Healthcare Update
Panelists
•
•
•
•
Jeffrey Lundgren, U.S. Chamber of Commerce
Mike Kahley, SrVP at Lockton Companies
Don Fox, CEO of Firehouse Subs
David Barr, Chairman of PMTD Restaurants
The PPACA – Where is Washington
Taking This Thing?
Jeff Lungren
U.S. Chamber of Commerce
PPACA Impact on Business
 64% franchise / 53% non-franchise businesses believe the health
care law will have a negative impact on their businesses
 29% franchise / 41% of non-franchise businesses are already seeing
health care costs increase due to the law
 More than 50% of franchise and non-franchise businesses are
planning to make decisions, such as reducing employee’s hours, to
comply with the law’s employer mandate
Source: Chamber/IFA survey
November 13, 2013
PPACA Regulatory Onslaught
 Red Tape Tower
— 300+ pounds
— 7 feet 3 inches
— 20,000+ pages
Political Reality – PPACA Has Ardent Defenders
in Powerful Places
“Despite all of the good news, there’s plenty
of horror stories being told. All of them are
untrue, but they’re being told all across
America.”
-- Sen. Harry Reid
Remarks on the Senate Floor
February 26, 2014
PPACA – Where Are We?
 Law is here to stay – glaring warts and all
 Administration frantically trying to put out political fires caused by
implementation
— www.healthcare.gov debacle
— Wave of cancellation notices
— Employer mandate blowback (volunteer firefighters/adjunct professors)
PPACA – Where Are We?
 Republicans pushing hard to undercut implementation
— Targeted repeal votes
— Seeking other ways to gum up implementation
 Democrats unsure of their message and approach
— Tout its benefits and argue GOP wants to go back to bad old days
— Tout its benefits and support targeted fixes
PPACA – Where Are We Going?
 Administration’s Theme: do almost anything to mitigate political
problems
— Possible areas of action
— Addressing policy cancellations
— Addressing rate shock
— Open network requirements
PPACA – Where Are We Going?
 Regulatory side:
— Do not expect any new regulations impacting 2015
— Fall of this year: start seeing regulations governing 2016
 Legislative side:
— 40 hour work week definition
— Medical device tax?
Employer Mandate Delay + “Transition Relief”
 July 2, 2013 – delayed until 2015 for all employers
 February 10, 2014 – “transition relief” for 2015 and 2016 for
employers with more than 100 full-time equivalent employees (FTEs)
— 70% coverage in 2015
— 95% coverage in 2016
Employer Mandate “Transition Relief”
 February 10, 2014 – “transition relief” in 2015 and 2016 for
those with more than 50 BUT less than 100 FTEs
— Maintain workforce and hours of service
— Maintain previously offered coverage
— Certify that it meets these requirements
40 Hours Full Time Legislation
 Opportunity for enactment this year?
 Passed House April 3 248-179
— 18 Democrats supported
 Some Democratic support in Senate
— 2 Ds cosponsor legislation
 White House veto threat
For more information:
Jeff Lungren, U.S. Chamber of Commerce
jlungren@uschamber.com or 202-463-5607
www.uschamber.com/health-care
Today’s ACA
Measurement & Workforce
Strategy
Mike Kahley
Lockton Companies
ACA: It’s a Continual Planning and Decision
Process
Plan Design & Contributions
Participation & Underwriting
Measurement Period & Eligibility
Compliance & Communication
Renewal Costs
Employer Play or Pay
Qualifying & Affordable Coverage:
 Must be offered in order to some to
Nuclear Penalty ($2k)
 Must be offered to employees and
dependent children
Employer’s
“Play or Pay”
 Must be “affordable” based on 9.5% of
2 or Federal Poverty Level
Affordable Cost:
9.5% W-2 or FPL
How Many Employees are Likely to Enroll in
Coverage?
Total # of full-time employees
Employer mandate requires coverage offered to full-time employees (work
130 hours per month/30 hours per week)
Less # in Measurement
Period
Variable and Seasonal employees may be eliminated from offering until full
time status is determined
Less # of <26 years
who opt out
Less # eligible for
government
programs
Less #
other optouts
#
covered
by plan
Employees less than 26 years old may elect to get coverage under a parent’s
plan
Employees eligible for Government programs (i.e. Medicaid, Medicare,
Tricare, Indian Nation) not likely to elect employer coverage
Other employees may opt out due to cost or availability of coverage through
spouse; employer only required to offer coverage
Determine number of employees likely to elect employer coverage or to
purchase coverage on exchange
Serving Three Employee Populations
I like the coverage
I have and want to
keep it.
I am excited about
the insurance plan
offered to me for
the first time.
I don’t qualify for
the Employer Plan
and need to buy
individual coverage.
Total Rewards & ACA
Your Decisions
 Do you need to apply the correct measurement and
stability periods for each employee group?
 Do you offer the right coverage for each group’s
unique needs?
 Are your contributions set appropriately to avoid
penalties?
 Can you pass Section 105(h) discrimination testing?
 With varying needs, do you need unique
communication and education solutions for each
group?
Your Decisions
 Somehow, you need to get elections to the right
carriers correctly.
 Since you don’t know who specifically will enroll, how
do you determine the premium and financial impact?
 How will Automatic Enrollment potentially change
your strategy?
Total Rewards & ACA
Components of a Group Exchange
Employer Sponsored
Marketplace/Shopping Experience
for the Consumer
Enrollment Decision Support
Tools
Employer Funded Defined
Contribution
Shifting the Paradigm from
Payroll Deduction to
Providing Funds and Choice
Enrollment Advocacy Resources
Online and Call Center
Online Technology Platform
Integrated with or Potential
Replacement for Benefits
Administration System
What’s the Hype?
 Predictable Long-term Costs for the Employer
 Cost Reduction – Buy downs
 Employee Choice = Higher Satisfaction
 “Free” Benefits Administration
 The Ability to “Get Out of Benefits”
 Defined Contribution vs. Defined Benefit
We Believe…
 Advisory Services Should be Independent from the Exchange
Owner
— 69% of Employers Agree that Independence is Very Important*
 Employer Remains Plan Sponsor
— Own Financial Results
— Accountable to Employees
— Compliance Requirements Remain
 Health Plan Optimization Strategies Should be Customized to
the Employer
*Source: PWC Private Exchange Evaluation Collaborative (PEEC) employer survey, Dec 2013
We Believe…
 Defined Contribution and Private Exchanges Alone Do Not
Stop/Slow Medical Trend
— CDHP Migration can Reduce Costs
— Health Outcomes and Unit Costs Matter
 Multi-Year Agreements Only Work when the Cost and
Performance are Guaranteed
 ACOs, Evolving Networks and Redirection Represent Significant
Savings Potential
— Exchanges Need to Support and Enable this Transformation
 Employee Choice Helps Drive Satisfaction but Not Necessarily
Lowest Cost
*Source: PWC Private Exchange Evaluation Collaborative (PEEC) employer survey, Dec 2013
What Should You Be Doing Now?
Stratifying employees (full, part,
seasonal, variable)
Decide offer strategy
(pay/play/somewhere in between)
Measuring variable hour employees
Understand and quantify exposure
Develop timeline for action
Mike’s Information & Experience
Mike Kahley
Lockton Dunning Benefits
Senior Vice President
Contact Information:
E-mail: Mkahley@lockton.com
Phone: 214.720.5762
As a husband of sixteen years and father of three, Mike is especially proud of the
unique professional, family-oriented atmosphere at the Lockton office. The
Kahleys’ live in Highland Village, Texas and enjoy being thoroughly involved in
the church and all the Kahleys’ either coach or participate in youth sports. When
Mike finds a moment to slow down, you might find him reading history and
planning the next adventurous Kahley trip.
Food Service Representation
Boston Market Corporation
Raising Cane’s
Consilient Restaurants
Dominos Franchise Association
Famous Dave’s of America
Jack In The Box Association
MAC Pizza
Sonic Drive-Thru Corp
TOMS King Holdings LLC
Uncle Julio’s
Village Tavern
Wingstop Restaurants
Speaking Engagements
Chain Restaurant Total Awards Conference
Corner Bakery Leadership Conference
Multi-Unit Franchise Conference
The Dominos Franchisee Association
Famous Dave’s Franchises
GE Capital Franchise Finance Seminars
Jack in the Box Franchise Association
Nations Restaurant News Panel
People Report Best Practices Conference
Sonic Advisory Council
Popeye’s Chicken
Fox News Radio
Our Mission
To be the worldwide value and service leader in
insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
www.lockton.com
© 2014 Lockton, Inc. All rights reserved.
Images © 2014 Thinkstock. All rights reserved.
The Affordable Care Act
Making Lemonade out of
Lemons
Establishing a Budget
 Variables:
— Cost of a qualifying policy
— Employee portion of the premium
— Number of full time employees
— % of full time employees who will accept
Establishing a Budget
 Employer portion of the premium
—Minimum safe harbor for employee portion:
—$7.25 X 30 hours X 9.5% =
—$20.66 per week, 1,074 per year
Establishing a Budget
 Number of full time employees
—Determined by 2013 payroll history
 % of full time employees who will
accept
— ?????
So What Happened at Firehouse?
Firehouse Subs
Company Restaurant Example
 $791K AUV
 $89K EBITDA
 17 employees
— 1 manager
— 16 hourly
— 3 full time
— 13 part time
Firehouse Policy Highlights
 Premium - $5,138
— Employee portion = 20% ($1,028 annually; $86 monthly)
 Deductible $4K
 Out of pocket max: $6250 (network) $10K (out
of network)
 Co Pay: $40 (Primary) $80 (specialist) $100
(urgent) $200 (emergency)
The Result
 Silver Plan offered to full time Firehouse
employees
 Firehouse pays 80% of premium
 65% of employees accepted (two per
restaurant)
 $8K expense per location; 3% sales increase
needed to recoup expense
What to do next?
 Determine your status
 Decide whether to offer health insurance or not
 Design scheduling protocols that support your
decision
Avoid Minefields
 Employees drifting above and below 30 hours,
creating unbudgeted risk
 Cutting employees hours due to poor planning
 Lawsuits and partial unemployment claims due
to cutting hours
Thank You!
Twitter: @DonMFox
Email:
dfox@firehousesubs.com
CEO, Firehouse of America, LLC
Affordable Care Act
David Barr
One Lonely Operator Trying to
Make Sense Out of This
A Case Study
PMTD Restaurants LLC – 23 KFC/Taco Bells/KT’s
A franchisee owner/operator of restaurants in small towns of
Alabama and Georgia.
PMTD Restaurants LLC – 23 KFC/Taco
Bells/KT’s
Total
Currently
Eligible
Pre-ACA
Currently
Enrolled
Pre-ACA
# of active employees
412
36
30
# of full time
109
36
30
# of part-time
303
0
0
Full time employees are defined using a one year measurement period.
Of the 109 full time employees, 36 are salaried and 73 are hourly.
PMTD’s Plan Currently Qualifies as
Affordable to Employees
Annual premium
Employee
Only
Family
Coverage
$5,028
$12,612
$4,073
81%
$4,349
34%
Paid by Employer
- $
- %
Total $ paid by Employer
Paid by Employee
$129,000
$955
$8,263
PMTD’s plan will meet the affordability test (less than 9.5% of
employees pay) for its employees as full time employees make at
least $10,000 per year and PMTD’s plan is at 84% actuarial value.
ACA Could Increase Insurance Cost To
Employer
Total $
Paid by
Employer
Currently pre-ACA
$129,000
Estimate under ACA with
change to plan
$444,000
This approx. $300,000 increase represents 1.5% of sales.
Assumption: All eligible individuals accept plan as currently
designed and employer maintains same contribution.
The Bigger Question – Will Employees Sign Up?
They will have different choices
Employer
Plan
Government
Exchange
Do Nothing
30+ hours employees with
household income > $16,800
(est. Medicaid threshold)
$955/yr.
9.5% of
$4,800/yr.
(Subsidized only if
employer doesn’t
offer plan at
2014 - $120/yr.
2016 - $695/yr.
Penalty on
30+ hours employees with
household incomes <
(est. Medicaid threshold)
$955/yr.
9.5% of
Enroll in Medicaid
$0/yr.
N/A
Summary of Costs and Employees
# of
Employ
# of
Salaried
Employ
# of Hourly
Employ
Total
412
36
376
Less: Non-fulltime employees
(303)
Sub-total of FT Employees
109
Less: Reducing 30-33 hour employees
(1/2 of 35)
Total Cost
(303)
36
73
$444,000
(17)
(17)
($69,200)
Less: Est. Employees that do not sign-up
(10% sign-up)
(50)
(50)
($203,700)
Less: Employees On Spouse Plan
(6)
(6)
($24,400)
Benefit of Employees Pay More
($3,600)
(36 employees x $100)
Change in Plan design (36 employees x approx. $275)
Ending Total
($10,000)
36
30
6
$133,100
As a Result of Planning for ACA,
Costs Can be Managed
Total $
Paid by
Employer
Currently Pre-ACA
$129,000
Calculated Estimate under ACA
$133,100
Everyone goes into the Exchange
(not tax deductible)
$158,000
Exchange is calculated as 109 employees less exemption for 30 full time
employees times $2,000 per employee
Healthcare Update
Panelists
•
•
•
•
Jeffrey Lundgren, U.S. Chamber of Commerce
Mike Kahley, SrVP at Lockton Companies
Don Fox, CEO of Firehouse Subs
David Barr, Chairman of PMTD Restaurants