Affordable Care Act Compliance Update & Strategy Development
Last Updated April, 2014
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MDG
EMPLOYEE BENEFIT SOLUTIONS
TABLE OF CONTENTS
1.
Mandate and Penalties 2015 & 2016
2.
Transitional Relief for Mid-Sized Employers
3.
Transitional Relief for Non-Calendar Year Plans
4.
Identifying Full-Time Employees
5.
Defining “Affordable” Coverage
6.
Meeting Minimum Value Coverage Requirements
7.
Closer Look at Measurement Periods
MDG
EMPLOYEE BENEFIT SOLUTIONS
MANDATE AND PENALTIES
2015 Rules
Large Employers (with 100 or more full-time and full time equivalent employees)
Mandate:
Large Employers must offer all employees (and dependents) working an average of 30 hours
per week health care coverage with “minimum value” that is “affordable” beginning in 2015, or
pay penalties
Penalties:
A.
No Offer Penalty: Employer does not offer minimum essential coverage to at least 70% of
full-time employees. Employers face a penalty of $2,000 times the total number of FT
employees, minus the first 80 full timers, if at least one employee receives a tax credit to
purchase coverage through a state-based health exchange.
B.
Unaffordable Coverage Penalty: If employer does offer minimum essential coverage to 70%
of full-timer but at least one full-time employee obtains federally subsidized coverage through
an Exchange, the employer must pay an annual tax of the lesser of: 1. $3,000 per subsidized
FT employee, or 2. $2,000 for each FT employees (less the first 80 FT employees).
MDG
EMPLOYEE BENEFIT SOLUTIONS
MANDATE AND PENALTIES
2016 Rules
Large Employers (with 50 or more full-time and full time equivalent employees)
Mandate:
Large Employers must offer all employees (and dependents) working an average of 30 hours
per week health care coverage with “minimum value” that is “affordable” beginning in 2016, or
pay penalties
Penalties:
A.
No Offer Penalty: Employer does not offer minimum essential coverage to at least 95% of
full-time employees. Employers face a penalty of $2,000 times the total number of FT
employees, minus the first 30 full timers, if at least one employee receives a tax credit to
purchase coverage through a state-based health exchange.
B.
Unaffordable Coverage Penalty: If employer does offer minimum essential coverage to 95%
of full-timer but at least one full-time employee obtains federally subsidized coverage through
an Exchange, the employer must pay an annual tax of the lesser of: 1. $3,000 per subsidized
FT employee, or 2. $2,000 for each FT employees (less the first 30 FT employees).
MDG
EMPLOYEE BENEFIT SOLUTIONS
MANDATE AND PENALTIES
Mid-Sized Employers Implementation Delayed
The final rules phase in the employer requirements for smaller employers, giving employers with less than 100 full-time
equivalent employees but more than 50 FTE’s until January 1, 2016 to comply with the employer requirements. To be
eligible an employer will have to through a certification process to demonstrate that during a period beginning on
February 9, 2014, and ending on December 31, 2014 the employer did not reduce the size of its workforce or the
overall hours of service of its employees in order to satisfy the workforce size condition.
For employers seeking to determine fi the mandate applies to them at all, the employer may establish a consecutive
six-month period of their choosing to count employees to determine applicability. For the first year an employer is to be
determined an applicable large employer, if the employer uses the last few month so for the year as its measurement
period for applicability, the employer will not have to have a compliant plan in place for all employees by January of the
next year if their previous plan was not compliant. Instead, the employer will have a one time penalty free period of
three months, as long as they establish a compliant plan and offer it to eligible employees by April 1 of the next year .
MDG
EMPLOYEE BENEFIT SOLUTIONS
TRANSITIONAL RELIEF FOR NON-CALENDAR YEAR PLANS
Employers who offer non-calendar year plans are not required to comply with the Employer Mandate
until the start of their plan years in 2015 if the plan meets certain key conditions:
(1) Maintained non-calendar year plan before December 27, 2012,
(2) Did not modify plan year after December 27, 2012,
(3) Did not change eligibility rules after February 9, 2014.
Also, the group needs to have met one of two coverage tests.

Since December 27, 2012, the plan needs to have been either offering coverage to at least 33
percent of all employees or covering at least 25 percent of its entire workforce, including parttime workers.
Or

Group would have to demonstrate that since December 27, 2012 it has been offering coverage
to at least 50 percent of all full-time employees or covering at least 33 percent of all full-time
employees.
This provision applies to the ERISA plan year stipulated in the group’s plan documents, not their
plan contract renewal date. If a group doesn’t have legal ERISA plan documents, the contract
renewal date is the default date, but plan documents need to be established.
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EMPLOYEE BENEFIT SOLUTIONS
WHO IS FULL TIME (Summary)
Employees that are “reasonably” expected to be employed on an average at least 30 hours a week.
Variable Hour Employees: If at the start date it cannot be determined that the employee is
reasonably expected to be employed on average at least 30 hours per week.
Safe Harbor Concept to Measure Hours
Summary
•
“Look back” to see if the employee truly was full time
•
If so provide coverage thereafter
•
Have 90 day period to provide employee with enrollment information
Newly hired employees

An “initial measurement period” – did they work 30 hours?

A “stability period” – if yes offer coverage during this period

An “administrative period” – similar to a new hire waiting period and open enrollment period
On-Going Employees

A “standard measurement period”

A “stability period”

An “administrative period”
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EMPLOYEE BENEFIT SOLUTIONS
WHO IS FULL TIME (Details)
Q. What is the “look-back” period as defined by PPACA?
A. In general, the look-back measurement method allows the employer to select a look-back period of time to
measure whether the employee worked an average of 30 hours per week. If the employee worked an average of 30
hours per week during the look-back period, the employer must consider the employee a full-time employee during
the subsequent “stability” period, regardless of the number of hours the employee works during the stability period.
Q. How do I calculate the look-back period?
A. Calculation of the look-back period depends on whether the employee is (1) an ongoing employee, or (2) a new variable
hour employee or seasonal employee.
Ongoing employees: For an ongoing employee, an employer may determine full-time status by using a look-back period
of between three and 12 months. Under the rules, the employer is given discretion to choose the length of the look-back
measurement period provided it conforms with the length of time rules discussed above and that the determination is made
on a uniform and consistent basis for all employees in the same category.
New variable hour employees: An applicable large employer may also use a look-back measurement period for new
variable hour employees and for seasonal employees in certain circumstances. A new employee is a variable hour
employee if, based on the circumstances at the employee’s start date, it cannot be determined that the employee is
reasonably expected to work on average at least 30 hours per week.
Seasonal Employees: Defined as am employee who is hired into a position for which the “customary annual employment
is six months or less.” The term is further defined by reference to DOL guidance. Employers are not required to offer
seasonal employees health insurance.
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EMPLOYEE BENEFIT SOLUTIONS
WHO IS FULL TIME (Details)
Q. Do I have to use a consecutive period of time?
A. Yes. The look-back period must use a consecutive period of time.
Q. What is the “stability period” as defined by PPACA?
A. The stability period begins immediately after the look-back period and any administrative period. Calculation of the
stability period depends on the type of employee and whether he or she is determined to be a full-time employee during
the look-back period.
Q. How do I calculate the stability period?
A. Ongoing employees: If an employer determines that an ongoing employee worked full-time during
the look-back period, then the stability period must be at least the greater of six consecutive calendar
months or the length of the look-back period. If the employer determines that the ongoing employee was
not a full-time employee during the look-back period, then the stability period must be no longer than the
look-back period.
New variable hour and seasonal employees: If a new variable hour or seasonal employee is
determined to be a full-time employee, then the stability period must be the same as that for ongoing
employees – either six consecutive calendar months or the length of the look-back period, whichever is
longer.
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EMPLOYEE BENEFIT SOLUTIONS
WHO IS FULL TIME (Details)
Q. What is the “administrative period” as defined by PPACA?
A. Employers may impose an administrative period that begins immediately after the end of the look-back period
and ends immediately before the stability period. The purpose of this administrative period, which may last up to 90
days, is to give employers time to determine employee eligibility for coverage, notify them of their eligibility, and
enroll them in the plan.
. How do I calculate the administrative period?
Q.
A. The administrative period may last up to 90 days. However, this administrative period cannot create a gap in coverage
for ongoing employees who are enrolled in coverage because of full-time employee status. For new variable hour
employees and seasonal employees, the look-back period and administrative period combined may not extend past the
last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date.
Q. Can I use different look-back periods, stability periods, or administrative periods for
different categories of employees?
A. Yes. According to the proposed rule on the employer mandate, an employer may select different lookback periods, administrative periods, and stability periods for certain categories of employees. For
example, the proposed rule states that an employer may select different periods for:
 Each group of collectively bargained employees covered by a separate collective bargaining agreement,
 Collectively bargained and non-collectively bargained employees,
 Salaried employees and hourly employees, and
 Employees whose primary places of employment are in different states.
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EMPLOYEE BENEFIT SOLUTIONS
WHO IS FULL TIME (Details)
Q. Can I select a look-back period where I have the fewest number of employees?
For example, I am a seasonal employer with 50 full-time employees for six months. For my look-back
period, can I select the six months where those seasonal employees are not working for me?
A. No. For new variable hour and seasonal employees, the look-back period must begin on a date between the
employee’s start date and the first day of the first calendar month following the employee’s start date. Therefore,
a seasonal employer would not be able to use, as the look-back period, the six months where those seasonal
employees are not working.
MDG
EMPLOYEE BENEFIT SOLUTIONS
WHAT IS AFFORDABILITY
The Three Safe Harbors to calculate “Affordability”
1.
Rate of Pay – 130 x hourly rate (use 130 even if employee works 160 hours)
2.
Form W-2 Box 1 Income (Reconcile 2015 income at end of tax year to confirm 9.5%)
3.
Federal Poverty Level
** If cost of single employee coverage is more than 9.5% of gross wages, it is “unaffordable”
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EMPLOYEE BENEFIT SOLUTIONS
WHAT IS AFFORDABILITY
2013 Federal Poverty Level Guidelines
48 Contiguous States and DC
Note: The 100% column shows the federal poverty level for each family size, and the percentage columns
that follow represent income levels that are commonly used as guidelines for health programs.
Household
Size
100%
133%
150%
200%
300%
400%
1
$11,490
$15,282
$17,235
$22,980
$34,470
$45,960
2
15,510
20,628
23,265
31,020
46,530
62,040
3
19,530
25,975
29,295
39,060
58,590
78,120
4
23,550
31,322
35,325
47,100
70,650
94,200
5
27,570
36,668
41,355
55,140
82,710
110,280
6
31,590
42,015
47,385
63,180
94,770
126,360
7
35,610
47,361
53,415
71,220
106,830
142,440
8
39,630
52,708
59,445
79,260
118,890
158,520
For each
additional
person, add
$4,020
$5,347
$6,030
$8,040
$12,060
$16,080
Source: Calculations based on data from the U.S. Department of Health and Human Services
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EMPLOYEE BENEFIT SOLUTIONS
MINIMUM VALUE PLAN DESIGN
MV Calculator:
Under proposed rules a plan will be deemed to provide “Minimum Value” (MV) if the percentage of the total allowed costs of
benefits provided under the plan is not less than 60 percent. In order to determine whether a plan provides MV, an employer
may use the DHHS and IRS MV calculator. However the calculator’s methodology has been revised since its release in
February 2013 and it is anticipated the methodology for the calculator will undergo additional revision in response to industry
concerns over metric weighting.
Actuarial Certification
For plans with nonstandard features that preclude the use of the MV calculator, minimum value is determined based on the MV
calculator with adjustments as certified to an actuary.
Safe Harbor Plan Design
Under proposed rules an employer may avail itself to an array of design safe harbors published by DHHS and IRS. Plan design
meeting the following specifications are proposed as safe harbors for determining MV if the plans cover all the benefits included
in the MV calculator.
• Plan with a $3,500 integrated medical and Rx deductible, 80% coinsurance, and $6,000 OOP max.
• Plan with a $4,500 integrated medical and Rx deductible, 70% coinsurance, and $6,400 OOP max, and $500 employer
contribution to an HSA.
• Plan with a $3,500 medical deductible, $0 Rx deductible, 60% medical coinsurance, 75% Rx coinsurance, $6,400 OOP max,
and Rx copays of $10/20/50 with 75% coinsurance for specialty drugs.
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EMPLOYEE BENEFIT SOLUTIONS
MINIMUM VALUE PLAN DESIGN
Safe Harbor Plan Designs (cont)
Each of the Safe Harbor plan designs must cover all of the following benefits:
• Emergency Room Services
• All Inpatient Hospital Services (including mental health and substance use disorder services)
• Primary Care Visit to Treat an Injury or Illness (except Preventive Well Baby, Preventive, and X-rays)
• Mental/Behavioral Health and Substance Abuse Disorder Outpatient Services
• Imaging (CT/PET Scans, MRIs)
• Rehabilitative Speech Therapy
• Rehabilitative Occupational and Rehabilitative Physical Therapy
• Preventive Care/Screening/Immunization
• Laboratory Outpatient and Professional Services
• X-rays and Diagnostic Imaging
• Skilled Nursing Facility
• Outpatient Facility Fee (e.g., Ambulatory Surgery Center)
• Outpatient Surgery Physician/Surgical Services
• Drug Categories
Generics
Preferred Brand Drugs
Non-Preferred Brand Drugs
Specialty Drugs
Specialist Visit
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EMPLOYEE BENEFIT SOLUTIONS
SAMPLE CALENDAR PLAN YEAR MEASUREMENTS
Measurement
Period
Administrative
Period
Stability
Period
• Begins October 1, 2014
• Ends September 30, 2015
• Begins October 1, 2015
• Ends December 31, 2015
• Begins January 1, 2016
• Ends December 31, 2016
MDG
EMPLOYEE BENEFIT SOLUTIONS
INTEGRATING THE NEWLY HIRED & ONGOING
The Employer Responsibility Rule and
MEASUREMENT PERIODS
Variable Hour and Seasonal Employees
Variable Hour Employee—12 Month Measurement and Stability Period