Health Care Reform: How the USPS plans to minimize Pay or Play penalties MAY 1, 2013

Transcription

1 Health Care Reform: How the USPS plans to minimize Pay or Play penalties MAY 1, 2013

2 Presenters Thomas (Ted) Williams Program Manager, CHRO, United States Postal Service Melissa Rasman Senior principal, Hay Group Philadelphia Adam Reese Consultant (sub-contractor), Hay Group

3 About Hay Group Hay Group consults with 9,000 clients worldwide in a wide variety of areas, including: Organizational effectiveness Managerial and executive assessment Compensation and benefits Performance management Executive remuneration and corporate governance Employee and customer attitude research 85 Offices in 48 countries 2600 Employees worldwide 9000 International clients 3

4 Agenda Overview United States Postal Service facts and figures Playing or paying in 2014 and beyond Determining full-time status ACA minimum health plan requirements Questions 4

5 01 Overview

6 Key issues Patient Protection and Affordable Care Act (ACA) enacted in 2010 ACA applies to governmental employers Employer shared responsibility (play or pay) penalties apply to governmental employers, including USPS Penalties apply when employers do not offer health plan to full-time employees OR when health plan does not provide minimum essential coverage or is not affordable U. S. Postal Service Receives no taxpayer support; paid for by people who use the mail The recession and rise in digital communication has decreased mail volume by 25% Most full-time employees are offered employer-subsidized health plan coverage through Federal Employees Health Benefit Plan (FEHB) Full-time non-career employees are offered FEHB coverage with no employer subsidy or are not offered coverage under any health plan 6

7 Considerations Quantifying the potential penalty How the penalties apply Identifying full-time employees Strategies to minimize costs Penalties versus health plan offer Health plan cost-sharing Seeking consensus among diverse stakeholders Congressional oversight 7

8 02 U.S. Postal Service

9 Key facts and figures -25% +3% -23% 9

10 Changing workforce composition Growing Non-career Workforce Career Non-Career 700, , , , , , ,

11 Career versus non-career employees Career employees Non-career employees Full-time employees Eligible for healthcare coverage under FEHB USPS pays about 70 percent of the premium Employees have access to any of the 200 health plans in FEHB Actuarial values range from 65% to 90% Complement of over 100,000 employees including: Casuals Postal Support Employees Non-bargaining temporary employees Rural Part-Time Subs Postmaster Relief and Leave Replacements Transitional Employees Full-time employees eligible for FEHB on100% self-pay basis after one year with no breaks of six or more days 11

12 03 Playing or paying in 2014 and beyond

13 Play or pay penalty overview Employers with 50 or more full-time equivalent employees FT employee: 30 hour per week average $166.67/month ($2,000/year) Each FT employee over 30 At least one has subsidized coverage on an Exchange Pay = do not offer minimum essential coverage to FT employees Pay and Play Play = offer minimum essential coverage to FT employees $250/month ($3,000/year) Each FT employee who receives subsidized coverage on an Exchange 100% - 400% FPL Employer health plan cost > 9.5% household income Up to full pay penalty 13

14 Play or pay penalty issues Under what circumstances will the full PAY penalty be imposed on an employer? Under what circumstances will an employer that offers health plan coverage (PLAYs) be required to PAY? What coverage must be offered to employees to avoid penalties? Who is a full-time employee? Determining hours worked New employee rules Impact of 90 day waiting period 14

15 Full PAY penalty Assessment of full PAY penalty Full PAY penalty = $2,000 for each full-time employee over 30 Assessed monthly Penalties increase after 2014 based on increase in average per capita premium for health insurance coverage in the US When assessed Employer does not offer minimum essential coverage (MEC) to full-time employees and their dependents, AND One employee qualifies for subsidized coverage on a health insurance exchange 15

16 Full PAY penalty Assessment of full PAY penalty Does employer need to offer MEC to ALL full-time employees and dependents to avoid full PAY penalty? IRS proposed regulations: At least 95% of full-time employees and their dependents Calculation of PAY penalty if MEC not offered to all, or almost all, FTEs Does USPS employ 50 or more full-time equivalent employees? Does USPS offer minimum essential coverage to all FTE employees? Likelihood of one employee qualifying for subsidized coverage on an exchange Yes No 100% How many FTE employees does USPS employ? 500,030 Penalty for each FTE over 30 $2,000 Annual penalty $1.0 Billion 16

17 Penalties for employers that PLAY Assessment of PAY penalty for employers that PLAY When assessed Employer offers Minimum Essential Coverage to all employees and dependents Not affordable (i.e., cost to employee is more than 9.5% of pay) Employee rejects employer coverage and purchases subsidized coverage on exchange $3,000 per employee penalty Assessed monthly Penalties increase after 2014 based on increase in average per capita premium for health insurance coverage in the US 17

18 Employees qualifying for subsidized coverage on an Exchange When full-time employee(s) enroll in a qualified health plan on an Exchange and qualify for federal subsidies: An employee must have household income between 100% and 400% of the Federal Poverty Level (FPL) and satisfy one of the following: No employer coverage Employer coverage that does not provide Minimum Value Required contribution toward employee only coverage in the lowest cost employer plan exceeds 9.5% of household Income Family Size 100% of FPL 400% of FPL 1 $11,490 $45,960 2 $15,510 $62,040 3 $19,530 $78,120 4 $23,550 $94,200 5 $27,570 $110,280 6 $31,590 $126,360 7 $35,610 $142,440 *Based on 2013 HHS Poverty Guidelines for the 48 Contiguous States 18

19 IRS affordability safe harbors IRS affordability safe harbors allows employers to avoid PLAY penalty Cost of lowest-cost MEC plan for self-only coverage is no more than 9.5% of Employee s W-2 income (Box 1 wages) W-2 safe harbor Employee s rate of pay (130 X employee s hourly rate of pay or, for salaried employee, monthly rate of pay) 9.5% of 1/12 of FPL for a single individual Dependents must be offered coverage to avoid penalty Employer may charge up to100% of cost of dependent coverage without penalty Spouse does not have to be offered coverage W-2 safe harbor determination is made after end of calendar year Cost must be consistent amount or percentage of all W-2 wages for year 19

20 Minimum value What is minimum value? Health plan coverage with an actuarial value of at least 60% The plan pays at least 60% of the benefits covered by the plan on average, with the employee/enrollee paying the difference Comparable to the lowest value (bronze level) plan available through a health insurance exchange Examples Actuarial value >60% >60% >60% >60% Deductible $2,500 $3,000 $4,000 $5,500 Coinsurance (member pays) 50% 40% 30% 0% Out of Pocket Limit (including deductible) $6,500 $6,500 $6,000 $5,500 20

21 04 Determining full-time employee status

22 Full-time employees Full-time employees are employees who work an average of at least 30 hours per week each month or 130 hours/calendar month Common law employees only Hours counted Each hour for which employee is paid or entitled to payment for work, plus Each hour for which employee is entitled to pay when no work is performed (e.g., sick days, vacation days, military leave days) Non-hourly workers 3 service counting methods Actual hours 8 hours for each day employee is entitled to pay for at least one hour 40 hours for each week employee is entitled to pay for at least one hour Different methods may be used for different employee classifications and for different years 22

23 Ongoing employees Determining whether an ongoing employee a full-time employee Employers may determine full-time status during a stability period using a lookback measurement period Employer may choose a standard measurement period of 3-12 months and a stability period of 6-12 months Status during measurement period status during stability period Employer may use an administrative period of up to 90 days to determine status Stability period must begin no more than 90 days after measurement period To prevent coverage caps, administrative period overlaps prior stability period Ongoing employee = an employee who has been employed for one full measurement period. 23

24 Ongoing employee: example October 2012 January 2013 April 2013 July 2013 October 2013 January 2014 April 2014 July 2014 October 2014 January 2015 Measurement Period 1 (12 months) Admin. Period Stability Period 1 (12 months) An employee works 1,560 hours during the measurement period, or 30 hours per week annually. This employee would be considered full-time and eligible for coverage during the first stability period. 24

25 New employees Hired as full-time OR hired as variable hour or seasonal? New employee expected to be full-time and not seasonal employee must be offered coverage before the conclusion of 3 full months of employment An employer that uses lookback measurement and stability periods to determine fulltime status for ongoing employees may use similar rules for new variable hour and seasonal employees Facts and circumstances test for employee expected to work at least 30 hours per week initially, but only for a limited duration After 2014, an employer may not assume employment will terminate before the end of the initial measurement period 25

26 New seasonal and variable hour employees Determining full-time status for new variable hour and seasonal employees Initial measurement period of 3-12 months begins on any date between employee s start date and 1 st day of next month Stability period must be same length as stability period for ongoing employees, no shorter than initial measurement period, no more than one month longer than initial measurement period Employer may use an administrative period of up to 90 days to determine status Employee who is full-time during initial measurement period must be offered coverage during stability period Employee tested as ongoing employee during first full standard measurement period 26

27 New variable rate employee example Facts Standard measurement period: October 15 October 14 Standard stability period: January 1 December 31 Employee A s employment begins March 10, 2014, her initial measurement period begins March 10, 2014 and ends March 9, 2015, and her initial stability period begins April 1, 2015 and ends March 30, 2016 Employee A averages 30.5 hours from March 10, 2014 March 9, 2015 Employee A averages 24 hours per week from October 15, 2014 October 14, 2015 Is Employee A a full-time employee? When? Employee A must be treated as a full-time employee during her initial stability period (April 1, 2015 until March 30, 2016) because she averaged 30.5 hours/week during her initial measurement period Employee A does not have to be treated as a full-time employee from April 1, 2016 through December 31, 2016, since she averaged only 24 hours per week during her first standard measurement period 27

28 05 ACA minimum health plan requirements

29 ACA minimum health plan requirements Feature Actuarial Value Annual Deductible Out-of-pocket Limit (Including deductible) Services covered at 100% Design At least 60 percent No required minimum Combined Medical & Pharmacy 1/ No more than HSA limit (2013: Single $6,250, Family $12,500) Routine Primary Care (Preventive) Office Visits Prenatal care Immunizations Recommended screenings FDA-approved contraceptives 1/ Recent guidance provides relief in 2014 for plans using separate carriers for medical and pharmacy 29

30 Lessons learned Plan ahead Gather as much information as you can on your non FTEs Allow for changes in regulations Meet with potential carriers early to assess capabilities Build a project plan and a communications plan - and adapt as events unfold Decision points Play or pay? Too expensive to pay and less costly to meet ACA requirements Length of measurement period Non-financial considerations How will your customers and other stakeholders react to the approach your organization takes? 30

31 06 Questions?