Health Care Reform
Exchanges, Penalties and Employer Responsibility
As of April 8, 2014
Table of Contents
Exchanges
Determining Large Employer Status
Employer Penalty
Coverage Requirements
Determining Full Time Eligibility
Notices and Reporting
Taxes and Fees
Pages 3-5
Pages 6-7
Pages 8-10
Pages 11-13
Pages 14-20
Page 21-22
Pages 23-26
2
Health Insurance Marketplaces/Exchanges
•
State-based competitive marketplaces to purchase health insurance and
qualify for premium tax credits and cost-sharing reductions.
•
2014 open enrollment closed March 31, 2014
•
2015 open enrollment runs November 15, 2014 – February 15, 2015
•
Individuals can purchase insurance through a Marketplace if they:
• live in its service area, and
• are a U.S. citizen or national, or
• are a non-citizen who is lawfully present in the U.S. for the entire period
for which enrollment is sought
• Not incarcerated
• Residents of a U.S. territory aren’t eligible to apply for health insurance
using the federal or state Marketplace
3
Health Insurance Marketplaces/Exchanges
Premium Tax Credits
•
Tax credits available in connection with Marketplace coverage for taxpayers
who:
 Have household income up to 400% of the Federal Poverty Line (FPL)
 May not be claimed as a tax dependent of another taxpayer
 Must file a joint return, if married
 Are not eligible for minimum essential coverage – including governmentsponsored programs and eligible employer-sponsored plans that
provide minimum value and are considered affordable
• Cost of self-only employer coverage > 9.56% of employee’s household
income = unaffordable for purpose of tax credit
•
Amount of tax credit is the difference between the cost of the second lowest
silver qualified health plan and the expected contribution of the individual based
on household income
4
2014 Federal Poverty Guidelines
• 48 Contiguous States and DC
Household Size
100%
133%
150%
200%
300%
400%
1
$11,670
$15,521
$17,505
$23,340
$35,010
$46,680
2
$15,730
$20,921
$23,595
$31,460
$47,190
$62,290
3
$19,790
$26,321
$29,685
$39,580
$59,370
$79,160
4
$23,850
$31,721
$35,775
$47,700
$71,550
$95,400
5
$27,910
$37,120
$41,865
$55,820
$83,730
$111,640
6
$31,970
$42,520
$47,955
$63,940
$95,910
$127,880
7
$36,030
$47,920
$54,045
$72,060
$108,090 $144,120
8
$40,090
$53,320
$60,135
$80,180
$120,270 $160,360
5
Determining Large Employer Status
Applicable Large Employer – employed an average of 50 FT (including FTE)
employees on business days during preceding calendar year
Full-time employee defined as 30+ hours per week
Calculate the total number of full-time employees by adding together:
•
Full-time employees (averaged 30 hours per week or 130 hours per month),
plus
•
Full-time equivalent employees (total of all hours for part-time employees for the
month divided by 120
Example
Company has 40 FT employees and 65 PT employees working 20 hours/week:
65 PT x 86 hours each per month = 5,590 / 120 = 46 FTEs
40 FT + 46 FTE = 86 Total FT employees
6
Determining Large Employer Status
Controlled Group Rules
For purposes of counting the number of FT and FTE employees to
determine if applicable large employer, all employees of a controlled
group or an affiliated service group are taken into account as a
whole
For purposes of determining liability for and amount of assessable
penalty, each commonly owned/controlled employer within a
corporate group is assessed and pays its own penalties separately
(even if less than 50)
7
Employer Penalty
Large Employer Penalty Trigger
***Assessment of penalty delayed one year until 2016 for employers with less
than 100 FT employees***
Applicable large employer may be subject to penalty if either of the following apply:
• Employer does NOT offer minimum essential coverage to at least 95% (70%
in 2015) of its FT employees (and dependent children) and at least one FT
employee receives premium tax credit through Exchange,
- OR • Employer offers minimum essential coverage to at least 95% (70% in 2015) of
its FT employees (and dependent children) and at least one FT employee
receives premium tax credit through Exchange, because
• Employer coverage does not provide minimum value (60%), or
• Employer coverage is considered unaffordable (> 9.56% household
income) to the employee
8
Employer Penalty - NOT Offering Coverage
Employer does not offer minimum essential coverage to at least 95% (70% in
2015) of full-time employees (and dependent children)
AND
At least one full-time employee receives a premium tax credit from the
Exchange
Annual penalty is:
•
Number of full-time employees (minus 30) X $2,000
• (minus 80 in 2015)
Example
Company has 100 full-time employees
100 – 30 = 70 x $2,000 = $140,000
• 100 – 80 = 20 x $2,000 = $40,000 in 2015
9
Employer Penalty - Offering Coverage
Employer offers minimum essential coverage to at least 95% (70% in 2015) of fulltime employees
AND
At least one full-time employee receives a premium tax credit from the Exchange
(because coverage is unaffordable or does not provide minimum value)
Annual penalty is the lesser of:
•$3,000 for each full-time employee who receives a premium tax credit, or
•Number full-time employees (minus 30) x $2,000
• (minus 80 in 2015)
Example - Company has 500 full-time employees, where 40 receive premium tax
credit through the Exchange
40 x $3,000 = $120,000
500 – 30 = 470 x $2,000 = $940,000
Penalty = $120,000
10
Coverage Requirements
Minimum Value Employer Coverage
• The plan’s share of total allowed costs of benefits provided under
the plan is at least 60% of those costs (i.e. 60% actuarial value)
• Methods to determine value:
– Minimum Value Calculator
– Design-Based Safe Harbor Checklists (no need for calculations or
actuary)
– Actuarial Certification
11
Coverage Requirements
Affordable Employer Coverage
9.5% Safe Harbors (in lieu of household income)
Based on self-only coverage of lowest cost plan
• W-2, Box 1 wages
• Rate of Pay
 Salaried employees = monthly salary
 Hourly employees = employee’s hourly rate of pay times 130
hours per month
• Federal Poverty Line
 $92.39/month based on 2014 FPL of $11,670/year
12
Coverage Requirements
Affordable Employer Coverage
Example:
• Employer makes 70% contribution towards single premium for
HDHP with $2,000 single deductible
• Total premium cost is $317.50 per month
• Employee contribution is $95.25 per month
• All salaries above $12,031 would meet the 9.5% affordability test
13
Determining Full Time Eligibility
Hours of Service
30 hours of service per week = 130 hours of service per calendar
month
Includes:
• each hour for which an employee is paid, or entitled to payment, for
the performance of duties for the employer: and
• Each hour for which and employee is paid, or entitled to payment by
the employer on account of a period of time during which no duties
are performed due to vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence
14
Determining Full Time Eligibility
Ongoing (current) Variable Hour Employee – current employee who
has been employed for at least one complete Standard
Measurement Period
• Standard Measurement Period
– 3-12 consecutive calendar months
– Period used to count/measure hours of service
• Stability Period
– Minimum 6 months – not shorter than measurement period
– Period employee considered PT or FT based on outcome of
measurement period
• Administrative Period
– Up to 90 days
– Period after measurement and before stability period
– Used to determine status, communicate and enroll
15
Measurement Period for Ongoing Variable Hour Employee
Standard Stability Period
1/1/2015 – 12/31/2015
Standard Measurement Period
10/3/2013 – 10/2/2014
Administrative Period
10/3/2014 – 12/31/2014
• 12 Month Standard Measurement Period
• 90 Day Administrative Period
• 12 Month Standard Stability Period
• If employee averages full -time status during Standard Measurement Period, must be treated as full-time and offered
coverage for entire Standard Stability Period, regardless of hours worked during Standard Stability Period
• If employee averages part-time status during Standard Measurement Period, can treat employee as part-time for entire
Standard Stability Period, regardless of hours worked and will not incur a penalty if coverage is not offered. Cannot be longer
than measurement period
• Standard Measurement Periods run consecutively each year
16
Determining Full Time Eligibility
New Variable Hour/Seasonal Employee
•
•
•
•
•
When hired, cannot reasonably be determined if employee will average at
least 30 hours per week (including per diem, occasional, on call)
Seasonal defined as customarily working 6 months or less per year, same
time of year (does not include employees of educational organizations)
Initial Measurement Period
– 3-12 consecutive calendar months
– No penalty assessed during initial measurement period
– Must re-test during first standard measurement period
Stability Period
– Minimum 6 months – not shorter than measurement period
Administrative Period
– When combined with the initial measurement period, cannot extend past
last day of 13th month after hire date
17
Measurement Period for New Variable Hour Employee
Administrative Period
6/1/2015 – 6/30/2015
1/1/2015
1/1/2014
1/1/2016
Initial Measurement Period
6/1/2014 – 5/31/2015
1/1/2017
Initial Stability Period
7/1/2015 – 6/30/2016
• Hire date May 10, 2014
• 12 month Initial Measurement Period beginning first of month following date of hire (June 1, 2014)
• Administrative Period plus Initial Measurement Period cannot extend beyond the end of the 13 th month after date of hire
• 12 month Initial Stability Period
• If new hire averages full -time status during Initial Measurement Period, must be treated as full-time and offered coverage for
entire Initial Stability Period, regardless of hours worked during Initial Stability Period
• If new hire averages part-time status during Initial Measurement Period, not required to offer coverage for the Initial Stability
Period. Cannot be longer than measurement period plus one month.
18
New Variable Hour Transition to Ongoing Variable Hour
Standard Measurement Period
10/3/2014 – 10/2/2015
Initial Measurement
Period
6/1/14-5/31/15
Initial Stability
Period
7/1/15-6/30/16
Standard Stability Period
1/1/2016 – 12/31/2016
Administrative Period
10/3/2015 – 12/31/2015
• Hire Date May 10, 2014
• New hire must be tested separately during the first Standard Measurement Period beginning after date of hire, in addition to
Initial Measurement Period
• Initial Stability Period and Standard Stability Period overlap
• If new hire averages full -time status during Standard Measurement Period, must be treated as full-time and offered
coverage for entire Standard Stability Period, even if new hire didn’t average full-time during Initial Measurement Period
• If new hire averages part-time status during Standard Measurement Period, can treat employee as part-time for the portion
of the Standard Stability Period remaining after the Initial Stability Period ends
19
Determining Full Time Eligibility
New Full-Time Employee
• Any employee who as of the date of hire, is reasonably expected to
be employed on average at least 30 hours per week and who is not
a “seasonal” or “variable hour” employee
• Full-time employees in this category must be offered coverage that
becomes effective within 90 days of hire.
20
Notices
• Summary of Benefits and Coverage (SBC)
• Exchange Notice
• Notice of Patient Protections
• Statement of Grandfathered Plan, if applicable
21
Employer Information Reporting – Code 6056
•
•
•
•
Applicable Large Employer (50+)
Due to IRS February 28, 2016 for 2015 calendar year
Due to FT employee by January 31, 2016 for 2015 calendar year
Form 1094-C transmittal, Form 1095-C employee statement
 Standard Report
• Identify each FT employee and details of coverage offered or elected for
each calendar month
 Simplified Report
• Do not need to report monthly details if “qualifying offer” made for all 12
months
• Minimum value, 9.5% FPL employee contribution, spouse and children
 Combined Report
• Self-insured plans – additional reporting requirement under Code 6055
22
Taxes and Fees
Comparative Effectiveness Research Fees
•
Plan Years ending after October 1, 2012 through 2019
 $1 per covered life per year, for plan years ending on or after 10/1/12
 $2 per covered life per year, for plan years ending on or after 10/1/13
 Indexed to national health expenditure until 2019 when expires
 Insured plans paid by the carrier/Self-insured plans paid by the plan
sponsor
 HRA and certain FSA paid by plan sponsor if not integrated with other
self-insured plan (count only one life per participant)
 Paid annually by July 31 via IRS form 720 (quarterly federal excise tax
return)
23
Taxes and Fees
Transitional Reinsurance Program
•
•
To help stabilize premiums for coverage in individual market
$12 Billion for 2014, $8 Billion for 2015, $5 Billion for 2016
 The 2014 fee of $63.00 per covered life is due to be paid in 2015 and is payable
in two installments: $52.50 in January 2015 and $10.50 in the fourth quarter of
2015.
 The 2015 fee of $44.00 per covered life is due to be paid in 2016 and is payable
in two installments: $33.00 in January 2016 and $11.00 in the fourth quarter of
2016.
 The 2016 fee amount has yet to be determined.
 Based on enrollment data submitted to HHS by November 15
 Insured plans paid by the carrier/Self-insured plans paid by the plan/employer TPA can be used to remit contributions
 Self Insured/self administered plans exempt for 2015 & 2016 benefit years
 HSAs, FSAs, HRA integrated with other health coverage, retiree HRA, and selfinsured plans limited to Rx benefits excluded
24
Taxes and Fees
Annual Fee on Health Insurers
• Begins in 2014
• Self-Funded Plans are exempt
• Standalone dental/vision included
• $8 billion 2014, $11.3 billion 2015 & 2016, $13.9 billion 2017, $14.3
billion 2018
• Indexed based on premium growth in future
• Each carriers fee will be determined based on their percentage of total
premium paid nationally
25
Taxes and Fees
Excise Tax on High-Cost Health Plans (Cadillac Tax)
•2018 – An excise tax will be charged on high cost plans
•
Single: $10,200 / Family: $27,500
•
40% Tax on premium that exceeds thresholds above
•
Includes medical, prescription, HRA, FSA and HSA
• Example: Single Plan Annual Premium in 2018 is $12,000
 ($12,000 - $10,200 = $1,800 x .40 = $720)
• Calculated and reported by employer
• Prorated amount paid by coverage provider (fully insured) and
employer/plan administrator (self insured)
26
Thank You.