Health Reform. Achieving Balance. Healthcare Reform. Major Dates. Current Issues. Automatic Enrollment. Benefit Summaries 3/19/2013

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1 Achieving Balance Healthcare Reform Health Reform What does it do, and when? What s coming next? What do we need to be doing now? Rick Jones, CEBS, ARe Jones Management Consulting Association County Commissioners of Georgia Major Dates 2014 Individuals required to have coverage Employers required to offer coverage New selling coverage Federal Subsidies for lower income % Excise Tax on plans over limit Federal Elections Minimum coverage Maximum cost 30 Hours is full-time Seasonal employees Tax penalties Reporting Notifications Current Issues Benefit Summaries Must provide four-page benefit summary Separate from SPD May be paper or electronic form Insurers distributing currently Shows details of coverage, exceptions, common scenarios, contact info Automatic Enrollment Applies to Employers of 200+ Must automatically enroll all new full-time employees Employer may select plan Employee must be able to opt-out Awaiting final regulations 1

2 40% Excise Tax Starts 1/1/2018 Billed through insurer 40% of the cost of coverage in excess of $10,200 Single $27,500 Family Exceptions: Age Gender based high cost plans Adjustment possible if costs rise faster than planned High-risk professions (add $1650 / $3450) Things That Changed Class Act Long Term Care for all, payroll deducted Numbers didn t add up Early Retiree Reinsurance Program Ran out of money Annual limits Waived repeatedly More Changes 1099 s to EVERYBODY Popular protest repealed Affordable coverage for families Dropped in IRS Regulations Covering Seasonal Employees Safe-harbored by IRS Timelines for benefit statements, W2 s auto enrollment, more. Individual Mandate Starts 2014 Must have coverage or Pay Penalty Tax $95 for the year 2014, or 1% of income $325 for 2015, or 2% of income $695 thereafter, or 2.5% of income Pay the larger amount. Income is household income. Employer Responsibility Employer Mandate Starts Employee Groups must offer coverage or pay tax penalty Add up part-time FTE s to reach 50 Treat 30 hours as full-time Special issues for seasonal workers and variable hour part-timers, covered later Large Employers have 50 employees! 2

3 Employer Mandate Two critical tests: Affordability Minimum Essential Coverage Meet these and you are Responsible and will not owe penalty taxes Must offer at least one plan to employees that satisfies these tests. They don t have to take it. Offer multiple plans? Only one must pass. Employer Mandate Tax penalty is $2,000 a year per EE above employees? 55-30=25, 25x2,000=$50,000 95% Rule Employers offering required coverage that have employees receiving Premium Assistance Tax Credit will pay $3,000 per subsidized employee (not to exceed above penalty tax) Transition Relief For fiscal year health plans that existed on 12/27/2012 and either: Was offered to 1/3 or more of full AND part time employees at last open enrollment Or covered at least ¼ of employees (on any day from October 31 December 27, 2012) Will not owe tax penalties on any full time employee until plan renewal in 2014 Provided these full-time employees are offered affordable, qualifying coverage at renewal in 2014 More guidance likely Minimum Coverage Test Employers must provide Minimum Essential Coverage by January 2014 Requires at least 60% of costs be paid Out of pocket maximums: $6,250 Single, $12,500 Family Indexed Actuarially determined, can use IRS online calculator in some cases Minimum Coverage Test Three Safe Harbors Offered 1. Minimum Value Calculator HHS/IRS online tool Enter deductibles, co-insurance, OOP max Enter coverage for Doctors, Hospital, ER, Drugs, Labs, & Imaging, HRA/HSA funding Based on actuarial tables & self-funded employer population it gives the Value Can be adjusted for extra benefits by a professional actuary. Minimum Coverage Test Design Based Safe Harbor Checklists Paper checklist using same plan design elements as MV for common plan features If you re as generous as the minimum in each category, all set 3. Actuarial Certification Hire an actuary to calculate value. Only option for non-standard plans. 3

4 Affordability Test Law says employee cost must not exceed 9.5% of Household Income for plan taken (Single, Two-person, Family, etc.) Employers can t determine Household Income IRS has provided relief Through at least January 1, 2015 See IRS Notice See IRS NPRM REG Affordability Test Affordability Safe Harbor allows comparing Employee W2 Income to Single Plan cost Lowest cost plan providing minimum essential benefits must not cost more than 9.5% of employee W2 income as reported in Box 1. Box 1 includes wages, bonuses, tips but excludes pre-tax health benefits, some retirement plans, etc. 2 New Safe Harbors Rate Of Pay Use lowest employee pay rate (or use every employee s) and multiply by 130 for monthly income, compare to employee share of premium (don t exceed 9.5%) For Salaried employees use monthly salary. Can t use in years when reducing pay. Federal Poverty Line 11,490 x 9.5% = / 12 = $90.96 (monthly) (20.99 weekly) Avoid Penalties Affordable 9.5% of Income Coverage meets standard 30 Hours is Full-Time? Determining full-time employees 30 hours is full-time for needing to provide health insurance or pay a penalty Effective January 1, 2014 Seasonal employees 90 days waiting period Notice IRS has offered safe harbors Types of Employees Full Time: expected to work 30 hours/week Part Time: average less than 30 hours 130 hours per month Variable Hour: can not reasonably determine average expected working hours Seasonal: only employed a portion of year but any could qualify as Full Time for health insurance purposes 4

5 Hour of Service Hour of service means each hour for which an employee is paid, or entitled to payment: For the performance of duties For time during which no duties are performed due to: Vacation Holiday Illness Layoff Military duty Incapacity (including disability) Jury duty Leave of Absence Typical Problem Cases EMTs Snowplow operators, Mowers Substitute Teachers Summer Recreation 24 hour shift Firefighters Coaches (multiple sports) Part-time in several Departments 32 hour schedules (designed to avoid benefits) Eligibility Options 1. Pay for their health insurance 2. Pay the penalty tax 3. Reduce hours below Consolidate two positions into one 5. Hire through temp agency 6. Use IRS Safe harbors for Variable Hour Employees and Seasonal Employees IRS Notice Safe Harbor for Variable Hour & Seasonal employees based on facts and circumstances at the start date, it cannot be reasonably determined whether the new employee is expected to work full time. Uncertainty of coverage not good for employees, families, or employers Uses 3 types of time periods 3 Time Periods Standard Measurement Period For tracking actual hours worked Getting started also called Lookback Period Administrative Period Optional, in case you need time to enroll employees Stability Period Qualifying employees can count on coverage Standard Measurement Period Employer chooses length, from 3 to 12 months in whole months Longer periods favor most employers Total hours worked are tracked for entire period Count vacation, sick leave as time worked Average hours of 130 per month is the cutoff point. This equals 30 hours per week. 5

6 Stability Period Must be same length as Measurement Period If an employee worked 130 hours per month on average then: They are entitled to health insurance for the entire Stability Period, no matter how many actual hours are worked Entitled to at least six months coverage Worked less than 130? No coverage this Stability Period Administrative Period Optional, employer choice Falls between Measurement & Stability Periods or- overlaps Measurement 90 days or less, shorter probably easier For smooth enrollment process following determination of eligibility Salaried Employees 3 methods to determine if full time: A. Track actual hours worked. B. Credit them 8 hours for any day they're scheduled to work even an hour. C. Credit them 40 hours for any week they're scheduled to work. However may not use method B or C if they substantially understate actual hours worked such that an employee does not qualify for health insurance. School Employees Can t use summer break to reduce average hours Any break over 4 weeks either: Leave out of the calculation completely Or credit with the average hours from when working (not to exceed 501 hours/year) See IRS NPRM REG Only Schools Reasoning pages 28-30, Proposed Reg pages Seasonal Employee Not cleanly defined See page 12 May use a reasonable good faith meaning IRS throws Ski Instructors under the Snow Cat See page 16: #3 How to use a long Initial Measurement Period to avoid offering coverage to seasonal workers Next Step Review every employee not being offered health insurance Part-time, seasonal, temporary Study actual hours worked over 3, 6, 12 months looking for best measurement period Consider how best to get ready now: Restructure positions, reduce hours, plan to pay benefits 6

7 The Future is Now Your Initial Measurement Period has probably already begun Using 12 months favors most governments For 1/1/2014 that started January 2013 If you re going to adjust hours worked, you need to be doing it soon next winter is too late Success Means Maintaining a Delicate Balance Hours worked vs. cost Employee retention Service to public Reporting W2 Reporting You should already have done this Health Reform requires reporting of health insurance costs on W2s Temporary exclusion for smaller employers filing fewer than 250 Form W2s for 2011 Do not need to file for 2012 Exclusion will continue until updated by IRS New Reporting Starting 2013 anyone providing heath insurance must report coverage to the IRS Must include: Name, SSN Dates of coverage Premium & cost data Copy sent to subscribers IRS Notices , Rules not final More Reporting Large employers (50+) need to report: Certify coverage meets minimum standards Duration of any waiting periods Which months the plan was available Monthly Premiums & Employer s share Number of full-time employees by month Employee name, address, SSN, which months covered, months dependents covered 7

8 Sell health insurance directly to individuals & small businesses Set up by States (or Feds when States decline) States lose regulatory power over much of market if Federal Government runs Also advantages in integrating with Medicaid Controlling benefits & State budget Don t set prices, but can exclude any with Excessive or unjustified premium increases Role Evaluate health plans Publish standard comparisons Call center to answer consumer questions Decide who s eligible, who s exempt Build computer systems to interact with Medicaid Insurers -- Individuals Employers -- Government Agencies States worry sick people will gather in exchanges Insurers must charge same rates in and out of the exchange Members of Congress are supposed to get coverage through the exchanges Employer notification date was just postponed Total of 24 million expected to be covered by 2019 (CBO) 80% receiving subsidies Subsidies available up to 4 times the poverty level ($88,000 for family of four) Subsidies average $6,000 per person per year 8

9 Two Existing Models already in use: Massachusetts Utah Very different styles Massachusetts State negotiates costs, details of coverage 5 carriers Significant subsidies for many people Most sign up using paper forms Can sign up online if no subsidy Utah Insurers set rates, plan design Exchange publishes plan data Organizes the marketplace Small business employees can choose a plan and enroll online Guided by invisible hand of the marketplace Almost There There s Help ACCG Health Members may call us for help: Rick Jones, Benefits Consultant to ACCG Ben Pittarelli, ACCG Your BCBS Representative 9