6/23/10 9/23/10 1/1/11 1/1/12 6/28/12 11/6/12 1/1/

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1 Thinking Ahead: Getting Our Hands Around PPACA in 2014 and Beyond Presenter: Don Heilman Area Senior Vice President id

2 Timeline ERRP High Risk Pool Increased Penalties Supreme Court Ruling Revenue 6/23/10 9/23/10 1/1/11 1/1/12 6/28/12 11/6/12 1/1/ Patient Protections W 2 Reporting SBC Election Day Reformed Marketplace 2

3 What s Happened Adult children coverage to age 26 No lifetime or annual limits No pre existing condition for dependents under 19 Preventive care coverage 3

4 Healthcare Reform: : 2013 Initiatives/Activities Exchange notices Both the State as an employer and LPBs must provide the notice of market place coverage to current full time and part time employees no later than October 1, 2013 W 2 reporting Report aggregate cost of employer sponsored coverage for 2012 (on W 2 given in Jan. 2013) in Both the State as an employer and LPBs with over 250 W 2s responsible for the 2012 reporting requirements (delayed for those with under 250) Summary of Benefits and Coverage (SBC) Reduced FSA limits Annual contributions to health FSA limited to $2,500 Patient Centered Outcomes Research Institute (PCORI) fee $1 per member per year in 2012; $2 in 2013; will increase with inflation for Due July 31 st of the subsequent year Additional Medicare payroll tax = 0.9% on high income workers di ll t h i 4

5 Healthcare Reform: : 2014 Impacts Employer and individual mandates Determining large employer status Insurance exchange marketplace Transitional reinsurance fees and insurer fees Patient protections No waiting periods longer than 90 days Elimination of pre existing condition exclusions for all adults Reminder: Effective for the first plan year beginning on or after September 23, 2010, plans could no longer impose pre no longer pre existing condition exclusions on exclusions enrollees under the age of 19 No annual limits for essential benefits Non grandfathered plans cannot deny participation in a clinical trial IRS reporting of health insurance coverage fh hi Automatic enrollment (delayed beyond 2014) Nondiscrimination (delayed beyond 2014) 5

6 Individual Mandate 2014 The individual mandate exceptions and exemptions: Unaffordability Required contribution exceeds 8% of the individual s household income Household income below income tax filing threshold Native Americans Short lapses Lack Minimum Essential Coverage for a period of less than 3 months Pi Prisoners Undocumented aliens Religious Exceptions Health care sharing ministry Conscientious objections 6

7 Individual Mandate General The Individual Mandate Tax Filing Threshold IF your filing status is... AND at the end of 2011 you were... * THEN file a return if your gross income was at least... ** single under 65 $9, or older $10,950 head of household under 65 $12, or older $13,650 married, filing jointly gj under 65 (both spouses) $19, or older (one spouse) $20, or older (both spouses) $21,300 7

8 Individual Mandate General Penalty Year Flat Dollar Amount* Maximum Penalty is the greater of: 2014 $95 Up to $285 per family or 1.0% of excess income 2015 $325 Up to $975 per family or 2.0% of excess income 2016 $695 Up to $2,085 per family or 2.5% of excess income After 2016 $695, indexed for inflation in $50 increments Up to $2,085 per family (indexed) or 2.5% of excess income *Halved for dependents under age 18 (but do not halve when determining 300% cap on dollar amount for those not insured by taxpayer) *Capped at the national average of the annual cost of a bronze level health insurance plan, for the family size, offered through the state exchange 8

9 Affordability W 2 Safe Harbor Based on the amount reported in Box 1 of the Form W 2 for the employee If the employee annual contribution for employee only p y y coverage does not exceed 9.5% of the Form W 2 amount, coverage is affordable Determination made at the end of the year Adjusted W 2 amounts and employee contributions are used for employees who did not work the entire year for the employer (e.g., 1/2 of annual contributions for employee only employed six months) 9

10 Affordability Rate of Pay Safe Harbor Based on the rate of pay as of the beginning of the coverage period Usually the first day of the plan year For an hourly employee, the monthly wage equals the hourly rate of pay times 130 hours For a salaried employee, the monthly wage is the y monthly salary If the employee s monthly contribution for employee only coverage does not exceed 9.5% of the monthly y wages, the coverage is affordable Note: Safe harbor is not available if the employer reduces wages for the applicable group during the year g p g 10

11 Affordability Federal Poverty Line Safe Harbor Affordability is based on the federal poverty line (FPL) for a single individual If the employee contribution for self only coverage does not exceed 9.5% of the FPL, the employer coverage is affordable for all employees For example, the 2013 FPL for a single individual is $11,490 Assuming this FPL applies in 2014, if the annual employee contribution for self only coverage is not greater than $1, (9.5% of the FPL), the employer coverage would be affordable Approximately $91/month 11

12 Determining Large Employer Status Having employed on average at least 50 full time employees (including full time equivalent employees, or p y FTEs) on business days during the preceding calendar year Determined by adding the number of hours of service for each employee who was not a full time employee during employee was a time employee each month (up to a maximum of 120 hours per employee) and dividing the total number by 120 For purposes of the shared responsibility penalty, FTEs are used solely to determine large employer status Special rules apply for seasonal workers ppy Add the total number of full time employees and FTEs employed during each month of that calendar year and then divide by 12 12

13 Determining Large Employer Status Transitional relief for 2014 May use a period of at least six consecutive calendar months in 2013 to dt determine status as a large employer, tt l rather than using the entire 2013 calendar year 13

14 Healthcare Reform: Employer Shared Responsibility Have at least 50 FTEs? No penalty applies! Offer Coverage to at least 95% of FTEs? $2,000 penalty per FTE (minus first 30) if if at least one FTE receives the tax credit Plan provides minimum required value? Is coverage affordable? Lesser of: $3,000 per FTE receiving tax credit* or $2,000 per FTE (minus first 30) No penalty applies! 14

15 Healthcare Reform: Employer Shared Responsibility Full Time Permanent Employee ACA:(30+ hpww) SONM(20+hpw) Offer affordable, minimum value employee + dependent child coverage Offer coverage within 90 days or pay penalty Part Time Permanent Employee ACA:(30+ hpw) SONM(20+hpw) Seasonal Employee ACA:(30+ hpw) SONM(20+hpw) Don t need to offer coverage No penalty applies Use a reasonable, good faith definition of seasonal employee Use measurement/lookback period to determine eligibility Offer coverage no later than 13 ½ months from hire date or pay penalty than from hire or penalty New Variable Employee ACA:(30+ hpw) SONM(20+hpw) Can t be determined that the employee is reasonably expected to work 30 hpw Use measurement/lookback period to determine eligibility Offer coverage no later than 13 ½ months from hire date or pay penalty Ongoing Variable Employee ACA:(30+ hpw) SONM(20+hpw) Use measurement/lookback period to determine eligibility (no longer than 12 months) Offer coverage at end of admin period or pay penalty 15

16 Healthcare Reform: Ongoing Full Time Employees 1 st Measurement Period ( 12 months) Oct 15, 2012 Oct 14, st Administrative Period ( 90 days) Oct 15, 2013 Dec 31, 2013 Meets hpw requirements during 1 st Standard Measurement Period Employee offered coverage Jan 1, Plan Year 2013 Plan Year 1 st Stability Period 2 nd Stability Period Jan 1, 2014 Dec 31, 2014, Jan 1, 2015 Dec 31, 2015, 2 nd Measurement Period ( 12 months) Oct 15, Oct 14, nd Administrative Period ( 90 days) Oct 15, Dec 31,

17 Healthcare Reform: New Variable and Seasonal Employee 2014 Ongoing Measurement Oct 15, 2014 Oct 14, 2015 Ongoing Stability Period Jan 1, 2015 Dec 31, 2015 Ongoing Measurement Oct 15, 2015 Oct 14, 2016 Ongoing Stability Period Jan 1, 2016 Dec 31, 2016 DOH: May 10, 2014 Initial Measurement Period ( 12 months) May 10, 2014 May 9, 2015 Initial Coverage i lc Stability Period Jul 1, 2015 Jun 30, 2016 Ongoing Stability Period Jul 1, 2016 Dec 31, 2016 Initial Administrative Period ( 90 days) May 10, Jun 30, 2015 Meets hpw requirement during Initial Measurement Period Employee offered coverage offered July 1,

18 Determining Full Time Status Essential for defining plan eligibility and determining risk for penalties Safe harbor guidance for variable hour and seasonal employees Determine at time of hire that cannot reasonably anticipate will work 30 hrs./wk. Use reasonable good faith in determining seasonal employees 30 hrs./wk. = 130 hrs./mo. (SONM: 20 hrs./wk.) Measurement period Administrative period Stability period i 18

19 Determining Full Time Status Three categories of employees Ongoing employees New full time employees New variable hour or seasonal employee 19

20 Determining Full Time Status New full time employees If a new employee is reasonably expected to be employed on average at least 30 hours a week tl t30h (SONM: 20 hours a week), then coverage must be offered within three months of his or her start date I.e., the date the employee is first required to be credited with an hour of service with the employer Must correspond to 90 day maximum waiting period gp 20

21 Employee Categories Full time employee Hired to work at least 30 hours per week (SONM: 20 week hours per week) Includes temporary employees Part time employee Hired to work less than average of 30 hours per week (SONM: 20 hours per week) Variable hour employee As of the date of hire, employer cannot reasonably t f hi t determined average hours May be full time employee 21

22 Employee Categories Seasonal employee Not limited to agricultural or retail workers to or retail Until further guidance issued may apply a reasonable, good faith interpretation of the statutory definition of seasonal worker, including the standard under the DOL l d d d h regulations, applied by analogy to workers and employment positions not otherwise covered under p those DOL regulations 22

23 Hour of Service For hourly employees, includes: Hours Worked Each hour for which the employee is paid, or entitled to payment, for the performance of duties ; and Paid Time Off Each hour for which the employee is paid, or entitled to payment, due to (1) vacation, (2) holiday, (3) illness, (4) to (2) (3) illness (4) incapacity (including disability), (5) layoff, (6) jury duty, (7) military duty, or (8) leave of absence 23

24 Hour of Service Non hourly employees: Guidance provides three possible methods: Actual Hours Count actual hours of service worked from records, as well as other non worked hours for which he or she is paid, or entitled to payment Days Worked Equivalency Credit 8 hours of service per day for each day for which the employee would be credited with at least one hour of service Weeks Worked Equivalency Credit 40 hours of service per week for each week for which the employee would be credited with at least one hour of service 24

25 Break in Service If break is greater than 26 weeks, considered a new hire upon return For breaks greater than 4 weeks but less than 26 weeks, if than but than service prior to break is longer than break, considered an ongoing employee and subject to regular measurement method For breaks greater than 4 weeks but less than 26 weeks that are attributable to the following special unpaid leaves FMLA leave, USERRA leave, and jury duty leave there are two options: y Determine the average hours of service by: Computing the average after excluding any special unpaid leave and any employment break period during that measurement period, and Using that average as the average for the entire measurement period OR Credit with hours of service for any periods of special unpaid leave and any employment break period during the measurement period by: Using rate equal to the average weekly rate at which the employee was credited with hours of service during the weeks in the measurement period that are not hh h h d h part of a period of special unpaid leave or an employment break period 25

26 Paying Any Penalties Keep in mind that the $3,000 penalty applies only to those who are not offered affordable coverage, purchase coverage on an Exchange, AND receive premium assistance For SONM / LPBs: These penalties will be the responsibility of the State as an employer and LPBs separately ssepaatey NOTE: They are different than the PCORI and transitional reinsurance fees, which will be paid by the State For SONM / LPBs: The State as an employer, and each LPB, will need to make their determination as to whether they meet the minimum requirements, and therefore avoid the $2,000 penalty 26

27 Employee Communications: New 27

28 Healthcare Reform: 2018 Cadillac Tax COBRA Rate $10,200 for individual or $27,500 for family Excise Tax Special Provisions High risk professions Early retirees Age & Gender = 40% of plan value that exceeds threshold 28

29 Online Healthcare Reform Resources 29

30 Questions? Don Heilman Area Senior Vice President (303) The intent of this presentation is to provide you with general information regarding the status of, and/or potential concerns related to, your current employee benefits issue. It does not necessarily fully address all your specific issues. issues. It should not be construed as, nor is it intended to provide, legal or tax nor it intended to legal or tax advice. Questions regarding specific issues should be addressed by the client's general counsel, tax advisor, or an attorney who specializes in this practice area.