Health Care Reform
Patient Protection and
Affordable Care Act (PPACA)
Chris Harrison, President
EBENCONCEPTS
David Smith, Vice President
EBENCONCEPTS
Version 50
July 24, 2013
Questions?
 Just stop me and
ask…. this is more
fun when you
participate.
Deadlines & Regulations
2010
2011
2012
2013
2014
Timeline
2010: Grandfathered Status, Dep Children,
SB Tax Credit
2011: MLR, Trend Increases
2012: SBC, W-2 Reporting
2013: FSA, Tax Increases for highly-comp
individuals
2014! Exchanges, Mandates
2010
Preventative Service Mandates
 Controversy over birth control pills mandate – final version
 Must be a religious employer (includes all houses of worship and their
affiliated organizations e.g. church-affiliated hospitals, daycares)
 No mandate to provide coverage for contraceptives (object on moral
grounds) but must notify insurer or TPA of objection
 Insurer/TPA must provide written notice of the right to free
contraceptives for any participant, and the cost of those contraceptives
will be paid through the ACA program
 Litigation
 All over the place – lots of cases pending with private employers related
to the mandate and religious freedom
 Likely headed to Supreme Court
2011
Minimum Medical Loss Ratio
 Carriers who spend less than…
 85% for large group plans
 80% for small group and individual
 …must rebate the amount spent below minimum loss ratios back to
purchaser (group or individual)
 Remember: it’s not how your group does… it’s how that carrier’s
entire market segment performs
 Also, self-funded plans are not subject to these rules
 What counts toward HC Expenses?
 Reimbursement of clinical services
 Activities that improve health care quality
 All other non-claims expenses excluding state and federal taxes,
licensing or regulatory fees
2011
Minimum Medical Loss Ratio
 Estimated to have saved over $4B in premiums directly
and indirectly though MLR program
 2011 Rebates: $1.1B
 2012: $500M
 So what if you got a rebate?
 Employer paid 100% of premiums for employees and
dependents: they keep it
 Employees paid for a part of the cost of coverage, fiduciary
duty to “give” a portion “back”
 Former employees or COBRA continuants: eligible for a
portion to be returned as well
2011
Receive
Rebate?
Determine %
from EE
Contributions
ER Keeps their
Portion
EE Portion
Former
EEs/Participant
s
COBRA
Continuants
Current EEs
Return their
share at
renewal with
lower EE
contributions
$20 or More
Less than $20
$20 or More
Less than $20
Send Check,
W-2
Add to current
EE Share
Send Check
Add to current
EE Share
2011
Minimum Medical Loss Ratio
 What are we doing?
 Excel spreadsheet to assist employers with determining what
portion of the rebate could be owed to participants and to assess
the economic cost of doing so
 Corporate resolution form so that the employer can, on behalf of
the Plan, show how the funds are being handled:
 Returned to current and/or former participants
 Rebates kept in the Plan and applied toward future participant
premium payments and/or benefit enhancements
 Draft letters to give to current and former plan participants to
reduce confusion about what is being done with the “sizeable”
rebate they think they are receiving
2012
W-2 Reporting
 Applies to all businesses for 2013 Reporting
 Make sure your payroll provider is ready to do this!
 Reporting the aggregate cost of employer-sponsored
health benefits
 Not taxable, and is informational only
 Reported in Box 12 via Code DD on W-2
 Not required to include HRA spending, separate dental and
vision plans
2012
W-2 Reporting
 What is the employer reporting
 Entire Health Insurance Premium Amount
 portion paid by EE and ER
 Unique to each employee
 Will be different for different tiers of coverage (EE, ES, EC, EF)
 Employer Contributions to FSA (but not HSA contributions)
 Wellness Programs and/or Onsite Medical Clinics that are
COBRA-eligible
 How to determine what to report
 If insurance coverage: Premium charged
 If self-funded: core COBRA rates
 Should reflect cost changes during the year
2012
PCORI Fee
 Why?
 To provide information regarding the effectiveness, risks and benefits of
various medical treatments
 How Much?
 First year: $1 x average number of covered lives (not just EE’s) for year that
begins 10/1/12 and ends 9/30/2013
 Second and subsequent years: $2 per covered life
 Who pays? (Included in COBRA rates too)
 Insured: carrier
 Self-funded: employer (TPA cannot pay on behalf of group)
 Plan assets may not be used to pay fee, but is a business expense
 Must be paid by July 31 on IRS Form 720
2012
PCORI Fee
 Some twists and turns:
 If separate HRA from health plan and
 Health plan is fully-insured – must collect fee twice
 Once for health insurance plan, for each plan participant
(including dependents)
 Again for the HRA, but only for the number of employees covered
 Health plan is self-funded, and HRA plan year runs concurrent
with insurance plan – must only collect fee once
 FSA is exempt if
 the employer offers group health coverage to their employees
the reimbursement max is capped the greater of two times the
employee contributions or employee contributions plus $500.
 If not, then they must pay the PCORI fee.
2012
Notice of Material Modification
 If you change benefits mid-year (off renewal), you must
provide 60 days notice of the change
 Modified “Notice of Material Modifications”
 Must be provided when there is change in benefits which an
“average participant” to be an “important change in covered
benefits, or other terms of coverage”
 Enhancements or reductions in benefits such as deductible,
copays, or the plan now covering a previously excluded benefits
 Increases in cost-sharing
 Change in health insurance carrier or administrator
 How? SBC and additional information if relevant
2013
Notices on Marketplaces
 All employers must provide notice to employees of the
existence of Health Insurance Marketplaces by late
summer or fall of 2013
 Draft Model Notices have been
released, to communicate:
 Health Insurance Marketplaces exist
 You may be eligible for subsidized
coverage through the HIM
 Not eligible if employer offers
coverage to their employees
 Employer info to assist with applying
for coverage in the Marketplaces
 Enforced by USDOL Wage & Hour Division
2013
Notices on Marketplaces
 Who gets the notice?
 Yes: Full- and part-time, eligible or not eligible in the health plan,
enrolled or not enrolled in the health plan and “independent
contractors” and contract and leased workers may need to receive
the notice depending on the nature of their relationship to the
employer, based on FLSA “economic reality test”
 No: dependents or others who may become eligible for coverage
but are not employees and former employees even if enrolled
retiree or on COBRA
 There are some folks exempt from sending out notice
 If you are not covered under FLSA: Receipts of less $500K
annually and have no interstate commerce.
2013
Notices on Marketplaces
 Other requirements:
 Provide to new employees hired on/after October 1, 2013
 Distributed by first class mail or electronically
 EbenConcepts will work with our clients to have these
notices available for distribution by August, when finalized
by USDOL
 Also modifying COBRA notices to include information
about the Health Insurance Marketplaces
 Will actually encourage former employees or their
dependents who lost coverage to seek subsidized coverage
through the Marketplace
 Overall positive changes
2014 is Nearly Here…
2014
2014
Individual Mandate
 All American citizens and legal residents to purchase qualified
health insurance coverage.
 Exceptions (which really aren’t exceptions):




religious objectors
individuals not lawfully present
incarcerated individuals
taxpayers with income under 100 percent of poverty, and those who have a
hardship waiver
 members of Indian tribes
 those who were not covered for a period of less than three months during the
year (if coverage gap is greater than 3 months, each month in the gap is subject
to penalty)
 People with no income tax liability
 Undocumented workers
2014
Individual Mandate
 Were you insured for the whole year through a combination of any of
the following sources?
 Medicare
 Medicaid or the Children’s Health Insurance Program (CHIP)
 TRICARE (for service members, retirees, and their families)
 The veteran’s health program
 A plan offered by an employer
 Insurance bought on your own that is at least at the Bronze level
 A grandfathered health plan in existence before the health reform
law was enacted
 If so – no penalty to be paid…
2014
Individual Mandate
 “Individual Responsibility Penalty”
 2014:
 $95 per adult and $47.50 per child
(up to $285 for a family) or
 1.0% of family income
…whichever is greater.
 2015
 $325 per adult and $162.50 per child
(up to $975 for a family) or
 2.0% of family income
…whichever is greater.
 2016 and beyond
 $695 per adult and $347.50 per child (up to $2,085 for a family) or
 2.5% of family income
…whichever is greater.
2014
Individual Mandate
 But it could be even higher…
2014
Health Insurance Marketplaces
AHB Marketplaces
for Individual
Purchasers
•
•
Open to individuals whose:
- employers do not offer
coverage
- employer-sponsored
coverage is deemed
inadequate or unaffordable
- are ineligible for Medicaid
SHOP Marketplace
for Small Employers
•
•
•
Open to individuals who are
employed by employers with
less than 50 FTEs
No premium subsidies –
employer receives 50% tax
credit for the non-elective costs
of coverage
Some provisions delayed until
2015 (e.g. employee choice)
The only place where premium
subsidies can be received
Used to be known as Exchanges
officially changed 1/16/13 (couldn’t translate into Spanish)
2014
Health Insurance Marketplaces
 State-based or Federal or
some Combination?
 18 states are setting up their
own Marketplaces
 Six more will have a
“partnership” HIMs
 All other states will fall under the federally-facilitated state
HIMs meaning run by the US Government and its
contractors
2014
Health Insurance Marketplaces
 Carriers have submitted rates and plans
 Most states have more than one carrier in the
individual exchange, less in SHOP
 Sebelius: Administration Is Negotiating
Rates In Federal Exchanges
 “Negotiations are underway and we will be negotiating rates
across the country.”
 Impact: Who knows? No one until mid-September.
2014
Health Insurance Marketplaces
 Main purposes
 Marketplace where individuals and small employers will be





able to shop for insurance coverage.
Facilitate the sale of qualified benefit plans to individuals,
including new federally administered multi-state plans and
non-profit “CO-OP” plans
Determine if non-Medicaid eligible individuals can receive
a premium credit based on a sliding scale
Will also direct people to Medicaid if they're eligible
Must have a website for comparative data about health plan
options and create a common enrollment form
Premium Subsidy/Advance Tax Credit…
2014
Metal Levels
 Estimate of the overall financial protection provided by a health insurance
plan – how measured?
 Four level of benefits, based on percentage of benefits that the insurance plan pays
for (vs. what those covered would pay)
 Flexibility allowed +/– 2% of actuarial value
 Deductible and Out-of-Pocket Maximums
 Deductible: $2,000/$4,000 — OOP Max: $6,350/$12,700
Coverage Levels
More expensive
Less expensive
Metal Tier
Actuarial Value Target*
Platinum
90%
Gold
80%
Silver
70%
Bronze
60%
Tax credits and subsidies are tied to the Silver plan
Richer benefits
Less Rich
Benefits
2014
Premium Subsidy/Advance Tax Credit
 For individual coverage only
 Estimated 26 Million American Estimated to be eligible for a premium
credit under ACA
 Can only if not eligible for other “minimum essential coverage”
through group or government-sponsored health plans
 AHB Marketplace will determine amount of premium subsidy based
on household income
 Will look at last tax year, or most recent information available
 Using new “simplified” form to collect the income information
 If a taxpayer/household gets too much – will pay it back on their taxes
 Advise new employees to notify exchange about new salaries
 We’ll provide you language for this purpose
2014
Premium Subsidy/Advance Tax Credit
 Amount of premium subsidy will vary based on three factors:
 Household income (total household income)
 Household size (# of family members)
 Age of the participant(s)
 Then amount of premium subsidy then set based on:
 Premium of “second lowest Silver plan”
 Not required to buy Silver plan though – will pay difference to higher plans
 Defined % of Household income relative to FPL
2014
Premium Subsidy/Advance Tax Credit
2014
Who falls where?
Expanded
Medicaid
Health-care exchange
Monthly costs for
Household Coverage
1
Up to $15,320
$15,320 - $45,960
$25.53 - $363.85
2
Up to $20,679
$20,679 - $62,040
$34.46 - $491.15
3
Up to $26,039
$26,039 - $78,120
$43.40 - $618.45
4
Up to $31,399
$31,399 - $94,200
$52.33 - $745.75
5
Up to $36,759
$36,759 - $110,280
$61.26 - $873.05
6
Up to $42,119
$42,119 - $126,360
$70.20 - $1,000.35
7
Up to $47,479
$47,479 - $142,440
$79.13 - $1,127.65
8
Up to $52,839
$52,839 - $158,520
$88.06 - $1,254.95
Family size
To see what the subsidy amounts look like:
http://healthreform.kff.org/SubsidyCalculator.aspx
2014
Role of Employer Information
 Employers will have to provide information to
Marketplaces to assist in determining an employee’s
eligibility for subsidy
EMPLOYER
COV ERAGE FORM
 Making changes?
Applying for help with health insurance costs from the
Health Insurance Marketplace?
The Healt h Insur ance Market p lace ap p licat ion asks q uest ions ab out an y healt h c overag e availab le t hroug h a
current job (even if it ’s from anot her p erson’s job , like a p arent or sp ouse) t o fi g ure out if you m ig ht b e ab le
t o g et help p aying for healt h insurance. Use t his form t o g et t he inform at ion you need from t he em p loyer
w ho off ers healt h coverag e. We’ll verify t his inf orm at ion, so it ’s im p ort ant t o b e accurat e. If you have m ore
t han one job t hat off ers healt h coverag e, use a sep arat e form for each em p lo yer.
 What are they? When are they effective?
 How will they effect EE contributions?
 Offer benefits today?
 EE eligible?
 Meet benefits standards?
 How much does EE pay per pay period?
 EE information
 How much do they earn in wages?
 How many hours do they work each month?
EMPLOYEE Information
The employee need s t o fi ll out t his sect ion. W rit e d ow n t he em p lo yee’s inform at ion t hen you m ay
req uest t he inf orm at ion b elow from t he em p lo yer. Use t his com p let ed form w hen you fi ll out a Healt h
Insurance Market p lace ap p licat ion.
Social Securit y Num b er
AF
T
Em p loyee Nam e (First , Mid d le, Last )
-
-
EMPLOYER Information
A sk t he employer for t his inf orm at ion.
Em p loyer Nam e
Em p loyer Id ent ificat ion Num b er (EIN)
-
Em p loyer Phone Num b er
Cit y
D
R
Em p loyer Ad d ress
(
–
)
St at e
Zip Cod e
W ho can w e cont act ab out em p loyee healt h coverag e at t his job?
Phone Num b er
(
)
–
Em ail Ad d ress
Tell us ab out t he health plan offered by t his employer.
This em p lo yee isn’t elig ib le for coverag e und er t his em p lo yer ’s p lan.
The em p loyee is elig ib le for coverag e und er t his em p lo yer ’s p lan on
(St art Dat e).
W hat ’s t he nam e of t he lowest cost self-only healt h p lan t his em p loyee could enroll in at t his job? (Only consid er p lans t hat m eet t he
“ m inim um value st and ard ” set by t he A fford ab le Care Act .)*
Nam e:
No p lans m eet t he “ m inim um v alue st and ard ”
How m uch w ould t he em p loyee have t o p ay in p rem ium s for t hat p lan?
$
How Oft en?
W eekly
Every 2 w eeks
Tw ice a m ont h
Mont hly
Yearly
Ot her:
*According to t he st andards set by the Affordable Care Act of 20 10 . If you’re not sure, ask your employer or healt h insurance issuer.
Use the information in this f orm to complete your
Health Insurance Marketplace application.
A p p ly online at www.placeholder.gov, or call us at 1-80 0 -XXX-XXXX t o g et st art ed .
NEED HELP W ITH YOUR APPLICATION? Call us at 1-80 0 -XXX-XXXX, or visit us a t www.placeholder.gov.
Para ob t ener una c op ia d e est e form ulario en Esp añol, llam e 1-80 0 - XXX-XXXX.
Page 21 of 21
2014
Small Employer Options
 New Market Options
AHB Marketplace
SHOP Marketplace
Small Group Market
2014
Taxes and Fees
 Imposes annual premium taxes on health insurers based on net premiums
 Estimated to raise $101.7B over 10 years
 Self-Funded Plans are exempt from this premium tax
 Transitional Reinsurance
 Fee will be charged to cover reinsurance for the individual market: $25B to be
collected from 2014-16
 A federally-established amount will be collected during first 3 yrs designed to spread risk
among carriers in individual market
 How much?
 2014: $63 per participant (employees and dependents)

How do you determine the number? Insured: monthly average; self-funded: 5500 counting method

Reducing the next two years: 2015: $42 and 2016: $26
 Example: 220 employee group that also covers 25 dependents: $15,435 in 2014
 Applies to all fully-insured and self-funded plans, including those on
COBRA as well as government employees
 Does not apply to FSAs, HSAs, HRAs, dental or vision plans
 Will be collected by insurers and TPAs
2014
Rating Changes
 Strict modified community rating standards for pricing all small
group and individual products
 Premium variations only allowed for age (3:1), tobacco use (up to
50%), family composition and geography
 Age bands: 0-20, 21-63, 64 or older
 One-year bands for 21-63 – above and below will have a single rate for
everyone falling in those age ranges
 Wellness discounts are allowed for group plans under specific
circumstances.
 Grandfathered groups are exempt from these changes
 Cost of transition felt in 2014 – will reduce factors increasing costs
for small businesses annually for 2015 and beyond
2014
Employer Mandate
 Requires Applicable Large Employers to offer coverage to their
eligible employees and that those benefits meet certain minimum
standards and maximum contribution levels
 Two Important Notes
 Does not require you to provide coverage to employees who work less
than 30 hours a week
 They are likely eligible for subsidized coverage in Marketplace
 Does not apply to Small Employers who have less than 50 FTEs
 No Mandate, but can still offer coverage, or employees can go to
Marketplace for subsidized coverage
 Exceptions?
 No – applies to all employers regardless of if they are for-profit,
nonprofit (including churches) or governmental entities
2014
Employer Mandate
 DELAYED but not really delayed.
 Announced on July 2 – Why?
 Reporting requirements for employers were taking longer to
figure out than expected
 Employer groups were lobbying on strongly on the issue
 98% of employers with 50 or more employees already offer
health coverage to their employees
 DOES NOT CHANGE REQUIREMENT to offer coverage,
only the penalties for noncompliance
 By delaying reporting, also delayed employer penalties
 So what’s the real impact?
2014
Employer Mandate
 DELAY is actually a little tricky on how to handle
 Makes early renewal process less important
 Likely eliminates the transition rule provisions – will have
to be compliant no later than January 1, 2015
 Don’t ignore the “gotcha” dates we’ve already seen
 December 27, 2012
 May 3, 2013
 Our advice: No simple answers – we’ll look at each
situation on a one-on-one basis
 Remember – the other requirements for 1/1/2014 still go into
effect and do not change from this delay.
2014
Employer Mandate
 There is no true requirement to buy:
 “Pay or Play” – Don’t offer coverage: pay a penalty
 If you do offer coverage, then…
 Employees can’t pay too much for EE only
coverage, or the employer pays a penalty
 The plan must meet the minimum benefit
levels, or the employer pays a penalty
2014
If over 50 FTEs…
 Really only one question:
 We’ll get there in a second…
2014
Applicable Large Employer?
Employer 2
Employer 1
FTEs
Employer 3
Common
Ownership/Control
1-29
hours
30+
Hours
2014
Common Ownership
 What if there are multiple employers which are
commonly owned?
 Common Law Test
 Control Group rules apply (IRC §414(c))
 Look at percentage of ownership
0-20%
20-50%
• Rarely found to have
common ownership
• Assumed to not have
common ownership
• Burden on employer
to show why there is
common ownership
50-80%
• Assumed to have
common ownership
• Burden on employer
to show why there is
NOT common
ownership
80-100%
• Common ownership
2014
Common Ownership
 Multiple owners at different shares of different
businesses
 Look at the common percentage of ownership among the
various businesses
 Why does this matter?
 Business 1: 20 employees
 Business 2: 40 employees
 Business 3: 5 employees
 On their own, none have the mandate
 Under common ownership, all three must offer coverage to
their respective employees
2014
Common Ownership
 If multiple entities
 Considered as one to determine whether the employer
mandate applies
 Each entity responsible for their share of the penalty for
either not offering or for other penalties
 Focusing penalty on noncompliant instead of entire group of
companies
2014
FTEs
 Once you get everyone into one “group” of
employees… or if you are just one employer:
 Are we an “Applicable Large Employer”?
 FTEs: How many hours do each employee work?
 What is an Hour?
 An hour paid: Any time that you pay someone, regardless of
whether they are at work or out of work but entitled to
payment:
•
•
•
•
Vacation
Holiday
Illness
Incapacity/disabi
lity
•
•
•
•
Layoff
jury duty
military duty
leave of absence
2014
Sorting employees
Work 30 or
more
Owner
All other
employees
Work same
number of hours
each week
Seasonal
Temporary
Employees
Independent
Contractors
Partial Year Employees
Work less than
30 hours
Work different
number of hours each
week
Salary or Hourly
not counted if a sole proprietor, a partner in a partnership,
a shareholder owning more than 2% of an S corporation
or an owner of more than 5% of other businesses (but
can’t use for purpose of avoiding coverage)
2014
Variable Hour Employees
 Someone who, as of his/her start date, you cannot tell
whether that employee is reasonably expected to work an
average of at least 30 hours per week
 Should look at the number of hours worked during “initial
measurement period” to determine if eligible
 Facts and circumstances determination
 Cannot take into account the likelihood that an employee
will terminate employment before the end of their
probationary period
2014
Ongoing “Variable Hour” Employees
• Track number of
hours worked by
all employees to
determine FTE
count and who is
working 30+
hours and now
eligible
• Can measure
every 3 months
up to every 12
months
Measurement
Period
Administrative Period
Measurement Period
Measurement
Period
Measurement
Period
• Counting: How hours worked by “variable hour”
employees during measurement period
• Notify and Enroll: Get those newly eligible enrolled
on health plan
• Can last 30-90 days
Stability Period
• Employees who work 30+ hours in measurement period
must be covered during stability period
• Must remain covered for at least six months (or length of
measurement period, whichever is longer) regardless of
number of hours worked in stability period
• Limited exceptions for those who work 30+ hours during MP
2014
Seasonal Employees
 Most will not be counted toward FTE count or eligible for benefits
 A seasonal employee is defined in the context of whether the
employer is subject to the shared responsibility requirements
 These requirements indicate that a seasonal employee is works
120 days or less during the calendar year
 However, it does NOT appear that an employee working more than
120 days automatically would lose seasonal status
 Labor is performed on a seasonal basis where, ordinarily, the
employment pertains to or is the kind exclusively performed at certain
seasons or periods of the year and which, from its nature, may not be
continuous or carries on throughout the year
 Employer must make a “good faith interpretation”
of whether employees are or are not seasonal
 Further guidance is definitely needed...
2014
“Independent Contractors”
 Will not count toward FTE or be eligible for benefits
since they are not “common law employees”
 However… be careful about what you call an independent
contractor
 More than just because you pay them via 1099
 IRS/DOL have been closely scrutinizing this issue
 Look to 11-point test from IRS
 EbenConcepts has developed a tool to help our clients
“figure out” whether or not they are truly independent
contractors
2014
“Independent Contractors”
 Three types of Control
 Behavioral control.
 If you have the right to control or direct not just what work needs to
be completed, but how it gets completed, the worker is most likely an
employee.
 Financial control.
 Two financial signs:
 has a significant personal investment in the work, or
 can incur a profit or a loss
 Type of relationship.
 If the person receives benefits — like insurance, a pension or paid
leave — that’s a giveaway the person’s an employee.
2014
“Independent Contractors”
 Other giveaways





They don’t have a business license
They don’t have their own place of business
They lack their own equipment
They are solely dependent on your business, or
They perform the same work as those classified as employees.
 You say they’re independent contractors, and IRS/DOL
disagree:
 Penalties for not offering coverage
 Penalties and interest for not paying your share of FICA
 Workers compensation liability
2014
Temporary Employees
 Temporary employees – short-term assignments or staged hiring
 Will be considered your employees – waiting periods could start being
counted from day #1 of temp assignment
 Can’t use temp firm to “split time” either to avoid hitting hours limit
 Employed by outside temp agency (and no common ownership)
 Temps won’t count toward FTEs or be eligible for your health coverage
 Be careful with staffing firm agreements
 Some are arguing that they are not the common law employer bc they
don’t have control over the employee – client does
 Carefully read the language that they aren’t trying to transfer
responsibility to provide coverage
2014
Do the Math…
 30 or more hours per week (work regular
hours or variable)
 Each employee 30+ hours/week = 1
 Less than 30 hours per week
 Each employee is a fraction of one:
# hours paid per week / 30
 Works 25 hours per week = 0.8333
 Add it up…
 If they add to 50 or more, mandates apply
 Limited Exception: If over 50 for not more than four months in
the prior calendar year – no mandate
2014
FTEs: Doing the Math
 Example:
 Work more than 30 hours a week
 30 employees
 Work less than 30 hours a week, but a consistent number of
hours each week
 40 employees who work 20 hours/week (on average)
 Variable hour employees
 5 employees
 two over 30 hours
 three work average of 25 hours/week
2014
FTEs: Doing the Math
 Now add it up




Group 1: 30
Group 2: 26.667
Group 3: 2 + 2.5
TOTAL: 61+ FTEs
 Conclusion
 Employer Pay or Play Mandate applies
 Only required to cover those employees who work 30 or more
hours a week
 Adding two variable hour employees who worked over 30 hours
for a stability period
2014
We’re over 50, now what?
Offer health benefits to…
• EEs who work 30+ hours
• Dependent children under 26
• Not required: Spouses
What counts as health benefit?
• Minimum Benefit Value Plan
• Fully-insured or self-funded
• But not…
2014
What doesn’t count as offering coverage
 “Defined Benefit Plans”
 Employer cannot provide cash or reimbursements to help
employees buy individual coverage
 Specifically prohibited:
 Using HRA dollars to buy individual coverage or purchase through
the exchange
 Limiting HRA contribution amounts for stand-alone HRAs
 Employer payments will keep an employee
from being eligible for a subsidy
 This rule applies to small group too…
2014
If I don’t offer coverage?
Pay a Penalty…
Credit for 30
$2,000 per FT Employee
Nothing for PT EEs
2014
If I don’t offer coverage?
…which is an Excise Tax
Companies taxed as a partnership will have the penalty paid by
their owners in accordance with their percentage of ownership
2014
If I don’t offer coverage?
 Example:
 75 FTEs - only 40 employees working 30+ hours per week
 Do not offer coverage to any employee
 The math:
 40 FTs x $2,000 = $80,000 – $60,000 (credit for 30 FT EEs)
 $20,000 penalty
 Reminder: Excise tax
 Must pay with after-tax dollars
 Increases “real” value of the penalty by the effective tax rate
 Means you have to earn $34,000, pay taxes on it and then
pay $20,000
2014
Unaffordable Coverage
 Coverage is deemed “unaffordable” if the employee
spends more than 9.5% of their household income
 Problems with the rule…
 Do you know your employees’ household income?
 Do you want to know?
 What about paying for dependent coverage?
 Revised Rule:
 What employee pays for employee only coverage?
 Doesn’t matter what employee might have to pay to cover their
dependents
 Does it pass any one of the three safe harbors?
2014
Unaffordable Coverage

EXAMPLE: Employee earns $9.50/hour, but monthly cost of employee only coverage is
$148.75
 W-2 Safe Harbor:
 EE earns $19,750, but $1,785 on a pre-tax basis = Box 1: $17,975
 9.5% of Box 1 income: $142.30/mo
 FAILS: $148.75 is 9.93% of employee’s Box 1 income
 Pay Safe Harbor:
 Hourly rate of pay ($9.50) x 130 hours/mo = $1,235.00
 9.5% of $1,235: $117.32
 FAILS: $148.75 is 12.04% of pay safe harbor
 FPL Safe Harbor:
 Federal Poverty Level: $11,170
 9.5% of FPL: $90.96 (based on 2013 FPL level)
 FAILS: $148.75 is 15.98%of federal poverty level

FAILS Affordability Test for this employee because didn’t
pass any of the tests but could be fixed…
2014
Unaffordable Coverage
 Could adjust EE contributions by discriminating in favor of lowerpaid employees
 Lower EE contributions to $140/mo for some
 Raise EE contributions to $152 for everyone else
 Two other issues:
 Employee contributions fall below 9.5% for EE only coverage, but
what about covering family?
 Very few good options – not eligible for subsidized coverage
 Wellness differences
 Smoking – ok
 Not involving smoking – only if in place as of 5/3/13
2014
Unaffordable Coverage
 Penalties if “unaffordable” coverage
 $3,000 per affected employee annual penalty (no reduction)
 Capped at the employer’s maximum penalty for not offering
coverage
 Example:
 75 FTEs within group, but only 40 FT employees
 5 employees spend more than 9.5% of their income for EE only
coverage
 Penalty: $15,000 Excise Tax
 Capped at $20,000
 However if no employee goes to exchanges and receives
subsidized coverage – no penalty
2014
Inadequate Benefits
 If benefits are not “minimum level”
 Each plan must have benefits at or above the actuarial value
of the “bronze” level benefit or 60% actuarial value
 If benefits do not meet that level, $3,000 per employee
excise tax penalty
 Capped at the employer’s maximum penalty for not offering
coverage
 Who is responsible for actuarial determination?
 There are standard calculators available
 Also created “safe harbor” plan designs that meet minimum benefit
value required under the law
 Employer ultimately responsible
2014
Essential Health Benefits (EHB)
 The law requires health plans offered in the individual and small
group markets offer a comprehensive package of items and services
 EHB requirements do not apply to large group or self-funded, but
may not meet employer mandate requirements if they don’t
comply with minimum benefit value standard
 Plan must cover





Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use
disorder services (MHPA)
 Prescription drugs
 Rehabilitative services and devices
 Preventive and wellness services
and chronic disease management
 Pediatric services, including oral
and vision care
2014
Essential Health Benefits (EHB)
 Cost sharing and deductible limits
 Annual max out-of-pocket – align with HSA limits
 $6,350 self only
 $12,700 family coverage
 Employer contributions to HSA and HRA reimbursements
can “lower” deductibles in risk-sharing model
MBV:
72.3%
2014
How caught?
 Not offering coverage:
 One employee gets subsidized coverage
from Exchange would cause employer
to pay penalties for everyone not covered
 How will they know?
 Must send in information when an
employee seeks subsidized coverage
 HIMs will obviously review tax information for each applicant and therefore
they find employers not offering coverage
 W-2 Reporting
 Employer Reporting to IRS
 Waiting on regulations for Section 6056 Reporting: Requires large employers
to file an informational return that reports and certifies certain information
about health care coverage offered to employees.
2014
Whistleblower Protections
 An employer may not fire or retaliate against an employee if:
 Provided information relating to any violation of ACA to:
 Employer
 Federal or state Agencies
 Testified, assisted, or participated in a proceeding concerning a
violation of ACA, or is about to do so
 Objected to or refused to participate in any activity that he or she
reasonably believed to be in violation of ACA
 Received a premium subsidy/tax credit or a cost sharing reduction
under ACA
 If employer takes retaliatory action against an employee, employee
can file a complaint with OSHA
2014
Could employee waive coverage?
 Employer has less than 200 FTEs: Yes
 Employer has more than 200 FTEs: Generally no.
 Employee must be covered on employer plan
 Only way for employee to waive coverage is to prove that they have
other coverage
 Other group coverage
 Medicaid or Medicare
 If employee does waive coverage and seeks to buy subsidized
coverage through AHB Marketplace
 Employer meets mandates: no penalty
 Employee cannot get subsidized health
coverage through the exchange
2014
What are larger businesses considering?
 Drop employer coverage completely
 Pay the $2,000 penalty and absorb productivity issues
 Keep coverage on management carve-out and not add those employees who
are currently not eligible
 Treated as “unaffordable coverage” and would pay $3,000 per non-covered
employee penalty
 Could also be considered discrimination under IRC 105(h)
 Reduce number of hours worked by certain employees to stay below 30
hours each week
 Commonly discussed strategy by restaurants and other hospitality industry
employers
 New study says on 2.3M will be affected by this strategy
 Pay employees more to cover their costs and penalty
 Of course they forget quickly why you did that…
2014
The option most employers are taking…
 Continue employer-based coverage
 Employee recruitment and retention
 Keeping tax advantages of employer based coverage
 Retain flexibility with plan design, risk and cost
 Cheaper to provide benefits than pay employees more
 Not offering coverage doesn’t eliminate reporting mandates
 Weaken unionization efforts
2014
What if I don’t currently offer benefits?
I offer to
some but
not all…
I don’t offer
to anyone
today…
 A time to talk strategy…
 Can I offer a benefit plan that meets minimum benefits and
Some will waive
to not pay for
coverage
Others bc
benefits not rich
enough
Net: Less than Penalty
$4,000
deductible
No Copays
100%
Coinsurance
EEs pay $90/mo
Offer 60% Plan
contribution limits that is less expensive than penalty?
Penalty after
deduction
vs.
excise tax
after paying
income taxes
2014
Waiting Periods
 Waiting periods in excess of 90 days are prohibited
 Restriction applies to both grandfathered and non-GF plans
 REMEMBER: 90 days is not three months
 First day of employment counts as day 1
 Waiting periods can be shorter than 90 days
 Cannot do first of the month after 90 days
 If employee doesn’t complete paperwork, then there is no
violation by the group
2014
Re-Hires
 Two proposed approaches based on length of absence,
 determine if a rehired employee is a new employee or for
purposes of determining the employee’s status as a full-time
employee.
 Been gone for 26 weeks or longer:
 Rehired employee is treated as if terminated employment and is
rehired as a new employee.
 Less than 26 weeks (the "rule of parity")
 Rehired employee is treated as a new employee (and new waiting
period) if “absence period” is at least 4-weeks long and is longer than
the employee’s period of employment immediately preceding their
last period of time without some hours of service
So now what?
Regulatory Process goes on…
 Numerous federal agencies in charge of drafting rules for
implementing law
 Still some questions outstanding
 States have certain things they should do to…
 Some are, others are not
 Some work by Legislatures, Governors, and/or Insurance
Commissioners
Preventative Maintenance
 Your team will work with you at renewal to identify issues
that need to be resolved now
 Taking steps now to avoid issues for 2014
Educating Employees
 Why?
 75 percent said they believe they will receive education regarding
health care coverage under reform
 13 percent of employers say educating employees about health
care reform is important.
AFLAC Employee Survey, May 2013
 What we’ll be doing…
 Making sure employees understand their benefits and any
changes that may be coming as a result of health care reform
 Important to keep them happy and feeling that their employer is
taking care of them – a critical aspect of retaining valued workers
 Working with employees not covered on employer health plans to
find the best options in the Marketplaces
Educating Employees
 What we know the feds and allies will be doing:
 Spread the word about the subsidy — without inflating
expectations
 Convince young invincibles that they are not
 Will emphasize financial impact of uninsured medical
expenses in the event of an accident or disease
 Interesting stats:
 64% of employees under 30 take coverage when offered vs. 76%
over 30
 if all eligible workers enrolled in their workplace health plans, each
employee could expect to pay 14% less in premiums
 “If you’re an employer, in the long run, to keep premiums down,
you want to have the young people as well as the older
people participating,” he says.
Questions?
Chris Harrison
csharrison@ebenconcepts.com
David C. Smith
dcsmith@ebenconcepts.com