ACA
Compliance
Your Top Ten List for
2014 and Beyond
Presentation by:
AON Risk Solutions
Dawn Montano
Assistant Vice President
6501 Americas Parkway NE, Ste 650
Albuquerque, NM 87110
(505) 889-6748
Dawn.montano@aon.com
1
Employer Mandate
and Penalties
Begin in 2015
Failure to Offer Penalty
• Employer does not offer
Minimum Essential Coverage
(“MEC”) to at least 95% of all
FTEs and their eligible
dependents, and
• At least one FTE enrolls in
Exchange and receives Federal
subsidy
– $2,000 per year for each FTE
(minus first 30 FTEs) within
controlled group entity
Or
Targeted Penalty
• Employer offers MEC to FTEs
but coverage is either
– “Unaffordable” or
– Not “minimum actuarial
value”
• $3,000 per year per each FTE
who enrolls in an Exchange and
receives a Federal subsidy
ACA – Employer Mandate Affordability Rules
•
Affordability Test
– Affordability test for purposes of the premium tax credit is based on the cost of
self-only coverage, even if the employee elects family coverage
– An employer-sponsored plan is affordable if the FTEs required contribution for
self-only coverage under the plan does not exceed 9.5% of the applicable
taxpayer’s household income for the taxable year.
• The IRS has issued three safe harbors for the purpose of determining
affordability
– W-2 safe harbor (current year W-2 [Box 1])
– Rate of pay safe harbor
– Federal poverty level line safe harbor – (9.5% of FPL is approximately
$1,100 per year – “safest choice” and allows for simple reporting)
How do you determine FTEs under the Look Back
Method?
Under the Look-Back Measurement Method, an employer
•
•
•
•
Must establish an Initial Measurement Period (IMP)
– No less than 3 months and no more than 12 months
May establish an Administrative Period
– No more than 90 days
Must establish a Standard Measurement Period (SMP)
– No less than 3 months and no more than 12 months
– Employer determines months in which SMP starts and ends
• Must be uniform
• Can use starting and ending payroll periods if additional rules are followed
Must establish a Stability Period
– Period of time for which FTE must be offered coverage
– Stability Period must follow and be associated with an IMP and SMP
2014 Transition Measurement Periods for Stability Periods Starting in
2015—Ongoing Employees


Employer wants to use a 12-month SP beginning in 2015
Employer may adopt a transition measurement period that is shorter than 12 consecutive months, but at least
6 consecutive months, and that begins no later than 07/01/2014 and ends no earlier than 90 days before the first day
of the plan year beginning on or after 01/01/2015
– Applies to employees as of the 1st day of the transition measurement period
– If an employee is hired during or after the transition measurement period, general Look-back rules apply
Transition Standard
Measurement Period
(04/15/2014–10/14/2014)
Does Not Work “FullTime”
Standard Measurement
Period #2
(10/15/2014–10/14/2015)
Works “Full-Time”
AP #1
10/15/14–
12/31/14
Standard Measurement
Period #3
(10/15/2015–10/14/2016)
Does Not Work “FullTime”
AP #2
10/15/15
–
12/31/15
Stability Period
(01/01/2015–12/31/2015)
Don’t Offer Coverage
Aon Hewitt | Health & Benefits
Proprietary & Confidential | April 30, 2014
AP #3
10/15/16
–
12/31/16
Stability Period #2
(01/01/2016–12/31/2016)
Offer Coverage (MV)
Stability Period #3
(01/01/2017–12/31/2017)
Don’t Offer Coverage
6
Look-Back Measurement Method Example—Ongoing Employees




Employer uses a 12-month SMP period that begins October 15 and ends October 14
Employer uses an AP from 10/15–12/31, following the end of the SMP
– During APs, employer “looks back” (see elbow arrows below) at total hours of service in SMP to determine if
employee was employed on average at least 30 hours/week
– Employee has 1,820 total hours of service during SMP #1; 1,820/52 weeks = 35 average hours/week
– Employee has 1,500 total hours of service in SMP #2; 1,500/52 weeks = 28.84 average hours/week
– Employee has 2,080 total hours of service in SMP #3; 2,080/52 weeks = 40 average hours/week
Employer offers coverage during a 12-month SP that equals the calendar plan year
Based on hours worked during the SMPs, employee is eligible for coverage in the 2015 plan year and the 2017 plan
year, but not eligible for coverage in the 2016 plan year
Standard Measurement
Period #1
(10/15/2013–10/14/2014)
Works “Full-Time”
Standard Measurement
Period #2
(10/15/2014–10/14/2015)
Does Not Work “Full-Time”
AP #1
10/15/14–
12/31/14
Standard Measurement
Period #3
(10/15/2015–10/14/2016)
Works “Full-Time”
AP #2
10/15/15–
12/31/15
Stability Period #1
(01/01/2015–12/31/2015)
Offer Coverage (MV)
Consulting | U.S. Health & Benefits
Proprietary & Confidential | 06/2014
AP #3
10/15/16–
12/31/16
Stability Period #2
(01/01/2016–12/31/2016)
Don’t Offer Coverage
7
Stability Period #3
(01/01/2017–12/31/2017)
Offer Coverage (MV)
Look-Back Measurement Example—New Variable Hour Employee
 Variable Hour Employee hired on May 10, 2015
– 12-month IMP beginning on date of hire (05/10/2015-05/09/2016)
– 1+ month AP from the end of the IMP through the end of the 1st calendar month beginning on or
after the end of the IMP
– During the AP, employer “looks back” (see elbow arrow below) at total hours of service in IMP
– 12-month SP
Initial Measurement Period
(05/10/2015–05/09/2016)
Consulting | U.S. Health & Benefits
Proprietary & Confidential | 06/2014
AP
05/10/2016–
06/30/2016
12-Month Initial Stability Period
(07/01/2016–06/30/2017)
8
Look-Back Method—Transitioning New Variable Hour E/ee to Ongoing
Employee

Variable Hour Employee hired on May 10, 2015; 12-month IMP begins 06/01/2015 and ends 05/31/2016
– During the AP (06/01/2016–06/30/2016), employer looks back at employee’s hours of service during the IMP
• Works “full-time” during the IMP (1,560 total hours/52 weeks = 30 average hours of service/week)
– Must be treated as a full-time employee and offered coverage during the entire, associated ISP (07/01/2016–
06/30/2017)
– Does not work “full-time” during his first SMP following (that begins after) his start date (10/15/2015–10/14/2016)
• During the AP (10/15–12/31), employer looks back at employee’s hours of service during the SMP
• Employee has 1,456 total hours of service during SMP; 1,456/52 weeks = 28 average hours of service/week
– Is not required to be offered coverage during remaining portion of SP for ongoing employees after the SMP
(07/01/2017–12/31/2017)
• Treat the employee as not a full-time employee only after the end of the ISP associated with the IMP
AP
Employee Hired 05/10/2015
Initial Measurement Period
(06/01/2015–05/31/2016)
Works “Full-Time”
AP
06/01–
06/30
12-Month Standard
Measurement Period
(10/15/2015–10/14/2016)
Does Not Work “Full-Time”
Consulting | U.S. Health & Benefits
Proprietary & Confidential | 06/2014
12-Month Initial Stability
Period
(07/01/2016–06/30/2017)
Offer Coverage (MV)
AP
10/15–
12/31
Stability Period
(01/01/2017–
06/30/2017)
Covered by Initial
Stability Period
9
Remainder of Stability
Period
(07/01/2017–
12/31/2017)
Don’t Offer Coverage
Look-Back Method—Transitioning New Variable Hour E/ee to Ongoing
Employee
Variable Hour Employee hired on May 10, 2015; 12-month IMP begins on start date
 AP from the end of the IMP through the end of the 1st calendar month beginning on or after the end of the IMP
 Does not work “full-time” during the IMP



– Employee has 1,456 total hours of service during IMP; 1,456/52 weeks = 28 average hours of service/week
Not required to be offered coverage during the ISP
Works “full-time” during his/her first overlapping or immediately following SMP; 1,560/52 weeks = 30 average hours of
service/week
Must be treated as a full-time employee for the entire SP that corresponds to that SMP
– Offer coverage during the entire SP that overlaps the portion of the first ISP (01/01/2017–06/30/2017)
•
Offer coverage 01/01/17–12/31/17
Employee Hired 05/10/2015
Initial Measurement Period
(05/10/2015–05/09/2016)
Does Not Work “Full-Time”
AP
12-Month Initial
Stability Period
(07/01/2016–
12/31/ 2016)
Don’t Offer
Coverage
12-Month Standard
Measurement Period
(10/15/2015–10/14/2016)
Works “Full-Time”
Consulting | U.S. Health & Benefits
Proprietary & Confidential | 06/2014
AP
Stability Period
(01/01/2017–12/31/2017)
Offer Coverage (MV)
Stability Period “cuts short” the ISP of
no coverage to 07/01/2016–12/31/2016
10
2
THE EMPLOYER
MANDATE AND
ELIGIBILITY
for Exchange Subsidies
Individual is not eligible for
subsidized coverage if offered
affordable health care coverage of
minimum value from an employer
• Employer must offer dependent coverage
(not spousal coverage) to employee to
avoid penalty, but coverage does not
have to be “affordable”
• Individual enrolled in employer-sponsored
MEC not eligible for a subsidy
– Regardless of whether coverage is
affordable or minimum value
What happens if an employed
individual is offered “affordable”
employee-only coverage, but family
coverage is “unaffordable”?
• Employee and family will not be eligible
for subsidy in the exchange
3
Proposed
Regulations
on Reporting Rules
Code Section 6055 requires
reporting to IRS by plan sponsors
and health insurers about health care
coverage offered to individuals and
requires statements to individuals
Code Section 6056 requires
employers to file a return with the
IRS about health care coverage
provided to FTEs and provide a written
statement to FTEs
When to File with IRS?
February 28, 2016 for 2015
coverage year
When to Provide to Individuals?
January 31 following calendar year
of coverage
When to File with IRS?
For 2015, March 1, 2016 or
March 31, 2016 (if filed electronically)
When to Provide to FTEs?
January 31 following coverage year
4
Transitional
Reinsurance
Fee Designed to
Stabilize Exchanges
Reinsurance fund stabilizes
insurers in exchanges during their
first three years in the event of losses
due to adverse selection
Fees are due in installments
Fees are required only for
“major medical coverage”
• 2014 per capita payment
($63) due in two installments
• 2015 per capita payment
($44) due in two installments
5
Cost-sharing
Limits
Start in 2014
Health plans must limit annual costsharing to same cost-sharing limits
• $6,350 (individual) and $12,700
(family)
as HDHP/HSA plans in 2014
• OOP limits apply only to
payments for essential health
benefits (“EHBs”)
Transition rule for 2014 for multiple
service providers
For 2015, medical and Rx
carve-out may use separate OOP
limits, as long as combined OOP limit
applicable to all EHBs does not exceed
maximum OOP limit
– Payments for non-network
providers and non-covered
services do not count
6
What Is—
And Isn’t—
Minimum Essential
Coverage?
Minimum Essential Coverage
does not include “excepted
benefits”
Excepted benefits don’t have
to comply with ACA group
market rules but won’t satisfy
mandates
•
FSA is an excepted benefit only if
employee has other health care coverage
available
–
FSA cannot exceed greater of
(1) 2 x salary reduction amount or
(2) $500 plus salary reduction amount
–
Must be offered through a Section 125
cafeteria plan
• Limited scope dental and vision benefits
• Disability coverage, AD&D coverage, liability
insurance, Workers’ Comp
• EAPs that do not provide significant benefits
in the nature of medical care or treatment
7
HRAs
and the ACA
HRAs must be integrated with
another ACA-compliant group
health plan in order to comply
with ACA group market reforms
• Stand-alone HRAs and employer
payment plans violate ACA rules
prohibiting annual dollar limits and
requiring 100% preventive care coverage
• Stand-alone retiree-only HRAs are not
subject to the ACA group market reforms
Previous guidance outlined
minimum value and nonminimum value options for an
HRA to be considered
“integrated”
• HRA can only be available to employees
enrolled in other group health plan
coverage
– Employer does not have to sponsor the
other coverage
• Participant must be able to permanently
opt out and waive HRA coverage
– Participant must have the option of
permanently forfeiting the HRA upon
termination of employment
8
HPID
Health Plan Identifier
Health Plans are required to use a
Health Plan Identifier (HPID) in HIPAA
standard electronic transactions
For fully-insured plans, the carrier will
obtain the HPID
Self-funded plan sponsors will need to
obtain their own HPID
• Health plan must obtain a HPID by
November 5, 2014
• Extended deadline until 2015 for
small health plans (less than $5
million in annual receipts)
• HPID applications are available through
the CMS Enterprise Portal at
https://portal.cms.gov/
9
FSA
Carryover Option
Employers can allow FSA
participants to carry over up to $500
of unused FSA funds for use in
subsequent plan years
• Does not count toward $2,500 health FSA
maximum amount
• Employers cannot utilize both the grace
period rule and the $500 carryover rule
• Consider impact on HSAs
Employers who want to adopt the
$500 carryover rule must amend their
plan documents on or before the last
day of the plan year from which the
amounts may be carried over
• For 2013, amendment can be made by
last day of plan year that begins in 2014
10
Excise Tax
on High Cost Employer
Health Care Coverage
Effective in 2018, 40% excise tax is
imposed on excess employer health
care benefits
The excess benefit is coverage over
certain indexed thresholds
Coverage includes employer
contributions and employee pre-tax
contributions under cafeteria plans
Self-Only Coverage: $10,200
$11,850 for “qualified retirees” and
high risk professions
Other than Self-Only
Coverage: $27,500
$30,950 for “qualified retirees” and
high risk professions
Employers Need to Comply with
ACA and Reduce Costs
Your Health Care
Compliance
Strategy
Your
Health Care
Strategy
What do you have to do?
When?
What are your options?
What is your long-term
plan to reduce your
health care costs?
Questions? Contact:
AON Risk Solutions
Dawn Montano
Assistant Vice President
6501 Americas Parkway NE, Ste 650
Albuquerque, NM 87110
(505) 889-6748
Dawn.montano@aon.com