Health Care Reform: Are you ready? Robert DiMase, Sentinel Benefits & Financial Group Kate Saracene, Esq., Nixon Peabody

Transcription

1 Health Care Reform: Are you ready? Robert DiMase, Sentinel Benefits & Financial Group Kate Saracene, Esq., Nixon Peabody

2 Employer Health Care Reform Challenges

3 Agenda Ma Healthcare Reform V 2.0 recap Employer and Individual Shared Responsibility: What is the Play or Pay Mandate for Employers and Employees? Individual Share Responsibility: What are the individual incentives to Play or Pay that my employees will face. Employer Penalties: What are they and what is the liability? Paying taxes/penalties/assessments: How do taxes impact the Penalties and your Premium? Exchanges a/k/a Marketplaces: What are they and how might they work? Large Employer defined: Am I a large employer? Full-time Employee defined: How do I identify my full-time employees who must be offered coverage? Other Mandates: What other plan changes do I need to make? Taking the next steps: What should be done now?

4 MA Health Care Reform V 2.0 Chapter 224 of the Acts of 2012 Aims to tie rising healthcare costs to the MA gross state product 3.6% for 2013 Generate $150 billion of healthcare cost savings over the next 15 years Establishes two new entities responsible for managing and monitoring goal Provides wellness tax credits for businesses and funds prevention trust fund Increases price transparency for consumers Expansion of primary care workforce Requires a transition to new health care payment methodologies

5 MA SGR rating rules today Small group in MA currently <50 employees, expected to become <100 no later than 2016 Current laws allow for modified community rating in the merged market (Individual and small businesses) Benefit design Age, single year age bands (2:1 rate bands) Family size Wellness/Tobacco Account area (7 specified geographic regions by zip code) Account size (1.157 for group of 1, reducing to 1.0 for groups with eligible) Industry (SIC code) Participation (loads under 70%)

6 MA SGR rating rules in the future Small group in MA currently <50 employees, expected to become <100 no later than 2016 Current laws allow for modified community rating in the merged market (Individual and small businesses) Benefit design Age, single year age bands (2:1 rate bands) new Federal standard age curve Family size Wellness/Tobacco Account area (7 specified geographic regions by zip code) Account size (1.157 for group of 1, reducing to 1.0 for groups with eligible) Industry (SIC code) Participation (loads under 70%)

7 MA SGR rating rules - January 1, 2014 Rates must be calculated on a per member basis, i.e. the number and ages of dependents on the contract must be taken into account Rates must be calculated on a list bill basis, but may be converted back to a group specific composite rate Example 1 Employee 1 = Age 40; Spouse age 40; 2 kids under age 21 Employee 2 = Age 40, Spouse age 35; 4 Kids under age 21 Employee 3 = Age 40; Spouse age 35; 4 Kids (3 under age 21; 1 age 21) Example 2 Employee 1 = Age 40; No dependents Employee 2 = Age 60; No dependents Today, the premium attributable to each employee in each example would be the same. In 2014, it will be different.

8 Individual Pay or Play? Individual Pay or play mandates use both a carrot and a stick Carrot = generous tax subsidies for eligible individuals who purchase health insurance through an exchange or marketplace Premium subsidy Cost sharing subsidy Stick = Tax penalties imposed on certain individuals who do not procure health insurance

9 Individual Carrot Individual incentives: The amount is based on the cost of plans in the area where the person is eligible to purchase coverage Amount varies by income Income level Premium as a percent of income Up to 133% of FPL 2% % FPL 3-4% % FPL 4-6.3% % FPL % % FPL % % FPL 9.5%

10 Individual Carrot Generous tax subsidies for eligible individuals who purchase health insurance through an exchange Premium subsidy Advanced Premium Tax Credit Cost Sharing subsidy primarily lower paid individuals Federal Poverty Level (by family size) Family size % of projected 2014 FPL $46,132 $62,484 $78,840 $95,192

11 Individual Carrot Cost sharing subsidies Individuals with household incomes at or below 400% of the poverty line have out-of-pocket liability capped at: Income level Reduction in out-of-pocket liability * % of FPL 2/3 of the maximum % of FPL 1/2 of the maximum % of FPL 1/3 of the maximum * $6,350 individual, $12,700 Family

12 Individual Stick Tax penalties imposed individuals who do not obtain minimum essential health insurance coverage Percentage of household income penalty is: and after 1% 2% 2.5% The Flat dollar amount penalty is: and after Adult $95.00 $ $ Child <18 $47.50 $ $ The dollar amount will be adjusted for inflation The total penalty is capped at 300% of the annual flat dollar amount or at the national average of the annual cost of a bonze level health insurance plan

13 Decision Matrix Coverage status Income Estimated annual premium (after APTC) Penalty Single $40,000 $3,800 $285 (3 x $95 flat dollar amount) Family $80,000 $7,600 $800 Will uninsured Americans with no access to employer healthcare, buy insurance or pay the penalty? (1% of income or 3 x flat dollar amount, whichever is less depending on family size)

14 Employer Pay or Play? Employer Pay or play mandates use both a carrot and a stick Carrot = small employers can receive tax credits (up to 25 employees) and utilize SHOP exchanges (up to 100 employees) to offer affordable coverage opportunities Stick = Penalties for large employers (50 or more employees) who: 1. offer no coverage or 2. whose coverage is unaffordable or 3. Do not offer minimum value coverage

15 Small Employer Tax Credits Qualified small employers are eligible for an annual tax credit for employer contributions to purchase employee health insurance up to 50% of employer premiums, 35% for NFPs Full tax credit is available to employers with: 10 or fewer full-time equivalent employees and; Average annual wages less than $25,000 (indexed for inflation after 2013) The credit is phased out for employers with between 10 and 25 FTE s or average wages between $25,000 and $50,000 To receive the tax credit the employer is required to pay a uniform percentage (not less than 50%) of the health insurance premium for each employee enrolled in health insurance coverage offered by the employer Only available for employer coverage offered through an exchange or marketplace

16 Two Types of Employer Penalties Effective January 1, 2014 there are two types of non-deductible penalties that can be imposed on large employers 1. Employers who do not offer health coverage to substantially all of its full-time employees and their dependents 2. Employers that offer coverage to substantially all of their full-time employees and dependents but that coverage does not satisfy the minimum value or affordability standards

17 Sledgehammer Penalty Large employers who fail to offer coverage to at least 95% of fulltime employees must pay an annual penalty equal to $2,000 times the number of full time employees. Applies to every full-time employee, including employees not receiving a government subsidy and employees who are covered under employer health insurance (spouses plan) Disregard the first 30 full-time employees Calculated monthly at $ per month

18 Defining Substantially All The 95% Rule Limited relief from the statutory requirement to offer coverage to all employees, by allowing up to 5% of the employer s full-time workforce to remain ineligible for coverage without triggering the penalty Alternatively, 5 employees can remain ineligible if that is greater than 5% This provision is intended to give employers leeway for inadvertent errors in determining which employees are full-time and must be offered coverage The failure to offer coverage need not be inadvertent

19 Tack Hammer Penalty Large employers who fail to satisfy either the minimum value or affordability standard will be subject to a $3,000 fine for each full-time employee who received an Advanced Premium Tax Credit. Only applies to employees who decline employer coverage and actually enroll for coverage through and Exchange or Marketplace. Calculated and paid monthly at $250 per month Total employer penalty capped at $2,000 times the number of the employer s full-time employees (disregarding the first 30)

20 Minimum Value The minimum value standard requires that the plan pay out at least 60% of the claims for benefits covered under a benchmark plan. Current year employer HSA and HRA contributions will count in determining minimum value (so long as the HRA contribution cannot be applied toward the cost of premiums) Insurance carriers must disclose whether plan offers Minimum Value on Summary of Benefits and Coverage (SBC) To determine if the health coverage provides minimum value, the IRS and the Department of Health and Human Services are developing a minimum value calculator Where the plan contains non-standard features not incorporated in the calculator, an actuary may evaluate the value of those features to develop the Minimum Value percentage. The IRS has proposed several plan design safe harbors. e.g., a plan with a $3,500 integrated medical and drug deductible, 80% plan costsharing, and $6,000 maximum out-of-pocket limit offers minimum value.

21 Affordability Safe Harbors Because employers generally will not have information about their employees household incomes, proposed regulations provide three safe-harbors that can be used as proxies for household income: the employee s W-2 wages the employee s current monthly pay rate the Federal poverty line An employer may use these optional safe harbors for all its employees or any reasonable classification on a uniform and consistent basis.

22 Unaffordable Coverage: Examples Annual Gross Wages Pay and Hours Status Affordable Coverage Safe Harbor W-2 Wages 1 Hourly Wage Rate of Pay (Hourly Rate X 130 hours/month if hourly, salary if salaried, X12 months) W-2 Safe Harbor Max EE Contribution (9.5% of W-2 Wages) Rate of Pay Safe Harbor Max EE Contribution (9.5% of Rate of Pay) $20,000 Hourly 40 hours per week $19,400 $9.62 $15,007 $1,843 $1,426 $50,000 Hourly 30 hours per week $48,500 $32.51 $50,715 $4,608 $4,818 $80,000 Salaried 40 hours per week $77,600 $38.46 $80,000 $7372 $7,600 1 Assume employee puts 2% in 401(k) or 403(b), and 1% in cafeteria plan contributions.

23 Minimum Value and Affordability: Impact of Wellness Credits Wellness program financial incentives that affect cost-sharing provisions (deductibles, coinsurance, co-pays, etc.) will count toward the MV percentage only to the extent the incentives relate to tobacco use. The Affordability of an employer-sponsored plan will be affected only to the extent the wellness program financial incentive is delivered in the form of a premium subsidy or surcharge related to tobacco use. Premiums discounts for other wellness incentives are ignored in the affordability calculation. A transition rule permits non-tobacco wellness incentives to be considered for the 2014 plan year under the terms of the wellness program that were in place on May 3, 2013.

24 Transition Rule: Fiscal Year Plans If an employer offered health coverage through a fiscal year plan year on December 27, 2012, transition relief is available for fiscal plan years in No penalty will be imposed for: Employees who were eligible to participate in the plan under its terms as of December 27, 2012 (whether or not they take the coverage). Full-time employees who were not eligible to participate, if: They are offered affordable coverage that provides minimum value no later than that first day of the plan year in 2014, and The fiscal year plan was either: offered to at least 1/3 of the employees) at the most recent open season, or covered at least 1/4 of the employees at any day between 10/31/12 and 12/27/12. Employers with fiscal year plans may amend their cafeteria plans to allow special one-time changes during the plan year consistent with the fiscal year plan.

25 Taking Into Account Penalty Alternatives The penalty taxes are not deductible. They will be subject to tax if the employer is a taxable entity An employer dropping coverage and paying the penalty will pay tax on the penalty and, if they pay extra wages to the employee to compensate for the lost coverage, those wages will be subject to employment taxes e.g., at a 35% corporate tax rate, it takes $3,077 of revenue to fund a $2,000 penalty, and $4,615 to fund a $3,000 penalty The amount the employee pays for coverage through a cafeteria plan is also tax free, which results in a reduction in employer side employment taxes

26 Taking Into Account Plan Based Taxes The cost of employer-provided coverage is tax free, but the plans themselves need to pay new taxes, which contributes to an upward trend in health plan costs Health Insurance Fee on carriers is expected to impact premiums between 2-4% beginning January 1, 2014 PCORI Excise Tax to fund the Patient-Centered Outcomes Research Institute, $2 per covered life Reinsurance Fees are tax deductible fees to stabilize premiums in the individual market, $63 per member or approximately 1% of premium

27 Health Insurance Exchanges a/k/a Marketplaces Health Insurance Exchanges are being compared to consolidator websites such as Priceline, Orbitz, Kayak, Travelocity, etc. but they will allow you to purchase health insurance Consumers and small business in every State and the District of Columbia will have access to a Marketplace Some States have chosen to build their own Exchange, some are partnering with the Federal government and some will allow the Federal government to run their States Exchange Open enrollment scheduled to take place October 2013 for January 2014 effective dates

28 Health Insurance Exchanges a/k/a Marketplaces As of April 23, 2013, 18 States and the District of Columbia plan to run their own Exchanges, 7 are planning for Partnership Exchange and 26 are defaulting to the Federal Exchange Exchange Decision Source: Kaiser Family Foundation paremaptable.jsp?ind=962&cat=17 Default to Federal Exchange Planning for Partnership Exchange Declared Stated-based Exchange

29 Health Insurance Exchanges a/k/a Marketplaces Beginning in 2014 all plans offered through an Exchange will need to meet specific actuarial values or metal levels:

30 Large employer - defined The employer penalties are imposed on large employers A large employer is defined as an employer that had 50 or more common law employees, or an equivalent combination of full-time and part time employees (referred to as full-time equivalents), on average during the prior calendar year Employers will determine each year, based on their current number of employees, whether they will be considered a large employer for the next year For example, if an employer has at least 50 full-time equivalent employees for 2013, it will be considered a large employer for 2014.

31 Counting Employees A full-time employee is an individual employed on average at least 30 hours of service per week (or 130 hours of service per month) Hours of service means hours actually worked or paid time off Hours of service include not only hours worked by the employee but also those hours for which an employee was paid but did not perform work due to; vacation, holiday, illness, incapacity, layoff, jury duty, military duty, LOA For employees not paid on an hourly basis, employers may count actual hours or apply and equivalency method of: 8 hours works per day; or 40 hours per week worked but only if this method does not substantially understate an employee s hours of service

32 Employees Whose Time Is Not Tracked Some employees are paid on a basis unrelated to hours worked (e.g., adjunct professors and commissioned sales people) Pending further guidance, employers must use a reasonable method for tracking hours The reasonable method must not underestimate employee s hours or have the effect of re-characterizing a full-time position as not full-time. It would not be reasonable to ignore preparation time for an adjunct professor It would not be reasonable to disregard traveling time for a traveling sales person

33 Full-Time Equivalence Full-time equivalence is determined by aggregating part-time service hours (up to 120 for each part-time employee) each month and dividing by 120 Employers will average their number of employees across the months in the year The number of employees is determined by taking the sum of the total number of full-time employees (including seasonal workers) for each calendar month in the preceding calendar year and the total number of FTEs (including seasonal workers) for each calendar month in the preceding calendar year, and dividing by 12. The result, if not a whole number, is then rounded to the next lowest whole number.

34 Seasonal Employers Seasonal workers can be backed out of the equation in some circumstances For purposes of determining large employer status, an employer that employs over 50 employees for 120 days (or four calendar months) or fewer during the year, does not need to count seasonal workers who only worked for 120 days (or four calendar months) or less The four calendar months and the 120 days are not required to be consecutive.

35 Employer Aggregation Rules Employers with common ownership or control are aggregated for purposes of determining whether an employer has 50 employees. Parent-Subsidiary: parent Co. owns 80% or more of a subsidiary (or has 80% directors/trustees in common or under control for NFPs) Brother/sister: five or fewer shareholders (who are individuals, estates, or trusts): own at least 80% of each corporation, and own more than 50% of all corporations taking into account identical ownership interests with respect to each corporation. Affiliated Service Group Rules: aggregate certain service organizations that engage in joint activity manage each other and have some overlapping ownership Government and church plans can rely on a good faith interpretation until further guidance is issued

36 Employer Aggregation Rules and Penalties Although large employer status is determined on an aggregated basis, the determination of whether an employer is subject to a penalty (and the amount of any such penalty) is determined on a member-by-member basis If an employee is employed by more than one large employer member, an hour of service for one member counts as an hour of service for all members The 30-employee penalty reduction is shared by all of the members of the large employer Divided pro rata in proportion to the member s FTEs

37 Standard Periods for Ongoing Employees Hours are tracked during a Standard Measurement Period and used to determine the employee s status during the Standard Stability Period. Standard Measurement Period: period designated by the employer that lasts between 3 and 12 months. Standard Administrative Period: optional period of time after a Standard measurement Period and before the next Standard Stability Period, which cannot exceed 90 days. Each Standard Administrative Period overlaps the prior Standard Stability Period. Standard Stability Period: period designated by the employer that lasts between 6 and 12 months that begins after, and is no shorter than, the Standard Measurement Period.

38 Relationship of Standard Measurement and Stability Periods If an employee is determined to be full-time during a standard measurement period, the following stability period must be at least six consecutive calendar months but no shorter than the measurement period. If an employee is determined to be not full-time during a standard measurement period, the following stability must be no longer than the measurement period. When you put the rules together, the standard measurement and stability periods must be the same length of time, and at least 6 but no more than 12 months.

39 How Standard Periods Works Assume Standard Stability Period: Calendar year Year 1 Year 2 Year 3 Jan Jan Jan Standard Stability Period

40 How Standard Periods Works Assume Standard Stability Period: Calendar year Standard Measurement Period: 12 month period ending October 15 Year 1 Year 2 Year 3 Jan Jan Jan Standard Measurement Period Standard Stability Period

41 How Standard Periods Works Assume Standard Stability Period: Calendar year Standard Measurement Period: 12 month period ending October 15 Administrative Period: 77 day period from October 15 through December 31 Year 1 Year 2 Year 3 Jan Jan Jan Standard Measurement Period Admin. Period Standard Stability Period

42 Points to Consider If an employee is determined to be full-time or not full-time during a standard measurement period, that designation applies during the following stability period regardless of the actual hours the employee works in the stability period (provided the employee remains employed during the stability period) An employer s eligibility rules do not have to perfectly reflect the rules for determining an employee s full-time status (although there can be excise tax consequences if the eligibility rules are less inclusive) Adopting eligibility rules to mirror these regulations will create some communication challenges

43 New Full-Time Employees Rule for New Full-Time Employees: If a new employee is not a seasonal employee and is reasonably expected to be a full-time employee at the date of hire, the employee must be offered coverage at the end of three full calendar months of employment Note: this rule does not comport with the 90 day limit on waiting periods If a new employee is a seasonal employee or a variable employee, the employer may use an Initial Measurement Period to determine full-time status

44 Initial Periods for New Variable Hour and Seasonal Employees Initial Measurement Period: 3-12 month period that begins at the date of hire or by the first of the month following hire. Initial Stability Period: must begin by the first day of the second month following the employee s first anniversary of employment and must be the same duration as the Standard Stability Period. If the Employee is full-time, the Initial Stability Period must be at least 6 months and no shorter than initial measurement period. If the Employee is not full-time, the Initial Stability Period can only be one month longer than the Initial Measurement Period and must end by the employee s first Standard Stability Period. Initial Administrative Period: Period of up to 90 days after the Initial Measurement Period and before the start of the Initial Stability Period. The period between hire and the Initial Measurement Period counts toward 90 day limit.

45 How Standard and Initial Periods Work Calendar Year Standard Stability Period, 12 Month Standard Measurement Period ending 10/15, Admin. Period 10/15-12/31 Year 1 Year 2 Year 3 Jan Jan Jan First Standard Measurement Period Admin. Period First Standard Stability Period

46 How Standard and Initial Periods Work Calendar Year Standard Stability Period, 12 Month Standard Measurement Period ending 10/15, Admin. Period 10/15-12/31 Hire Date of June 15 th 12 month Initial Measurement Period begins first of the month following hire 1 month Initial Administrative Period Year 1 Year 2 Year 3 Jan Jan Jan Initial Measurement Period Initial Admin. Period First Standard Measurement Period Admin. Period First Standard Stability Period

47 How Standard and Initial Periods Work Calendar Year Standard Stability Period, 12 Month Standard Measurement Period ending 10/15, Admin. Period 10/15-12/31 Hire Date of June 15 th 12 month Initial Measurement Period begins first of the month following hire 1 month Initial Administrative Period Year 1 Year 2 Year 3 Jan Jan Jan Initial Measurement Period Initial Admin. Period Initial Stability Period if FT First Standard Measurement Period Admin. Period First Standard Stability Period

48 How Standard and Initial Periods Work Calendar Year Standard Stability Period, 12 Month Standard Measurement Period ending 10/15, Admin. Period 10/15-12/31 Hire Date of June 15 th 12 month Initial Measurement Period begins first of the month following hire 1 month Initial Administrative Period Year 1 Year 2 Year 3 Jan Jan Jan Initial Measurement Period Initial Admin. Period Initial Stability Period if FT Initial Stability Period if NOT FT First Standard Measurement Period Admin. Period First Standard Stability Period

49 Transition Rule: 2013 Measurement Periods Employers planning to use a 12 month measurement period to determine full-time status during a stability period beginning in 2014 will need to have a 2013 measurement period, but for 2013 only, that measurement period may be short. Must be at least 6 months. Must begin by July 1, Must end not more than 90 days before the start of the 2014 plan year.

50 Comments/Observations These regulations will trigger the need for some employers to revisit the eligibility rules that apply to their health plans Employers with complicated work forces will need to identify employee groups that could cause problems (e.g., per diems, temporary employees, adjunct faculty, commissioned sales persons, etc.) Some employers will begin closely monitoring the hours worked by their part-time employees to ensure they are not treated as full-time employees Employee status is determined under the common law standard this has implications to independent contractor/leased employee arrangements Rules require coordination among different employer functions (benefits, payroll, information technology, etc.) planning and coordination needs to begin soon

51 New Informational Reporting Beginning in 2014, employers must report to the IRS whether they offer their full-time employees and their dependents the opportunity to enroll in health coverage and to provide certain other information, including dependent addresses and SSNs. The reporting and statement requirements apply to coverage provided on or after January 1, The first information returns will be filed in The IRS will use the information that employers report to verify employer-sponsored coverage (for Exchange subsidy eligibility) and to administer the playor-pay employer penalty provisions. Employers must share the information reported with the affected employees.

52 Other Mandates 2013: Notice of availability of Exchanges 2014: No waiting period in excess of 90 days Elimination of standalone HRAs Essential Health Benefits and Maximum Deductibles (Small Group Market) Out-of-pocket Maximums (All non-grandfathered employer plans) Cannot have in-network annual out-of-pocket maximums greater than the limits for high deductible health plans set by IRC 223 ($6,350 for single and $12,700 for family in 2014). Deductibles, copays and coinsurance payments appear to apply towards the out-of-pocket maximum.

53 Modeling to Assess Play or Pay Options Actuarial firms and consulting firms have developed models, some of which are quite complex, to predict trends and determine possible penalty amounts and costs for different structures Because the possibilities are almost endless, but limited by the products the insurance market provides for most employers, these models cannot explore all options, but they can look at current offerings, identified design changes, and help with employee cost sharing amounts Our experience is that most models do not yet model use of the safe-harbor using the measurement periods, do not determine fulltime status, or analyze affordability safe-harbor options

54 Weigh Your Options: Play, Pay or Risk It? First step is to weigh your options and decide whether you will play by offering health coverage or pay the tax penalty. Best outcome for everyone may actually lie somewhere in the middle: Offer coverage to everyone, but Make it affordable only for some.

55 Putting It All Together Example of Employer that Does offer Coverage Today Hypothetical Employee Family of Four Projected Health Insurance Premium and Employee Contribution in 2014 $18,000 $16,000 $14,000 $15,921 $3,980 $12,000 $10,000 $8,000 $6,000 $11,941 $4,000 $2,000 $0 Employee Contribution Employer Contribution

56 Putting It All Together Example (cont d) Percent of Federal Poverty Level Income Tax Bracket Wage Equivalent of Employer Health Plan Federal Subsidies Required Pay Raise Cash to fund $2,000 penalty (35% tax) Employer Free Cash Flow (after penalty) Empoyer Drop Decision 133% $31,521 15% $14,048 $14,176 -$128 $3077 $8,864 Drop 150% $35,550 15% $14,048 $13,385 $663 $3077 $8,864 Drop 200% $47,400 25% $15,921 $10,985 $4,936 $3077 $8,864 Drop 250% $59,250 25% $15,921 $7,530 $8,391 $3077 $8,864 Drop 300% $71,100 25% $15,921 $5,187 $10,734 $3077 $8,864 Keep 400% $94,800 28% $16,585 $2,935 $13,650 $3077 $8,864 Keep *Source: Adapted from Douglas Holtz-Eakin and Cameron Smith, Labor Markets and Health Care Reform: New Results, American Action Forum (2010)

57 Other Considerations Other Considerations for Pay or Play Analysis Workforce compensation demographics drive analysis. Tax rates can impact true cost of penalty. Providing affordable coverage at single level but not family level may hurt employee s entire family due to loss of Exchange subsidy. Not all of employer s employees would sign up for subsidized health care coverage even if offered. Penalty for failure to offer coverage is guaranteed, subsidy is not. Not all employees who decline employer coverage would sign up for coverage through Exchange.

58 How Employers Might Respond Include high deductible plan as an option Offset costs with large employee contributions subsidized by reducing employer contributions for dependent coverage Use salary-based contribution schedules or subsidize lower income workers Some employers may want to increase their use of part-time employees, use leased employees, or increase use of independent contractors, but strict common law employee tests, worker misclassification liability, anti-abuse rules and bad PR should limit the viability of these types of responses.

59 Now Is the Time to: Determine how many full-time employees you have. Chose a measurement/stability/administrative period. Determine how you will track hours. Determine whether you are a large employer subject to the play-orpay mandate. Determine whether you are a small employer eligible for tax credits and/or participation in the SHOP Exchanges. Test for affordability Choose a safe harbor method for the affordability test (W-2, current rate of pay, or federal poverty level) Review cost-sharing subsidies (and wellness credits) to ensure they will avoid affordability penalty.

60 Now Is the Time to: Ensure coverage provides 60% minimum value. Consider plan design and subsidy changes so that you can offer at least one affordable option. Redefine health insurance eligibility: Include employees averaging 30 hours of service per week. Consider if groups traditionally excluded from coverage must become eligible (e.g., coaches, substitute teachers, W-2 temporary employees, per diems, adjunct professors, etc.) to pass 95% test. Consider if hiring or retention standards need to be changed with respect to temporary hires and other groups that are not part of your stable workforce. Revise plans to cover all mandated categories of children.

61 Now Is the Time to: Amend policies so that no employee has a waiting period for health coverage in excess of 90 days. Amend plans for out-of-pocket maximums. Review Notice of Exchanges and prepare to automate completion. Start gathering information at open enrollment that will be required for IRS reporting. Consult with unions regarding necessary changes to CBAs. If employees participate in multi-employer plans, ensure plan terms comply.

62 Market Trends to Keep an Eye On Expansion of the merged markets from 50 employees to 100 employees Scheduled for 2016 but could come as early as %+ rate shock expected to this market New self funding or alternate funding products in the space Limited and tiered network products Steward Health Care Further hospital/provider consolidations Providers entering the insurance plan space Partners owns Neighborhood Health Plan Tufts Medical Center and Vanguard Health Systems rolling out the Minuteman Health Initiative with $88.5 million interest loan from CMS as a result of PPACA

63 How Can We Help? If you have questions on what you can do to combat some of these key challenges, we would love to help. Just as important as the experience we have helping our clients, we are a company just like yours and we are faced with the same reality keeping people happy and engaged is critical to our successful business. We re learning everyday. Robert DiMase, AIF, Executive Vice President Kate Saracene, Counsel Rob.DiMase@sentinelgroup.com ksaracene@nixonbpeabody.com