The State Exchanges. Health Care Reform s Employer Mandate NOTE:

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1 Health Care Reform s Employer Mandate 1 NOTE: The materials and opinions presented by the speaker at this program represent the speaker s views, are for educational and informational purposes only, are not intended to be legal advice and should not be used for legal guidance or to resolve specific legal problems. In all cases, legal advice applicable to your organization s own specific circumstances should be sought. 2 The State Exchanges 3 1

2 Small Firm Plan Choices Restricted for The Individual Mandate 5 The Individual Mandate It is effective January 1, 2014 Individuals must maintain minimum essential coverage each month or face a penalty Applies to all citizens and lawfully present aliens 6 2

3 The Individual Mandate Minimum essential coverage includes a state exchange health plan, government sponsored plans such as Medicare, Medicaid, certain employer sponsored plans 7 The Individual Mandate Essential Health Benefits is the core package of benefits: Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance abuse services, including behavior health treatment 8 The Individual Mandate Essential Health Benefits (cont d): Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care 9 3

4 The Individual Mandate Annual penalty is the lesser of: (1) the sum of the monthly penalty amounts; or, (2) an amount equal to the national average premium for a certain state exchange plan. 10 The Individual Mandate Monthly penalty is equal to one-half the greater of: (1) a flat dollar amount per individual; or, (2) an percentage of the individual s taxable income. 11 The Individual Mandate The flat dollar amount is $95 in 2014, $325 in 2015, and $695 in It is capped at 300% of the flat dollar amount. The percentage of taxable income is a percentage of the individual s household income that is in excess of the income tax filing threshold. Phased in at 1% in 2014, 2% in 2015, and 2.5% in

5 The Individual Mandate The amount equal to the national annual premium for a certain state exchange plan cannot be determined until the state exchanges are established. 13 The Employer Mandate 14 The Employer Mandate Formal name is Employer Responsibility It is effective January 1, 2014 It does not require your agency to actually provide health insurance to your employees 15 5

6 Penalties Penalties can be assessed whether or not your agency provides health insurance and depends on whether or not a full-time employee receives taxpayer subsidized coverage 16 It Is a Two Step Analysis Step 1 Is your agency subject to the employer mandate? Step 2 If it is subject to the mandate, will a penalty be assessed, and if so, how much will it be? 17 Step 1 Is Your Agency Subject to the Employer Mandate? Your agency is subject to the employer mandate with respect to a calendar year if it employed 50 or more full-time and full-time equivalent employees during the preceding calendar year. Whether your agency is covered in 2014 depends on the make up of its workforce in

7 Step 1 Is Your Agency Subject to the Employer Mandate? How to Count Employees The number of full-time employees in a month PLUS The number of full-time equivalent employees in that same month 19 Step 1 Is Your Agency Subject to the Employer Mandate? What Is Full-Time? At least 130 hours of service in a calendar month An employee who is not a full time employee for a given month is taken into account in the FTE calculation 20 Step 1 Is Your Agency Subject to the Employer Mandate? How To Calculate FTEs Divide: (a) the total hours of service during the month by employees who are not full-time employees by (b) 120 The result is the number of FTEs for that month 21 7

8 Step 1 Is Your Agency Subject to the Employer Mandate? Calculation of Hours of Service Each hour for which the employee is paid or entitled to payment, and Each hour for which an employee is paid for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence Not more than 120 hours for any employee who is not full time employee for that month. What about live-ins? 22 Step 1 Is Your Agency Subject to the Employer Mandate? How To Convert Months To A Year Add together the 12 monthly full-time and FTE employee totals and divide by Step 1 Is Your Agency Subject to the Employer Mandate? How To Convert Months To A Year If the result from the previous slide is less than 50, your agency is not subject to the employer mandate the following year. If the result from the previous slide is 50 or more, your agency is subject to the employer mandate the following year. 24 8

9 Step 1 Is Your Agency Subject to the Employer Mandate? Proposed Transitional Option Use 6 consecutive calendar months in 2013, rather than entire year. 25 Step 2 Will A Penalty Be If your agency is not subject to the employer mandate for a calendar year, it is not subject to penalties for that year. Your agency still could be subject to penalties in later years. It is determined year to year. 26 Step 2 Will A Penalty Be The penalty calculation is different if your agency does not offer minimum essential insurance coverage than if it does offer minimum essential insurance coverage. 27 9

10 Step 2 Will A Penalty Be Affordable means the employee s contribution for employee only coverage does not exceed 9.5% of employee s household income and the plan pays at least 60% of the plan s total cost of benefits. (It is actually a sliding scale from 3% to 9.5% based on federal poverty level.) 28 Step 2 Will A Penalty Be Proposed Affordability Safe Harbors Form W-2 Safe Harbor Rate of Pay Safe Harbor Federal Poverty Line Safe Harbor 29 Step 2 Will A Penalty Be Taxpayer assisted coverage means the individual receives either a premium tax credit, a cost sharing reduction, or both

11 Step 2 Will A Penalty Be Dependent means children under 26 years of age. It does not include a spouse. 31 Step 2 Will A Penalty Be If Health Insurance Is Not Provided A penalty will be assessed for a month if: (1) Your agency does not offer minimum essential insurance coverage to its full-time employees and their dependents; and (2) It has at least one full-time employee who receives taxpayer subsidized coverage that month. 32 Step 2 Will A Penalty Be If Health Insurance Is Not Provided The penalty for that month will be 1/12 th of $2,000 (i.e. $166.67) per full-time employee after the first 30 full-time employees

12 Step 2 Will A Penalty Be If Health Insurance Is Provided A penalty will be assessed for a month if: (1) Your agency does offer minimum essential insurance coverage to its full-time employees and their dependents; and (2) It has at least one full-time employee who receives taxpayer subsidized coverage that month. 34 Step 2 Will A Penalty Be If Health Insurance Is Provided The penalty for that month will be the lesser of: (a) 1/12 th of $3,000 (i.e. $250) for each full-time employee who receives taxpayer subsidized coverage that month; or, (b) 1/12 th of $2,000 (i.e. $166.67) per full-time employee after the first 30 full-time employees. 35 Step 2 Will A Penalty Be Optional Look-Back Method To determine full-time and part-time status of variable hour and seasonal employees Can be used only for penalty calculation 36 12

13 Observations Penalties are based on full-time employees, not on FTEs. Even if subject to the mandate, an employer will never pay a penalty if it has 30 or less full-time employees for the month involved. 37 Observations No penalty is payable unless at least one full-time employee obtains taxpayer assisted coverage through a state exchange. If you provide affordable, minimum essential coverage, employees do not have to participate in it. 38 Observations Agencies can experience significantly different ramifications from the Employer Mandate The Employer Mandate applies to all of your locations; they are added together and treated as one employer 39 13

14 Observations If your agency is part of a controlled or affiliated group of employers, all are collapsed and treated as a single employer. IRS has proposed that the penalties will still be calculated on each employer separately. 40 Observations You simply have to offer minimum essential insurance to full-time employees dependents. It does not have to be affordable and, consequently, you can require the employee/dependents to pay the full cost of the dependent coverage. 41 Strategies Avoid having 50 full-time and full-time equivalent employees on average during business days in a year or, for 2013 if you prefer, in a 6 consecutive month period

15 Strategies Move to a workforce with as many parttime employees as possible and as few full-time employees as possible. 43 Strategies Reduce as needed employee schedules to keep them below an average of 30 hours of service per workweek. 44 Strategies Consider paying the penalty rather than offering insurance

16 Strategies Reduce employee compensation to help pay for insurance. 46 Strategies Be sure employee-only insurance offered to full-time employees is affordable and minimum essential coverage. 47 Strategies How many of your full-time employees will actually purchase insurance from you or from the exchange? 48 16

17 Strategies Employee leasing? Whether an individual is an employee is determined under the common law test. However, the status of leased employees is not clear. 49 What Should Be Your Goal Now? 50 What Is the Likelihood Of Repeal or Modification? 51 17

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