What is the Employer s responsibility? Basically, eligible employers must offer affordable coverage to all eligible employees Or pay a penalty.

Transcription

1 Guide to the PPACA

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3 What is the Employer s responsibility? Basically, eligible employers must offer affordable coverage to all eligible employees Or pay a penalty.

4 Eligible Employers Companies with more than 50 employees (or FTEs discussed later) that do not offer health insurance as a benefit to at least 95% of their full time workers, and have at least one full-time employee get a subsidy from the federal government to purchase health insurance on his or her own,

5 Health Care Reform must pay a fee of $2,000 for every one of your full-time workers beginning (you could subtract the first 30 of your employees from that assessment).

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7 Health Care Reform Ok, but when the mandates penalties do kick in down the road, what is that going to do to companies!?

8 Well, let s remember that 96% of businesses have fewer than 50 employees, and with the rare exception of things like the notice of rights to exchanges (discussed later) companies under 50 FTE s are exempt from almost all provisions. Additionally, 98% of companies over 50 employees already offer insurance so, what we re really here to talk about today is the new right way to offer insurance, if the law applies to you. (source: 2010 US Census)

9 And, if it s any comfort, a recent University of Chicago study found that more than 99% of companies who offer work-sponsored insurance plans have insurance that meets at least most of the PPACA standards. So, the good news is, we are probably all only a couple of adjustments away from being in full compliance. so, let s talk about those adjustments!!

10 Health Care Reform Based on the size of my company specifically, how do I know if we have to comply with the employer s mandate?

11 Health Care Reform Calculating Employer Size To determine if your business qualifies as a large employer add your full time staff with the fulltime equivalent of your part-time employees using the following formula: Total hours of service all part-time employees worked in a month / 120 = Full-time Equivalent *Note: don t count hours in excess of 120 that were worked by a single part time employee; also seasonal employees are excluded

12 As an example, if you have 30 part time employees working for you and they did a combined 1,800 hours of labor in the month you would do the following calculation: 1800 monthly hours / 120 = 15 full-time equivalent employees If you also have 36 full-time employees, the total full-time equivalent is 51 employees.

13 Health Care Reform You do this calculation every month for a full calendar year to see if you averaged 50 or more employees in that year. If you average 50 or more employees in the calendar year, you are required to offer insurance in the following year.

14 Health Care Reform Remember that you re only responsible for extending coverage to the employees who are legitimately full time employees full time equivalents are used for the large employer calculation but are not considered benefits eligible for the purpose of the fines.

15 Common Ownership Treatment And, yes, if two or more companies have a common owner or are otherwise related, they are combined for purposes of determining whether they employ enough employees to be subject to the Employer Shared Responsibility provisions If the combined total meets the threshold, then each separate company is subject to the Employer Shared Responsibility provisions, even those companies that individually do not employ enough employees to meet the threshold.

16 Health Care Reform Ok, so if I m large enough to need to offer insurance to my employees, what benefits will qualify?

17 First and foremost, for a plan to be considered affordable regardless of what you do to split the premium with an employee, the plan has to maintain an actuarial value of 60%. In other words, you can t get away with buying a cheapie plan that forces too much of the costs of service onto the member with extra high co-pays, deductibles, or co-insurance rates.

18 To give a sense of what 60% looks like, assuming a broad range of services typical of employersponsored plans and no-cost preventive care as mandated by the PPACA, a 60% plan is a fairly lenient figure that looks like this

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20 *Survey by Towers Watson of over 2,000 employers plans in 2010

21 Health Care Reform Assuming your plan pays for at least 60% of covered health care expenses for a typical population, then you need to look to how you set your premium split. The cost for an employee s premium cannot exceed 9.5% of his/her gross annual salary for the EMPLOYEE ONLY portion of the LOWEST COST plan design. Buy-ups and dependents are not the employer s responsibility.

22 Health Care Reform Figuring an employee s annual earnings can have some trickiness to it also, so there are a few safe harbors for this as well

23 1. Employers can just look at the employee s earnings from Form W-2 Box 1 2. Employers can also use the rate of pay safe harbor by taking either a salaried employee s monthly pay and comparing it against the premium co-share or taking the hourly rate of pay for hourly workers and multiplying it by 130 and using that number (rate of pay X 130) as the basis for comparison against the premium 3. A third safe harbor exists if your co-share is lower than 9.5% of the FPL (in today s numbers, that s about $90/month)

24 Unaffordable coverage penalty Unlike the Pay or Play penalty that we mentioned earlier being an annual fine of $2,000 for every one of your full time workers (minus 30), the Unaffordable Coverage penalty is actually a $3,000 annual penalty, but the employer is only fined on a per person affected basis, and the fines are not to exceed the would be fine for not offering coverage at all.

25 Health Care Reform OK I don t want to be fined. But how do I know who, exactly, are the all eligible employees that I m supposed to offer this affordable coverage to?

26 who am I fined on? The Act s Employer Shared Responsibility rules mandate that, to avoid the non deductible tax penalties, qualifying employers (50 or more FT s/fte s) are responsible for identifying the population of their employees that are supposed to be offered coverage and offering them affordable insurance. Employers know they need to offer full time staff the benefits, but who s part time and who s full time can sometimes be a little unclear.

27 who am I fined on? Understanding that many organizations employ staff with variable hours, the IRS allows an optional look-back/stability period safe harbor for employers to check and see which people ultimately averaged enough hours to be legally deemed as full time (and, thus, benefits eligible). The PPACA defines full time as 30 hours/week.

28 What about New Hires? For newly hired employees, PPACA mandates waiting periods cannot exceed 90 days. Except that you have a caveat if you deem the employee a variable hour employee. An employee is deemed variable hour if, at the time of hire, you cannot reasonably predict whether he/she will average 30 hours a week.

29 What about New Hires? In the case of a new hire with variable hours, the employer can use a similar safe harbor as for ongoing staff, where there is a defined measurement period of between 3 and 12 months, after which there is a corresponding stability period where the member is treated according to the results of average hours worked during the measurement.

30 Health Care Reform More on waiting periods

31 More on waiting periods While CA AB 1083 only references group coverage and small group coverage (and did not explicitly list large groups) it s now being interpreted to apply to ALL group coverage in California.

32 More on waiting periods The CA legislation goes beyond the PPACA s 90 day limit and institutes a maximum 60- day limit which would apply in CA as of renewals on or after January 1, As a hard 60 days that probably means updating waiting periods to 1 st of the month following 30 days.

33 Health Care Reform Speaking of legislation that may impact companies prior to the 2015 delays.our ol friend the Exchange notification

34 All current full time and part time employees must be provided notice no later than October 1, 2013; After October 1, 2013, each new employee must be provided notice upon hiring (or within 14 days); The notice must also be provided to the COBRA beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event. (a model notice can be found at DOL website:

35 Health Care Reform More on exchanges. a quick look into the individual insurance world

36 Health Care Reform What must people buy? Most US citizens and legal residents must purchase minimal essential coverage for themselves and their dependents.

37 Health Care Reform What happens if they don t? Individuals begin to pay a tax penalty. It starts at the greater or 1% of household income (or $95) for being uninsured in 2014, then up to 2% (or $325) in 2015 and 2.5% (or $695) in 2016, with subsequent years slated for increases at cost of living increments.

38 Health Care Reform Who are people responsible for covering? People should know they are not only responsible for themselves, but they re responsible for dependents as well. If you claim a person on your tax return, you re responsible for the fines if they don t have coverage. Children s fines are lower (half) and there s an annual cap per household (x3 adults), but you ll want to talk to tax professionals with an understanding that, for many people, the individual mandate will extend beyond just the individual

39 Health Care Reform What counts as minimal essential coverage The good new here is lot of things will satisfy the mandate. for the most part, people will be satisfying this with coverage from: Employer plans, plans purchased on the individual market (including exchange plans), Medicare, Medicaid (Medi-Cal), CHIP coverage or certain VA coverage like TRICARE.

40 Health Care Reform What are these exchanges and subsidies? The subsidies are only good for plans purchased inside of the exchange. Here, ours is called Covered, CA and it s basically like an Orbitz or Priceline where you go in one stop, input a little data and then see the pricing for several different carriers. The subsidies cap premium for a person at a certain percentage of their income where they pay up to that amount and the government sends the carrier a check for the balance.

41 Health Care Reform exchanges and subsidies cont In order to qualify for a subsidy, you need to satisfy a few main requirements, which for the most part are: 1. You don t have affordable coverage available to you elsewhere (for example an Employer plan or a social service plan like Medicare/Medi-Cal) 2. You did not take COBRA or, if you did, you ve exhausted your COBRA 3. You have earnings below 400% of the federal poverty level

42 Health Care Reform exchanges and subsidies cont If you do qualify for a subsidy, then the amount you receive is given on a sliding scale, depending on your income and is based on a silver level plan aka, a plan with a 70% actuarial value.

43 Health Care Reform exchanges and subsidies cont

44 Income Household Size = 1 Maximum Monthly Premium Amount $45, $15, $17, $22, $28, $25.47 $57.45 $ $ $363.85

45 Income Household Size = 2 Maximum Monthly Premium Amount $62, $20, $23, $31, $38, $34.38 $77.55 $ $ $491.15

46 Income Household Size = 3 Maximum Monthly Premium Amount $78, $48, $39, $25, $29, $43.29 $97.65 $ $ $618.45

47 Income Household Size = 4 Maximum Monthly Premium Amount $94, $47, $58, $31, $35, $52.50 $ $ $ $745.75

48 Health Care Reform Additional cost sharing assistance Beyond qualification for assistance with just the cost for the premiums, some people (below 250% of the FPL) may receive assistance with their plan designs as well offering them help with things like co-pays and deductibles, in what s being called Enhanced Silver plans.

49 Health Care Reform Additional cost sharing assistance

50 Health Care Reform Additional cost sharing assistance

51 Health Care Reform Enrolling in individual plans The individual market will begin to have an open enrollment period now too. For this year, it will be elongated, extending from 10/1/2013 all the way through 3/31/2014, but in subsequent years, it will be running from 10/15 to 12/7 every year.

52 Health Care Reform Enrolling in individual plans Individuals looking for insurance coverage can shop for private exchange plans and plans for Covered California at

53 Call or us if you have any Questions!