7/8/2015. HEALTH CARE REFORM AND ITS EFFECTS ON YOUR BUSINESS Presented by Ophelia Y., SPHR, GPHR, MBA AGENDA

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1 HEALTH CARE REFORM AND ITS EFFECTS ON YOUR BUSINESS Presented by Ophelia Y., SPHR, GPHR, MBA AGENDA Background & History The Past: Previously Implemented HCR Provisions The Present: Current & Pending HCR Provisions The Near-Future: HCR Provisions on the Horizon Cheat Sheets Wrap Up/Questions and Answers 1

2 BACKGROUND & HISTORY US History of Healthcare Reform Patient Protection and Affordable Care Act Education Reconciliation Act THE PAST: PREVIOUSLY IMPLEMENTED PROVISIONS Lactation Breaks Summary of Benefits and Coverage Notice of Exchanges and Subsidies LACTATION BREAKS Requires almost all employers to provide reasonable break times for an employee to express breast milk for her nursing child Only applicable up to one year after the birth of her child Exemptions for small employers (less than 50) if able to demonstrate undue hardship Amends the Fair Labor Standards Act (FLSA) 2

3 SUMMARY OF BENEFITS & COVERAGE A uniform template pre-filled with the important provisions of a specific health insurance plan Creates an apples to apples approach to comparing and contrasting health plans Must be included with open enrollment materials each year and to all new enrollees during the plan year 3

4 NOTICE OF EXCHANGES & SUBSIDIES Purpose: To inform employees of the existence of Health Insurance Exchanges (Health Insurance Marketplaces) and potential federal subsidies available to them Applies to virtually all employers, regardless of size Must be provided to each new employee within 14 days of the employee s start date NOTICE OF EXCHANGES & SUBSIDIES Federal Department of Labor has released two model notices (one for organizations that sponsor a health plan, and one for organizations that do not) No penalties for noncompliance at this time THE PRESENT: CURRENT/PENDING HCR PROVISIONS 90-Day Waiting Period Small Business Tax Credits Health Insurance Exchanges New COBRA Notice Language Tax Treatment: Individual Plan Reimbursements W-2 Reporting 4

5 THE PRESENT: CURRENT/PENDING HCR PROVISIONS Employer Mandate Employer Mandate Reporting 90-DAY WAITING PERIOD As of 1/1/14, no more than a 90-day waiting period for coverage for new employees For all plans renewing on or after 1/1/14 Applies to all group health plans, regardless of group size Applies to both Grandfathered and Non-Grandfathered Plans Current guidance does not allow first of the month following 90-day waiting period SMALL BUSINESS TAX CREDITS Up to 50% Tax Credit on Employer-Paid Premiums (35% for nonprofits) Tax credit, not a deduction 5

6 SMALL BUSINESS TAX CREDITS To Be Eligible: Must contribute at least 50 percent of the cost of health care single coverage, Must pay average annual wages below $50,000, Must purchase coverage through the state SHOP exchange; and Must have less than the equivalent of 25 full-time employees To Be Eligible for Full Amount: Must pay average annual wages below $25,000, and Must have less than the equivalent of 10 full-time employees STATE HEALTH CARE EXCHANGES Each state has one. Some set up by federal government, some by the state and some are hybrids Virtual/competitive marketplace offering health plans Individuals and small employers (fewer than 50 FTEs) may shop in exchanges Some states currently allow groups of fewer than 100 Starting in 2016, all SHOPs will be open to employers with up to 100 full time equivalents States have some flexibility regarding the set up of the exchange(s) and participation requirements STATE HEALTH CARE EXCHANGES Two Parts to the State Health Care Exchange: 1) Marketplace Individual health plans 2) SHOP Small Group Health Plans (Small Business Health Options Program) 6

7 STATE HEALTH CARE EXCHANGES: THE MARKETPLACE Next open enrollment: 11/15/15 2/15/16 Forfeit the employer health insurance contribution, but may be eligible for federal premium subsidy No payroll deduction available for Marketplace Plans STATE HEALTH CARE EXCHANGES: THE SHOP For groups with less than 50 employees May shop with or without a broker, cost is the same to the employer Small business tax credit only available for plans purchased through the SHOP STATE HEALTH CARE EXCHANGES: THE SHOP Employers may enroll at anytime during the year If the employer enrolls by the 15 th of the month, coverage may begin as soon as the 1st of the next month Must offer plan to all full-time employees working 30+ hours/week In many states, at least 70% of the full-time employees must enroll in the SHOP plan to maintain eligibility. (Employers who apply for SHOP coverage from 11/15-12/15 can enroll without meeting this requirement.) States that set up their own Exchanges have some flexibility in the features 7

8 STATE HEALTH CARE EXCHANGES Plans Available in an Exchange: Level Premiums Out-of-Pocket Costs Plan Pays Enrollee Pays Bronze Lower Highest 60% 40% Silver Moderate Higher 70% 30% Gold Higher Moderate 80% 20% Platinum Highest Lowest 90% 10% Costs are paid through deductibles, co-pays, and co-insurance NEW COBRA NOTICE LANGUAGE Employers with 20+ employees who have a group health plans must offer COBRA to qualified beneficiaries When a participant has a COBRA qualifying event, the employer must mail the qualified COBRA beneficiary a COBRA Notice & Election Form Now this Notice must contain verbiage regarding the Marketplaces and federal premium subsidies DOL has published a new model (May 2014) EMPLOYER REIMBURSEMENTS FOR INDIVIDUAL HEALTH PLANS Per IRS Notice and IRS Notice , employers are no longer allowed to reimburse employees for Individual or Marketplace plans The employer is generally unable to ensure that the individual plan meets certain ACA market reforms to be eligible for pre-tax treatment Penalty: $100 per employee per day 8

9 W-2 REPORTING Large employers (issuing more than 250 W-2s in the previous tax year) must report the aggregate cost of employee-sponsored health plans on the W-2 Applies to both grandfathered and non-grandfathered plans Does not change tax treatment of plans For most plans, the aggregate cost includes both employee and employer contributions THE PRESENT: NEW FOR 2015 Employer Mandate Employer Mandate Reporting EMPLOYER MANDATE DELAYED Employer must offer health insurance to full-time employees (30 hours/week) according to the following table: Full Time Equivalents Employer Mandate Penalties Begin Margin of Error Including Control Groups /1/ % in 2015 and 5% thereafter /1/2016** 5% Less than 50 N/A N/A Full Time Equivalents Including Control Groups Employer Mandate Penalties Begin ** Delay to 2016 applies only if: 1) The employer did not reduce its workforce to get below the 99 employee threshold without a bona fide reason 2) The employer did not materially reduce its health care plan Margin of Error 9

10 EMPLOYER MANDATE: FULL TIME EQUIVALENT EMPLOYEES (FTES) Part-time Employee Equivalents (Total Monthly Part-Time Hours/120) + Full-time Employees (30 hours/week or more) Owners (Sole proprietors, Partners in a Partnership, Members of LLCs - Taxed as a Partnership, and Shareholders who own two percent or more in an S Corporation) = Full-time Equivalent Employees Look-back period EMPLOYER MANDATE: PENALTIES A Penalty: When a plan that meets minimum coverage requirements is not offered B Penalty: When minimum coverage is provided but it is not affordable Calculation: $2,000 annually for each full-time employee, excluding the first 30 (80 in 2015) employees {the total number of employees in the firm (subsidized and unsubsidized) minus 30 or 80} x {$2,000} Calculation: $3000 annually for each employee who actually receives a federal premium subsidy Overall Penalty: The lesser of A Penalty or B Penalty Penalties are Calculated Monthly Paid Annually EMPLOYER MANDATE: IMMUNIZING THE PLAN Minimum Essential Coverage Affordable Rate All Full Time Employees 10

11 MINIMUM ESSENTIAL COVERAGE Health insurance plan design, not employer contribution to the plan Health insurance carrier must pay for at least 60% of treatment costs (60% actuarial minimum value) Bronze level plan AFFORDABLE RATE Exclusively refers to employee contribution to the plan Misconception Certain Contribution % Required Coverage is considered affordable if employee contributions for employee only coverage do not exceed 9.5% of an employee s household income There are three safe harbor methods for determining affordability: 1) W-2 Wages - 9.5% of an employee s W-2 wages (reduced for salary reductions under a 401(k) plan or cafeteria plan) 2) Rate of Pay - 9.5% of an employee s monthly wages (hourly rate x 130 hours per month) 3) Federal Poverty Level - 9.5% of the Federal Poverty Level for a single individual FULL TIME EMPLOYEES Minimum essential coverage at an affordable rate must be offered to all full time employees regularly working at least 30 hours per week following the 90-day waiting period Also, it must be offered to their dependent children, but not spouses No requirement to offer insurance to part time employees less than 30 hours 11

12 EMPLOYER MANDATE: REPORTING REQUIREMENTS Begins in 2015 tax year and only applies to employers with 50+ full-time equivalent employees The forms must be filed for first time in early 2016 for the 2015 calendar year. Just like W-2 s, copies of the forms must be provided to employees by January 31 st and filed with the IRS by February 28 th (paper) or by March 31 st (electronic) Electronic filing required unless the employer will be submitting fewer than C forms for the year EMPLOYER MANDATE: REPORTING REQUIREMENTS Section 6056 of the Tax Code requires: 1) One Transmittal Form (IRS Form 1094-C) 2) Employee Statements (IRS Form 1095-C top half only) It may help you to think of the 1094-C as similar to the W-3 (a transmittal form) and the 1095-C as similar to the W-2 (a separate return for each employee) *Self-funded plans require additional reporting under Section 6055 of the Tax Code 12

13 EMPLOYER MANDATE: REPORTING REQUIREMENTS Three Methods of Reporting: 1) General Method Required method for all large employers unless they qualify for reporting relief provided by the two alternative methods. (See next two slides for data collection requirements) 2) Qualifying Offer Method To use this method the employer must offer a bronze level or higher plan where the cost to the employee of employee-only coverage is less than about $1,100 in Also, plan must be offered to all family members. Provides relief from reporting monthly, employee-specific health information. 3) 98% Offer Method To use this method, the employer must offer a bronze level or higher plan at an affordable rate to at least 98% of the company s full time employees. Provides relief from identifying which employees regularly work full-time hours. 13

14 EMPLOYER MANDATE: REPORTING REQUIREMENTS So What Information Do I Need to Track in 2015? 1) Employer name, address, and Tax ID 2) Name and phone number of employer s contact person responsible for health insurance (this may be either an employee or agent of the employer) 3) Calendar year for which the information is reported 4) Certification as to whether the employer provided minimum essential coverage to full-time employees and their dependents by calendar month 5) Months minimum essential coverage was available to each full-time employee EMPLOYER MANDATE: REPORTING REQUIREMENTS So What Information Do I Need to Track in 2015 (cont.)? 6) Each full-time employee s monthly cost for employee-only coverage under the employer s least expensive minimum value plan (bronze level or higher plan) 7) Number of full-time employees employed each month in the calendar year 8) Name, address, and tax ID of each full-time employee employed during the calendar year 9) Months each employee was covered on the group health plan during the year ** Self-insured plan sponsors must collect additional information THE NEAR FUTURE: HCR PROVISIONS ON THE HORIZON Non-Discrimination Automatic Enrollment 14

15 NON-DISCRIMINATION Per IRS, delayed until at least 2015 Similar to current regulations for self-insured plans Grandfathered plans excluded When implemented will most likely prohibit: Management Carve-Out Plans Higher % contributions to HCI s Executive Health Plans AUTOMATIC ENROLLMENT Employers with more than 200 full time employees required to automatically enroll new employees Employees may still opt out Automatic Enrollment Rules delayed until at least 2015, probably longer Federal Department of Labor has not yet issued guidance on this issue CHEAT SHEETS Provisions by Employer Size 15

16 CHEAT SHEET #1 Provisions for Small Employer (fewer than 50 employees) with no Health Insurance Plan: 1) Notice of Exchanges and Subsidies 2) Lactation Breaks 3) No reimbursements allowed for Individual or Marketplace health plans CHEAT SHEET #2 Provisions for Small Employer (fewer than 50 employees) with no Health Insurance Plan: 1) Notice of Exchanges and Subsidies 2) Lactation Breaks 3) Small Business Tax Credits (If less than 25 employees) 4) Summary of Benefits and Coverage 5) New COBRA Notice Language 6) 90-Day Waiting Period 7) Non-Discrimination if non-grandfathered (delayed) CHEAT SHEET #3 Provisions for Large Employer (50+ employees) with a Health Insurance Plan: 1) Notice of Exchanges and Subsidies 2) Lactation Breaks 3) W-2 Reporting (if issue more than 250 W-2s) 4) Summary of Benefits and Coverage 5) New COBRA Notice Language 6) 90-Day Waiting Period 7) Employer Mandate Effective 1/1/15 for 100+ employees and 1/1/16 for employees. 8) Employer Mandate Reporting 9) Non-Discrimination if nongrandfathered (delayed) 10) Automatic Enrollment 200+ employees (delayed) 16

17 Questions? Ophelia Y., SPHR, GPHR, MBA HR Consultant Ophelia has held HR roles in the financial services, healthcare, IT, real estate, and telecommunications industries. She holds a Bachelor of Arts degree in Sociology and a Masters of Business Administration (MBA) degree with a concentration in Human Resources from Willamette University. A member of SHRM since 2008, Ophelia currently serves as the Director of College Relations for the State Council of SHRM, and will serve as the Director of College Relations for the regional Human Resources Management Association this year. 17