongoing Employees
Combined
 The periods overlap so that employee FT status is continually being
monitored for the following Stability Period
 Renewal stays at the same date from year to year
All periods must be uniform for employees within the same category
You may distinguish EE categories based on
1) Collectively bargained EEs and non-collectively bargained;
2) Salaried EEs and hourly EEs;
3) EEs of different entities (parent/subsidiary);
4) EEs located in different states.
Question #2 – Who gets offered coverage?
Full-time Employees
Variable Hour/Seasonal Employees
What if we don’t know how many hours the employee will work?
- Initial Measurement Period
- Administrative Period
- Stability Period (same as ongoing employees)
- Standard Measurement Period Crossover
Unsure if new hire will be FT or PT?
New Hire
↑ New Hire Becomes Ongoing EE
Average hours during IMP > 30/wk or 130/month?
- No? Then no coverage offered and hours will be reevaluated at the end
of SMP 2
- Yes? The coverage must be offered and begin before the first calendar
month beginning on or after the 1st anniversary of the EE’s start date.
Coverage must last through ASP regardless
of EE status at the end of SMP 2
Question #3 – What kind of coverage do we have to offer?
Minimum Value
60% or “Bronze” plan – tested actuarially
Coverage must be “affordable”
No more than 9.5% of household income for self-only coverage*
Safe Harbors
- W-2 – Do premiums exceed 9.5% of W-2 Box 1 income?
- Rate of Pay – Do premiums exceed 9.5% of EEs rate of pay
multiplied by 130 hours (as of the first day of coverage)?
- Federal Poverty Level – Do premiums exceed 9.5% of the
FPL divided by 12?
*Employers must offer dependent coverage, but there is no
“
“affordability” test attached & no requirement to offer spouse/family
coverage
Penalties (non-tax deductible)*
 $2,000 per full time employee (minus first 30)
 Employer does not offer coverage to all, or substantially all (>95%),
of full time employees and their dependents
 AND at least one full time employee receives federal insurance
subsidies
 $3,000 per subsidized full time employee
 Employer offers coverage but it is “unaffordable” or does not meet
the 60% minimum value test
 AND at least one full time employee receives federal insurance
subsidies
 Lesser of:
 $3,000 per FTE receiving subsidy
or
$2,000 per FTE (minus first 30)
*(annual penalties calculated monthly and pro-rated across controlled groups)
Penalties (non-tax deductible)
Transitional Relief for 2015
 $2,000 per full time employee (minus first 80)
 Employer does not offer coverage to all, or substantially all (>70%),
of full time employees and their dependents
 AND at least one full time employee receives federal insurance
subsidies
Fees
All Plans
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2014 Plan Design Changes
All Plans*
 $6,350/$12,700 maximum out of pocket
– Now includes ALL mechanisms of cost-sharing
 Clinical trials (only have to pay for “routine services”)
 The term “approved clinical trial” is defined in the statute as a
clinical trial that is conducted in relation to the prevention,
detection, or treatment of cancer or other life-threatening
disease or condition and is one of the following:
1. A federally funded or approved trial
2. A clinical trial conducted under an FDA investigational new drug application
3. A drug trial that is exempt from the requirement of an FDA investigational
new drug application
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 No pre-existing condition exclusions
 No lifetime or annual limits on Essential Health
Benefits
 Maximum 90 Day waiting period
 Automatic Enrollment (Only if 200+ EEs – delayed
indefinitely)
*Applies on renewal date in 2014
Plan Design Changes
Small Groups*
• Composite rating (can only ask age, location, tobacco use)
3:1 Age bands
• Plan must cover essential health benefits (EHB) – includes
pediatric dental and vision
• $2,000/$4,000 maximum deductible (REPEALED – 4/1/14!)
*Applies on renewal date in 2014
Plan Design Changes
Small Groups
PPACA
In connection with a group health plan, the term “small employer” means an employer
who employed on average at least 1 but not more than 100 employees on business
days during the preceding calendar year and who employs at least 1 employee on the
first day of the plan year. (The term “large employer” means, in connection with a
group health plan, an employer who employed an average of at least 101 employees
on business days during the preceding calendar year and who employs at least 1
employee on the first day of the plan year.)
- For plan years beginning before January 1, 2016, a state has the option of
defining a small employer as an employer who employed on average at least
1 but not more than 50 (instead of 100) employees and defining a large
employer as an employer who employed on average at least 1 but not more
than 51 (instead of 101) employees.
Texas
Senate Bill 1332 amended Texas law to allow the inclusion of part-time employees to
classify businesses as large or small employers. It allowed the definitions to be based
on total number of employees instead of the previous “eligible” employees, which
were those who worked at least 30 hours per week. This brought the state in line with
federal definitions regarding how businesses are sized for the Affordable Care Act &
HIPAA. The change in law applies only to health benefit plans delivered, issued for
delivery, or renewed on or after January 1, 2014.
Disclosure Requirements
By October 1, 2013, all employers subject to the FLSA should have provided
Exchange notices to their employees, and, moving forward, must do so to all
new employees within 14 days of hire.
In general, the Exchange notices must:
 Inform employees about the existence of the Exchange and describe the
services provided by the Exchange and the manner in which the employee
may contact the Marketplace to request assistance;
 Explain how employees may be eligible for a premium tax credit or a costsharing reduction if the employer's plan does not meet certain
requirements;
 Inform employees that if they purchase coverage through the Exchange,
they may lose any employer contribution toward the cost of employerprovided coverage, and that all or a portion of this employer contribution
may be excludable for federal income tax purposes; and
 Include contact information for the Exchange and an explanation of appeal
rights.
» Employers may distribute the notice electronically, provided
that they use the DOL’s Electronic Distribution Safe Harbor
provisions.
» Model Notices are available on the EBSA website
Reporting Requirements
According to Section 6056 (6055 for issuers or self-funded plans), large
employers will have to report certain information to the IRS including:
 The employer’s name, address and EIN, the name and telephone number of the
employer’s contact person and the calendar year for which the information is reported;
 A certification as to whether the employer offered its full-time employees (and their
dependents) the opportunity to enroll in minimum essential coverage under an eligible
employer-sponsored plan by calendar month;
 The number of full-time employees for each month during the calendar year;
 For each full-time employee, the months during the calendar year for which coverage
under the plan was available;
 Each full-time employee’s share of the lowest-cost monthly premium (self-only) for
coverage providing minimum value offered to that full-time employee, by calendar month;
and
 The name, address and TIN of each full-time employee during the calendar year and the
months the employee was covered under an eligible employer-sponsored plan.
The Future
Employer Strategies
Assessing your risks/liabilities
 Are you currently offering insurance?
– Will you be required to in 2015?
– Will there be transitional relief for fiscal year plans?
– How many employees will be eligible?
 Does it pass the affordability and minimum value tests?
 What is the income level of your employee base?
 Between 100% and 400% of FPL?
 Would you pass nondiscrimination testing if it were in
effect today?
 Will you be subject to the “Cadillac” tax?
The Future
Employer Strategies
Plan for the future
 Pay?
 Penalties (non-deductible)
 Cost shift to employees
 Increased compensation
 Employee recruitment/retention
 Play?
 Budget for new costs (participation “penalty”)
 Change in plan structure (Bronze or MEC Plan)
 Penalties
 Limit potential liabilities
 Reduce claims/costs
 Spectate?
 <50 full-time employees (early renewal up until 10/1/14?)
Reducing Cost
Employer Strategies
Partially Self-Funded/Level Funding
Source: JP Farley
Reducing Cost
Employer Strategies
Partially Self-Funded/Level Funding
Source: Cigna
Reducing Cost
Employer Strategies
CDHP with Patient Advocacy Program
Source: Compass Case Study of 6000 Life Group
Reducing Cost
Employer Strategies
Minimum Essential Coverage (MEC) or “Skinny” Plans
 Self-funded to avoid state/federal mandates
 Usually only cover preventative care with some doctor’s visits
 May offer RX co-pays
 Often sold alongside voluntary hospital indemnity plans
 May or may not be offered alongside full medical plans
Source: Pan American Life
Reducing Cost
Employer Strategies
Defined Contribution/Private Exchanges
Source: The Horton Group
Reducing Cost
Employer Strategies
 Two kinds of wellness programs:
 Participatory wellness programs
 Health-contingent wellness programs (outcomes-based)
 Regulations have increased the maximum reward
under a health-contingent wellness program from 20%
to 30% of the cost of coverage and further increased
the maximum reward to 50% for wellness programs
designed to prevent or reduce tobacco use
Resources
www.dol.gov/ebsa/healthreform/
www.healthcare.gov/
www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions