Health Care Reform Beyond the Basics. Ross Manson, Principal Fargo, ND

Transcription

1 Health Care Reform Beyond the Basics Ross Manson, Principal Fargo, ND 1

2 Health Care Reform EMPLOYER BASICS

3 Employers key number is > 50 = Large Employer and subject to penalties < 50 = Small Employer and NOT subject to penalties Full time equivalent employees

4 Health Care Reform Large Employer? Large employer = 50 Full-Time Equivalent Employees Steps: 1. Calculate your Full-Time Employees (average 30 hrs/week or 130 hours per month) 2. Calculate your (part-time and seasonal) FTEs (add up total hours and divide by 120) 3. Add the two numbers in steps 1 and 2 4. Add up the 12 monthly numbers in 3 and divide by If less than 50, not applicable large employer 6. If more than 50, greater than 120 days? 4

5 Employer Penalties EE Category Included in FT equivalent calc? Not offering minimum essential coverage? Offering minimum essential coverage but not affordable or adequate? Full-time Yes Yes Yes Part-time Yes No No Seasonal, working full-time Seasonal, working part-time Employer subject to Penalty for: Yes Yes Yes Yes No No

6 Large Employer NO insurance Employers NOT offering health insurance A penalty of $2,000 per year/per full-time employee Exempts the first 30 full-time employees from computation Example: 100 full-time employees and one goes to an Exchange and utilizes credit Penalty = (100-30) x $ = $11,667/month $140,000 annually Triggered on all full-time employees if one full-time employee goes to the exchange and receives a subsidy Penalty is NOT tax deductible 6

7 Large Employer Offer Insurance Potential penalty if employer OFFERS health insurance A penalty of $3,000 per year/per FT employee who goes to the exchange and receives an exchange subsidy Subsidy eligibility based on unaffordable or inadequate insurance Unaffordable = Employee insurance premiums exceeding 9.5% of HHI Inadequate = Insurance policy less than 60% of actuarial value Capped by the amount of penalty for not offering insurance coverage (in aggregate, not per employee) 7

8 Large Employer Safe Harbor Affordability safe harbor and proposed regulations issued 12/28/12 Employer must offer minimal essential coverage Employee portion of self-only premium for the lowest cost coverage that provides minimum value must not exceed 9.5% of the employee s wages Wages equal Box 1 on Form W-2 Rate of Pay rate of pay at beginning of year multiplied by 130 hours. This becomes base amount for 9.5% affordability calculation. Federal poverty line (FPL) self only coverage < 9.5% of FPL for a single individual. 8

9 Large Group Coverage Employer must offer coverage to at least 95% of all full-time employees and their dependents Help protect against errors that could occur in identifying full-time employees; Coverage must be offered to dependents only required to pay premium towards single plan (can t exceed 9.5% test); Dependents; Children up to age of 26 Spouse not defined as a dependent 9

10 Health Care Reform BUSINESS EMPLOYER SPECIFICS 10

11 Hours of Service Rules Hours of service include not only hours worked but also hours for which an employee is paid or entitled to payment even when no work is performed. Including: Vacation, holiday, illness, incapacity, layoff, jury duty, military duty or leave of absence. Service outside of the U.S. is generally not counted. 11

12 Key Definitions: Determining Full-Time Employees Hourly Non Hourly Actual hours Days worked equivalency Weeks worked equivalency You cannot intentionally use a method to lower their actual hours (3 ten hour days using days worked would be an example) 12

13 Controlled Groups Employer Controlled group Parent-subsidiary chains Brother-sister controlled group Combined group of the above Affiliated service group Has direct or indirect ownership interest and Performs services for service organization or Works with other organization in rendering services to third parties 13

14 Health Care Reform Terms Waiting period Measurement period Initial measurement period Standard measurement period Stability period Administrative period

15 Health Care Reform Terms Waiting Period period of time that must pass before an employee or dependent, who is otherwise eligible to enroll under terms of a group health plan, can receive coverage. This period cannot exceed 90 days. 15

16 Health Care Reform Terms Measurement Period period of not fewer than three or more than 12 months, chosen by the employer, as the measurement period that can be looked back to in order to determine the full- or part-time status of an employee. Stability Period period following the measurement period. Measurement and Stability periods apply to: Ongoing employees, New variable hour employees, New seasonal employee. 16

17 Measurement Period Standard Measurement Period (SMP) applies to ongoing employees Employees employed at least one full SMP Initial Measurement Period (IMP) applies to new variable hour and seasonal employees Is usually going to be different than the SMP Begins between the employee s start date and first day of next calendar month. IMP and SMP will likely overlap for new employees.

18 Stability Period The Stability Period is the period in which an employee s status is determined for offering insurance or paying penalties. Status will be either a full time or part time employee (as determined from the measurement period) Full time employee stability period has to be at least six months, or the length of the measurement period. Part time employee: Ongoing employee not longer than SMP New variable hour seasonal employee not longer than IMP plus one month and status must be tested again during first SMP.

19 Permissible Employee Categories for Measurement Periods Collectively bargained employees and noncollectively bargained employees Each group of collectively bargained employees under separate agreements Salaried and hourly employees Employees in different states 19

20 Health Care Reform Terms Administrative Period this is the time allowed between the measurement period and stability period used to determine the status of the employee. This cannot exceed 90 days and cannot delay the effective date of coverage to an eligible full-time employee. Initial measurement period and administrative period cannot exceed past the last day of 1 st calendar month beginning on or after 1-year anniversary of new variable hour employee (approximately 13 months). 20

21 Example 1 Ongoing full time employee: SMP 11/1/13 to 10/31/14 (12 months) Admin period 11/1/14 to 12/31/14 (2 months) Stability period 1/1/15 to 12/31/15 (12 months) Employee Alex has worked for XYZ for 10 years and averaged more than 30 hours per week. Alex would be considered a full time employee during the Stability period of 1/1/15 to 12/31/15. XYZ must offer insurance to Alex or pay a penalty.

22 Example 1 Chart 11/1/13 SMP 10/31/14 AP 1/1/15 SP 12/31/15 SMP = Standard Measurement Period AP = Administrative Period SP = Stability Period

23 Example 2 Ongoing part time employee: Same measurement, admin and stability period as Example 1. Employee Ben works for 10 years but averages less than 30 hours per week during SMP. XYZ company does not count Ben as a full time employee during stability period and is not required to offer insurance and is not subject to any penalties. Ben s status cannot change during the year!

24 Example 3 New variable hour employee: Carter is a new employee who started June 1, 2014 for XYZ. XYZ choses a 12 month IMP starting on Carter s hire date (6/1/14 to 5/31/15). XYZ s SMP is 11/1/14 to 10/31/15 Admin period: New employee 6/1/15 to 6/30/15 Ongoing employees 11/1/15 to 12/31/15

25 Example 3 continued Carter averages more than 30 hours a week during IMP (6/1/14 to 5/31/15) Carter is a full time employee of XYZ from 7/1/15 to 6/30/16. XYZ must also track Carter s hours during the SMP and if Carter s hours during the SMP are greater than 30 per week, than XYZ must consider Carter full time during the stability period associated with the SMP. i.e. 7/1/16 to 12/31/16

26 Example 3 Chart 6/1/14 IMP 5/31/15 AP 11/1/14 SMP 10/31/15 7/1/15 SP-IMP 6/30/16 AP 1/1/16 SP-SMP 12/31/16 IMP = Initial Measurement Period AP = Administrative Period SP = Stability Period SMP = Standard Measurement Period

27 Fiscal Year Plans Transition Relief Employers with fiscal plans in place as of 12/27/12 can receive transition relief, but must have: Plan offered to at least 1/3 of employees; or Plan must have covered at least ¼ of employees; Employers must determine they meet the qualifications for relief. Then measurement period may occur based on fiscal year date renewal 6/30/13 plan year can run from 7/1/13 to 6/30/14. Employer must offer coverage to qualifying full-time employees ( > 30 hrs/wk) upon first plan renewal date. 27

28 Employment Status Change Change in employment status for new variable hour or seasonal employee during IMP. If employee would have started in that employment status and been expected to work 30 hours per week, then employee must be treated as Full-Time and coverage would need to be extended on the first day of the fourth month following the change. This rule does not apply to ongoing employees. Their status is locked (during stability period) even if they have a change in employment status.

29 Employees Rehired A rehired employee will resume their full-time or part-time status for the remainder of the stability period. Status would change if: Employee did not have 1 hour of service within the prior 26-week period preceding the return to work, Rule of parity, they were gone for longer than their length of service measured in weeks.

30 Section 1411 Certification Department of Health and Human services will establish a process to notify employers of those employees receiving Premium tax credits or cost sharing reductions. Requirement will include 2 informational tax returns for reporting. Estimate first excise tax (penalty) will be due sometime mid-year

31 Health Care Reform Employers Requirement to notify employees of exchange: Inform employees of exchange Inform employees of potential tax credit if insurance is purchased on exchange Inform employees of potential loss of employer contribution if they get insurance from exchange March 1, 2013 effective date is now delayed until late summer or fall

32 Additional Fees PCORI (Patient Centered Outcomes Research Institute). Fees applicable to policy and plan years after October 1, 2012 and before October 1, 2019 and is on the average number of covered lives under the plan per month: $1 the first year, $2 in subsequent years. Transitional Reinsurance Fee (2014 thru 2016) fee on insurers and self funded plans. In place to create a fund for insurance companies to offset the cost of covering people in the individual market Fee is $63 per covered life in 2014 raise $12B 2015 fee decreases raise $8B 2016 fee decrease raise $5B Health Insurance Industry Fee 32

33 Grandfathering Provisions Grandfathered health plan is one that was in existence on March 23, 2010 Loss of status events Reduce or eliminate benefits Raising co-insurance, or significantly raising copayments and deductibles Significantly lowering employer premium contributions To maintain grandfather status document the plan and policy terms effective as of 3/23/10 33

34 Health Care Reform Employers Tax credits available for Small Employers 35% credit for (25% for tax-exempts) 2014 and 2015 credit is 50% (35% for tax-exempts) if coverage is offered on the Insurance Exchange Criteria: No more than 25 full-time equivalent (FTE s) employees FTE average wages cannot exceed $50,000 Offer a qualified health plan Sequestration impact? 34

35 Employer Next Steps: Make an Informed Decision Determine if you are controlled group Calculate your full-time and part-time employees Conduct affordability testing Determine actuarial value of plan Determine strategy on health insurance benefit Look at current plan design New options available Evaluate impact to employees Track hours if a large employer Consult experts to determine penalties, but also to stay on top of new regulations 35

36 Questions? Thank you!