Health Care Reform WHAT EMPLOYERS NEED TO KNOW 5 KEY QUESTIONS and STRATEGIES April 2013

Transcription

1 Health Care Reform WHAT EMPLOYERS NEED TO KNOW 5 KEY QUESTIONS and STRATEGIES April 2013 Presented by: Marshall Beckham Owner, Maybank & Beckham LLC marshall@maybankandbeckham.com 260 West Coleman Blvd. Suite B Mount Pleasant SC Note: Presentation for Information al Purposes only and Subject to Change

2 Table of Contents BIO: Marshall Beckham / Maybank & Beckham LLC? What is Health Care Reform? Attack Plan 5 Key Questions and Strategies for Employers. 1. Does Mandate (penalty) Apply? 2. When Does Reform Apply to my group? 3. Who must be offered coverage? 4. Pay vs. Play: Penalties and Strategies? 5. Small Group Plans (<50 FTE)

3 BIO: Marshall Beckham / Maybank & Beckham LLC? C. Marshall Beckham, III Education: University of Georgia: BBA Insurance and Risk Management; Terry College of Business Professional Experience: Marsh Inc. Global Insurance Brokers; Account Sales. CIGNA Health Insurance; Account Sales, Gold Circle Recipient. Maybank & Beckham, LLC; Owner Recent Activity: Guest Speaker on HC reform: Berkeley County Chamber, Sea Islands Chamber, Low country association of health underwriters. Presenter: Charleston Restaurant Association. Represented South Carolina in Washington, DC to lobby for small business owners and Health Insurance Professionals. Personal: Local business owner and active in community. Resides in Mount Pleasant with his wife, Jane and 2 young children. Maybank & Beckham LLC Insurance Advisors since Knowledgeable, experienced, and local Account Team. Manage Insurance Plans for 75+ employers and hundreds of individuals.

4 What is Health Care Reform? Healthcare Reform is a law based on the Patient Protection and Affordable Care Act (PPACA or ACA) that was passed in The goal is to provide insurance coverage to more Americans while implementing numerous health insurance coverage requirements. Does not address health care cost or the impact to employers. The key components of this law are: 1. The individual mandate which requires all Americans to have health insurance coverage by 1/1/14 or pay a fine. 2. Small employers and individuals will have new coverage rules. 3. The employer mandate requires large employers (>50 FTE s) to offer qualified and affordable coverage or pay a penalty beginning 1/1/14. Employers need to know how the employer mandate will affect them. 4

5 5

6 Attack Plan 5 Key Questions and Strategies 1. DOES THE EMPLOYER MANDATE APPLY? Yes, If you have 50+ Full Time Equivalent Employees (FTE) How Do You Measure 50 +FTE? Use any consecutive 6 month period of prior calendar year. Combine Full time employees (>30 hours/week) and Part Time employees each month (add P/T hours then divide by 120) then take 6 month average. Exclude Seasonal, 1099, temp. staffers and owners. Seasonal = 120 days or less per calendar year.or Feds allowing good faith judgment in Strategy: Consider the best 6 month period for your organization to avoid 50+ mandate. Keep tracking records for that period. Consider Common Ownership? IRS Controlled Group rules apply to entities with common ownership. Same rules as pension and retirement plans. Combine the FTE of common ownership to determine 50+ FTE If common ownership is 50+ FTE, the mandate only applies to each individual entity. i.e. one 20 FTE entity and one 40 FTE entity = 60 FTE so mandate in play. But penalty could be for just one of the entities. Likely types of Common Ownership; Brother/sister companies ; any 2 companies have at least 50% similar ownership. Also Parent/Subsidiary relationship. We provide clients with access to Benefits Attorney and CPA to get final qualification. Full Common Ownership description on my website Full Common Ownership description enclosed

7 Attack Plan 5 Key Questions and Strategies 2. When do the new rules apply? A) When does the employer Mandate Apply for 50+ FTE? B) When Do small groups have to comply with new coverage rules? A) 1/1/14 for calendar year plan renewals or companies without a plan in place. Or if current plan covers less than ¼ of total employees. Example: management carve out plans which offer to less than ¼ of total employees need to comply 1/1/14. At 2014 renewal date for all companies with current plan in place B) Small Groups same as above. The new coverage rules for small group will begin on the date described above. New rules: Community Rating, Essential Health Plan Benefits, Premium Fees, and deductible and coinsurance caps. All potentially expensive changes due to coverage requirements imposed by the Federal Government. Strategy: Consider changing to late 2013 renewal dates to get a free look in 2014 and avoid the expensive ACA rules until late Example: Move 2014 renewal back to Dec 1, 2013 so not affected until Dec 2014 renewal. Need to act by August 1, 2013.

8 Attack Plan 5 Key Questions and Strategies 3. Who must be offered coverage for 50+ FTE? All full time employees = 30 hours /week Count W-2 employees only. Measurement Period: look back period between 3-12 months during which hourly averages are calculated. 30 hours/week OR 130 hours/month is benchmark. Strategy: Measurement Period can be decided by employer. Key for seasonal employee calculation. Needs to be documented. Could consider reducing hours for employees near 30. Reference IRS Guidance: (notice ) Note: Small Groups must comply with state based insurance company eligibility rules there is no penalty since they are exempt from mandate.

9 Attack Plan 5 Key Questions and Strategies 4. PAY vs. PLAY: Penalty Analysis and Strategies for 50+ FTE groups a.) What are the Mandate Penalties? Sledge Hammer Penalty for any month an employer does not offer qualified group health coverage and an employee goes to the exchange, and receives a subsidy the employer must pay a penalty based on all full time (30 hour) employees. Penalty is $167 per month (2k/year) times all FT employees minus 30. Example: 70 Full time employees; 40 X $2,000 = $80,000 Compliance Rule: 95% must be offered coverage so there is room for error. This is an excise tax. Not deductible business expense. Tack Hammer Penalty for any month a full time employee is not offered qualified AND affordable (9.5% rule) group health coverage, and employee goes to the exchange and receives a subsidy the employer must pay a penalty. Penalty is $250 per month (3K/year) only on the affected FT employee rather than all FT employees. Affordability standard is based on whether EE only premium is more than 9.5% of EE Only annual taxable income from Box 1 of w2. Need to offer to each 30 hour employee OR ensure they are under 30 hours in measurement period

10 Attack Plan - 5 Key questions and Strategies 4. Penalties and Strategies for 50+ FTE groups B.) What are some Strategies for CRA? Strategy: AVOID Sledge Hammer and Tack Hammer penalties. Just OFFER Qualified and Affordable PLAN: How? Avoid Sledge Hammer: Simply offer a Qualified Plan. Avoid Tack Hammer: Simply build employer contribution off lowest paid full time employee. i.e. $15,000 per year salary / 12 months = $1,250 *.095 = $118 per month is most employee could pay. Employer offers lowest qualified plan to all employees (to avoid Sledge Hammer penalty) which should be around $250/month for single coverage. So employer pays $132 (or 50%) in premium contribution for only those that take the plan. Vs. potential penalties $167/month for all employees on sledge hammer and $250 / month/ employee on tack hammer. So the employer has offered qualified coverage and met the affordability component thus avoiding both the sledge hammer and tack hammer penalties. Employer avoids both penalties even if employee declines. Likely, if most employees are offered only minimum plan coverage with minimum employer contribution then they will decline. Could offer minimum plan and better plan as dual option. Strategy: When Determining Plan Participation Cost consider: Individual Mandate: US Citizens must have qualified health insurance or pay a fine of 1% of income or $95 whichever is greater in Average fine about $250/year.Could be taken from tax refund starting in April Individuals will weigh their options and may decide penalty is less than qualified coverage. Many will not realize the fines until the April 2015 tax season. Others will not seek subsidy due to 21 page subsidy app. NO subsidy = no employer penalty trigger. Strategies CONT on Next Page..

11 Attack Plan - 5 Key Questions and Strategies Strategy: Terminate health plan and pay Sledge Hammer excise tax for not offering plan f you have > 50 FTE s. Run the penalty number then consider financial cost of offering minimum plan as described above and consider the number who will decline. Is simply paying the sledgehammer tax a smart Financial Solution? Strategy: Avoid the Sledge Hammer by offering a qualified plan. Don t follow affordability rules (9.5%) and take chances with Tack Hammer so employer only fined $250/month for individuals that seek a subsidy (21 page app). Strategy: Determine importance of health plan with recruiting and retaining good employees. The right health plan strategy could be cost effective and improve morale and overall health of company. Strategy: Consult with a qualified insurance advisor, tax advisor and employee benefit attorney. Partner with an organization that gives you all three in one. Strategy: Best of Both Worlds - Offer qualified and affordable Group Plan BUT change to a Level Funding Plan that looks and acts like fully insured but because it is filed as self insurance. 1. Avoids expensive OBAMACARE coverage rules (community rating, deductible caps and essential health benefits) 2. Returns premium on good claims years. No Penalty on Bad Claim Years 3. Priced competitively with traditional fully insured plans and premiums are fixed for 12 months. 4. Full Claims reporting and No claims run out expense.

12 Attack Plan 5 Key Questions and Strategies 5. What about my small group (<50 lives) Health Insurance Plan? Exempt from any mandate penalties or penalties associated with mandate. Must play by state specific or carrier specific rules. On 1/1/14 or at renewal there are new rules: Community Rating, Essential Health Plan Benefits, Premium Fees, and deductible and coinsurance caps. All potentially expensive changes due to coverage requirements imposed by the Federal Government. Does the Employer see a group employee benefit plan as a value in Recruiting and Retaining key Employees? Strategy: If no, then can drop plan no penalty. Consider setting up Defined Contribution for employees to purchase qualified coverage on the individual market through an insurance agent. The IRS Code allows an employer to reimburse individual coverage without adding the value of the reimbursements to an employee s W2 income. Strategy: If yes, then Decide on a Plan that meets your company s needs. Strategy: Best of Both Worlds - Offer qualified and affordable Group Plan BUT change to a Level Funding Plan that looks and acts like fully insured but because it is filed as self insurance. 1. Avoids expensive OBAMACARE coverage rules. (community rating, deductible caps and essential health benefits) 2. Returns premium to employer on good claims years. No Penalty on Bad Claim Years 3. Priced competitively with traditional fully insured plans and premiums are fixed for 12 months. 4. Full Claims reporting and No claims run out expense.

13 Questions? Contact info: THANK YOU