06/29/2015_830 AM. Healthcare Reform How Will Your Business be Affected in 2015 and Beyond? Introduction

Transcription

1 Healthcare Reform How Will Your Business be Affected in 2015 and Beyond? Introduction Overview of ACA Healthcare Reform in 2015 What s on the Horizon Potential Legislative Actions Patient Protection and Affordable Care Act (PPACA) Goals Enacted March 23, 2010, health reform s goals were: Provide access for 30+ million uninsured (#1 objective) Cost control Quality Focusing on all three goals was a challenge Health reform is primarily health insurance reform It does not address major cost saving opportunities Provider payment Harmonization across payer programs Tort reform 1

2 Paying for Reform Increase revenue through taxes, fees Penalize/tax people who don t buy coverage Penalize employers If they don t provide coverage If coverage isn t affordable If coverage costs too much Increase taxes on upper income Fees on employers, health plans, suppliers Change tax treatment of Part D subsidy Reduce spending on Medicare Advantage plans Cut Medicare and Medicaid provider payments Implement stronger fraud and abuse controls Improve quality Key Elements of Health Reform for Employers Change in tax treatment for overage dependent coverage Accounting impact of change I in Medicare retiree drug subsidy tax treatment Early retiree medical reinsurance Medicare prescription drug "donut hole" beneficiary rebate Break time/private room for nursing moms Employers to distribute uniform summary of benefits and coverage (SBC) to participants (deadlines vary with group of recipients) 60-day advance notice of mid-year material modifications to SBC content Form W-2 reporting for health coverage Coverage for additional women s preventive care services begins (plan years on or after August 1, 2012) 5 Health insurance exchanges Individual coverage mandate Financial assistance for exchange coverage of lower-income individuals States may expand Medicaid HIPAA wellness limit Employer shared responsibility (2015) Additional reporting and disclosure Dependent coverage to age 26 for any covered employee s child 2 No annual dollar limits 2 No pre-existing condition limits 2 No waiting period over 90 days 2 Additional standards for new or "non-grandfathered" health plans, including limited cost-sharing and deductibles ($6,250/individual $12,500 /family in 2013) and perhaps limit deductibles to $2,000/individual,$4,000/family), provider nondiscrimination, and cover routine medical costs of clinical trial participants Health insurance industry fees begin Temporary reinsurance fees Dependent coverage to 26 Additional standards for new (grandfathered plans may or non-grandfathered" health limit to children without plans, including preventive access to other employer care in network with no costsharing appeal and external coverage, other than parent's coverage)1 review, provider choice No lifetime dollar limits 1 and nondiscrimination Restricted annual dollar limits, provisions for insured plans 3 phased amounts until Income-based Medicare Part No pre-existing condition D premiums limitations for enrollees up to Pharmaceutical importers and age 19 and no recissions 1 manufacturers' fees start No health FSA/HRA/HSA Medicare, Medicare reimbursement for nonprescribed drugs payment reforms to begin Advantage benefit and Increased penalties for nonqualified HSA distributions loss ratio Insurers subject to medical rules $2,500 per plan year health FSA 40% excise tax on "high cost" contribution cap (plan years on or or Cadillac coverage after January 1, 2013) Comparative effectiveness group 1 Applies to all plans, including health plan fees begin "grandfathered" plans, effective Annual dollar limits on essential for plan years beginning on or health benefits cannot be lower than after Sept. 23, 2010 (Jan. 1, $2 million 2011, for calendar year plans). Employers notify employees about 2 Applies to all plans, including exchanges grandfathered plans, effective for Medical device manufacturers' fees Plan years beginning on or after start Jan. 1, Higher Medicare payroll tax on wages 3 Delayed until regulations exceeding $200,000/individual; issued/date TBD $250,000/couples 4 A temporary exemption applies Change in Medicare retiree drug to certain categories of subsidy tax treatment takes effect employers. Exchanges initial open enrollment 5 Applies to nongrandfathered period to begin plans Individual Coverage Mandate Penalties for Lack of Health Coverage Employee Requirement in 2014 Individual must obtain minimum essential coverage through employer, individual exchanges or Medicaid Individual penalty would be the greater of a flat dollar amount ($95 in 2014, $325 in 2015, rising to $695 in 2016) or a specified % of income Certain exceptions (e.g., lowest cost plan exceeds 8% household adjusted gross income, no coverage for less than 3 months, income below the income tax filing threshold) If not, Pay Penalty Mandate Apply? Pay or Play Have Coverage? 2

3 What coverage do you have to offer? Avoiding Penalties To avoid the penalties, the health plan offered has to meet three tests: Minimum essential coverage (major medical) Minimum value (on average, plan pays at least 60% of costs/member pays no more than 40% ) Affordability (single premium for lowest cost plan can be no more than 9.5% of household income) Affordability How do you calculate this test? W2 wages safe harbor (9.5% of wages reported in Box 1) Hourly wages safe harbor (9.5% of hourly rate x 130 hours/month) Federal Poverty Level safe harbor (9.5% of $972.50/month) 3

4 Marketplace & SHOP States must establish an American Health Benefit Marketplace that will facilitate the purchase of qualified health plans and includes a Marketplace for small businesses called Small Business Health Options Program (SHOP). Florida runs a federal marketplace with year-round, open enrollment SHOP has been delayed until 2015; although, States may still elect to offer coverage to small businesses in Individuals can enroll in a plan through the state Marketplace and employers can offer a choice of plans to their employees through the marketplace, certain conditions apply. See below for update on SHOP. Creates four benefit categories Bronze (60% actuarial value) Silver (70% actuarial value) Gold (80% actuarial value) and Platinum (90% actuarial value) Marketplace & SHOP Subsidies- premium tax credits and help with out-of-pocket health expenses will be available to people who cannot meet its individual mandate to have health insurance, meaning they are unable to find affordable coverage from employers or other private insurance plans. Eligibility for support will be determined by the relationship of individual or family gross income levels to the national federal poverty level (FPL). Individuals and families with incomes from 100 to 400 % of the FLP will qualify for tax credits to reduce the premiums for health insurance purchased through the exchanges. Incomes from 100 to 250 % of the FPL also will qualify for help in paying out-ofpocket costs for the co-pays and deductibles not covered by their health insurance. The Silver Plan will serve as benchmark for premium tax credits Marketplace & SHOP FPL percentages and sliding scales of income that people must pay toward their health insurance premiums: Up to 133 % of FPL: Payments are 2 % of income. 133 % up to 150 % of FPL: Payments begin at 3.0 and rise to 4.0 % of income. 150 % to 200 % of FPL: Payments begin at 4.0 % and rise to 6.3 % of income. 200 % to 250 % of FPL: Payments begin at 6.3 % and rise to 8.05 % of income. 250 % to 300 % of FPL: Payments begin at 8.05 % and rise to 9.5 % if income. 300 % to 400 % of FPL: Payments are 9.5 % of income. 4

5 Implementation Timeline Implementation 2015: Groups with 100 or more full-time employees will have to offer coverage to at least 70% of its fulltime employees. 2016: Groups with 50 or more full-time employees will have to offer coverage to at least 95% of its fulltime employees. Employer Mandate: Does it apply to you? 5

6 Employer Responsibility The ACA requires that large employers are subject to penalties if they do not offer insurance to their full-time employees. More than 50 full-time equivalent employees during the preceding year Need to track hours in 2014 for 2015 Part-time hours are included in calculation Excludes seasonal employees who work less than 120 days Are You a Large Employer? Full-time employees + Part-time employees Full-time definition 30 hours per week 130 hours per month 1 FTE = 120 hours worked per month Example 38 Full-time employees 20 Part-time employees 24 hrs/week (96 hrs/month) (20 x 96)/120 = 16 FTE Determining Who is A Large Employer Applicable large employer if for a calendar year if it employed, on average, at least 50 full-time employees, including full-time equivalent employees (FTEs) Employer for purposes of the Play or Pay mandate includes government entity employers (e.g., federal, state, local or Indian tribal government employers) and tax-exempt organization employers, as well as private sector employers Members of a controlled group or affiliated service group, employees of all such group members are counted for determining whether the group is considered an applicable large employer. 6

7 Determine Large Employer Status Full time employee- full-time employees are those who were employed on average for at least 30 hours of service per week Sole proprietors, partners in partnerships, 2% S corporation shareholders, employees who work outside the United States and leased employees (as defined in Code section 414(n)(2)) are generally not employees for purposes of the Play or Pay mandate. Full time Equivalent Employees - must (1) add up the total number of hours of service for all employees who were not employed on average at least 30 hours of service per week (up to a maximum of 120 hours of service per employee per month may be included); then (2) divide that total by 120. Fractions are disregarded. Determining Who is A Large Employer # full-time employees (those who work an average of 30 hours or more per week) in the month plus, # full-time equivalents in the month (total hours worked by all part-time employees for the month (but not in excess of 120 hours for any such employee) 120 (retaining any fractions) equals # total FTE's for the month. Then, total the FTE count for each calendar month and divide by 12. If the total for the prior year is equal to or exceeds 50, the employer is subject to the pay or play mandate. In calculating this final number, disregard any fractions. For example, if the final average is 49.9, round down to 49. Special Rule- Seasonal Workers A special rule for seasonal workers allows employers to avoid the pay or play mandate if they exceed the 50 FTE threshold for 120 days or fewer during the look-back period solely because of seasonal workers. The guidance allows employers to use either the 120 days or a four calendar month period for purposes of this special rule. The guidance defines "seasonal worker" as including a worker who performs labor or service on a seasonal basis, retail workers employed six months or less. Work generally must begin during the same time of year (i.e. winter/summer) 7

8 Employer Coverage Mandate Shared Responsibility Penalties 2015 Large Employer (At Least 50 Full-Time Equivalent Employees) Pay Penalty if one full-time employee receives subsidized coverage on exchange* 1/12 x $2000 x (Number of Full-Time Employees 80) Reduce to 30 in 2016 Lesser of: No Are any of the Full-Time Employees in an Exchange and Receiving a Premium Tax Credit? Yes Are Full-Time Employees Offered Health Coverage? No No Penalty 1/12 x $2000 x (Number of Full-Time Employees 80) Reduce to 30 in /12 x $3000 x (Number of Full-Time Employees Who Receive Credits for Exchange Coverage) No Yes Is Coverage Affordable Costing less than 9.5% of monthly income, and Covering 60% of eligible expenses? Yes What is the penalty? What is the penalty? Offering penalty: $2,000 annually per full-time employee (assessed monthly) if employer does not offer coverage AND if any employee receives a premium subsidy through the Exchange; or Affordability penalty: $3,000 annually per employee who is offered coverage that is not affordable or not minimum value and that employee receives a premium subsidy through the Exchange 8

9 Example Who owes a penalty? EMPLOYER # OF FTE EEs # OF Full-Time EEs RECEIVING SUBSIDY A B 53 0 C General Rules Full-time Employee: With respect to any month, an employee who is employed on average at least 30 hours of service per week Final regulations provide 2 methods for determining full-time employee status: Monthly measurement method Look-back measurement method Employer may apply either monthly measurement method or look-back measurement method based on permitted categories of employment 130-hour monthly equivalency applies for both methods 9

10 Permitted Employee Categories Collectively bargained vs. non-collectively bargained Hourly vs. salaried employees Different groups of collectively bargained employees (separate CBAs) Employees whose primary places of employment are in different states Variable Hour Employees Definition: based on the facts and circumstances at the employee s start date, it cannot be determined whether the employee is reasonably expected to work full-time hours during the initial measurement period because the employee s hours are variable or uncertain Factors: Status of employee being replaced (full-time vs. variable hour) Actual variation of hours for same or comparable positions Whether position was advertised as variable hour Seasonal Employees Final regulations provide a definition of seasonal employee Definition: an employee who is hired into a position for which the customary annual employment is six months or less Period of employment should generally begin in approximately the same part of the year (for example, summer or winter) Can still be a seasonal employee if employment extended beyond customary period 10

11 New Employees Reasonably Expected to Work Full-time Must be offered coverage by the first day of the month after the first three full calendar months of employment Reasonable expectation based on facts and circumstances Factors may include: Status of employee being replaced Status of employees in same or comparable positions Whether job was advertised as requiring at least 30 hours of service per week on average Counting Hours Who do you need to offer coverage to? Employees who work 30 hours or more per week OR 130 hours per month Look-Back Measurement Method Measure for block of time, lock in/lock out status for same length You need to count hours now if you may be responsible for the penalty in

12 Who do you need to offer coverage to? Measurement Period 3-12 month period to count hours and determine if employee has worked 30 hours per week on average Administrative Period No longer than 90 days Notify employees qualifying for coverage and handle enrollment tasks Stability Period Period of time during which employees who meet the hours threshold must be treated as full-time regardless of actual hours worked Who do you need to offer coverage to? Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Plan Year 2016 Plan Year Green = Measurement Period Red = Administrative Period Blue = Stability Period Look-back Measurement Method May be used for new variable hour and seasonal employees if used for ongoing employees Employers may not use the look-back measurement method for variable hour/seasonal employees and use monthly measurement method for employees with predictable schedules Rules protect full-time status for employees transferring between positions using different methods Transition measurement periods allowed for

13 Special Rules for Education Institutions If employee works 30 or more hours per week during school year, you cannot consider them part-time because of summer break Summer break Exclude it from counting and average without those weeks OR assume that the employee would have worked their average number of hours Monthly Measurement Method Used to identify full-time employees by employers who do not use the look-back measurement method Employees are identified based on the hours of service for each calendar month Employer must offer coverage to an employee by the end of three full calendar months beginning with the month the employee is otherwise eligible for coverage to avoid penalties Must be treated as returning employee unless there is a 13 week break in service or 4 week break in service that is longer than the prior period of employment Change in Employment Status Special rule for change in status during initial measurement period Variable hour or seasonal to a position that would have been expected to average 30+ hours of service per week Part-time to full-time Must be offered coverage by: First day of the 4 th calendar month after the change OR The first day of the month after IMP + administrative period (if earlier and the employee measured full-time) Special rule for employees moving from full-time to part-time status 13

14 Rehired Employees Proposed rule: Employees may not be treated as new employees unless they have a break in service of 26 weeks Break in service may be shorter period under rule of parity Rules designed to avoid abuse of lookback measurement method Final rule: 26 week period shortened to 13 weeks for most employers Educational institutions must continue to use 26 weeks Additional Delays Announced 50 to 99 FTE employees will not be subject to the employee mandate assessments until January 1, to 99 employees will report on their workers and coverage in 2015, but have until 2016 before any employer responsibility payments could apply. These employers must certify that they meet certain conditions The "pay or play" mandate for employers with 100 or more fulltime equivalent employees is still effective January 1, Additional Delays Announced Conditions to be met (transitional relief 50-99): Limited workforce size employs on average at least 50 full-time equivalent employees but fewer than 100 full-time equivalent employees during Maintenance of workforce and hours of service during the period Feb. 9, 2014 until Dec. 31, 2014, the employer may not reduce the size of its workforce or the overall hours of service of its employees in order to qualify for the transition relief. Maintenance of previously offered health coverage during the period Feb. 9, 2014 until Dec. 31, 2015, the employer does not eliminate or materially reduce the health coverage it offered as of Feb. 9,

15 Additional Delays Announced Companies with 100 or more full-time equivalent employees were also provided some relief in the announcement. To avoid payment for failing to provide health coverage, these employers need to offer coverage to: at least 70 percent of their full-time employees (as defined by ACA) in 2015 and 95 percent in 2016 and beyond. This helps employers who may offer coverage to employees with 35 or more hours, but not yet to that portion of their workforce who work 30 to 34 hours. Additional Delays Announced 2015 plan year only, if a large employer chooses to pay rather than play, or if the employer unintentionally fails to offer coverage to at least 70% of all full time employees: The non-offering employer penalty is calculated differently. The annual penalty, prorated monthly, is calculated by multiplying $ by all full time employees, minus 80 (instead of minus 30). This change is due to the temporary (2015 only) definition that a large employer is one with at least 100 employees, rather than 50 Additional Delays All employers with at least 50 employees remain subject to the annual information reporting requirements under IRC section 6056 for 2015, even if they are not subject to the employer mandate in Large employers will not be penalized for not offering dependent coverage until 2016: unless they are already offering to dependents and then stop, and as long as they are taking steps toward providing coverage to dependents. 15

16 Non-Calendar Year Plans Some large employers with non-calendar year plans: Effective date of the employer mandate is the first day of the plan year (rather than January 1, 2015), as long as the following requirements are met: I. The employer must have maintained a non-calendar year plan as of December 27, 2012 (the day before the proposed regulations were issued) and has not modified the plan year since then, II. and the employer offered coverage to at least 1/3, or actually covered at least 1/4, of all employees as of February 9, 2014, or the employer offered coverage to at least ½, III. or actually covered at least 1/3, of all full-time employees as of February 9, Safe Harbors Three Safe Harbors to determine affordability: Premium is less than 9.5% of the employee s income on Form W-2, Box 1: Employers who use the W-2 safe harbor will continue to use Box 1 wages, which do not include pre-tax contributions to cafeteria (IRC 125) plans or to 401(k) plans. Premium is less than 9.5% of the employee s hourly rate (as of the first of the plan year) multiplied by 130 hours: An employer can use the rate-of-pay safe harbor even if the employer reduces an employee s hourly pay rate during the plan year, but the rate-of-pay safe harbor will apply separately for each month. Premium is less than 9.5% of Federal Poverty Level (FPL) for one person: An employer can use the FPL rate in effect six months prior to the start of the plan year, rather than at the start of the plan year. Open Enrollment 16

17 Open Enrollment Avoiding the Penalty An open enrollment period must be held within the 12 months prior to the penalty being effective. After that, open enrollment must be offered yearly. The period must be an effective opportunity to accept of decline coverage. Waiting Periods for New Hires Waiting Periods - Effective January 1, 2014 Waiting periods cannot exceed 90 calendar days Other criteria can be required before the 90 calendar-day period begins Examples: Licensure, Orientation Late enrollment penalties are still allowed 17

18 Administrative Requirements 2016 IRS forms to be completed using 2015 data All applicable large employers - 50 or more FTE Need to begin tracking information internally Payroll data IRS Reporting IRS Reporting 1095 C Employer submits to IRS by - Used to Determine Fines Paper version due February 28 Electronic version due March 31 Data includes: Who is FTE each month Basic Employee Info- name, address etc Health Insurance Info offered each month Share of lowest cost EE-only coverage 18

19 IRS Reporting 1095 C Data continued: Months Employee Enrolled in Coverage Months ER met Affordability Safe Harbor If Self Insurance plan, info on covered individuals but month This imposes significant administrative time and data collection. IRS Reporting 1094 C Employer submits to IRS by - Used to Determine Fines Paper version due February 28 Electronic version due March 31 Data includes: Basic Employer Information Offered coverage to 70% or more FT employees Total # 1095C issued FTE count by month Total employee counts by month Eligibility for transition relief Looking Ahead to 2018 and the Excise Tax 40% excise tax on high cost coverage, including medical, health FSA contributions, onsite medical clinics, and employer contributions to HSAs Does not include stand-alone insured dental and vision coverage or certain other coverage types Initial cap set at $10,200/single and $27,500 family Higher thresholds ($11,850/$30,950) for retirees and workers in high-risk professions Higher thresholds ($27,500) for single multiemployer plan coverage Indexed to CPI (for 2019 only, CPI+1%) 19

20 Looking Ahead to 2018 and the Excise Tax Aggregate cost determined using a methodology similar to that used for determining applicable COBRA premiums Employers must determine aggregate cost Insurers responsible for tax for insured coverage Benefit administrators responsible for tax for selfinsured coverage Employers responsible for tax for HSA contributions On the radar DOES apply to you Cadillac Tax Starting in 2018, annual premiums that exceed $10,200 for a single plan will be taxed at 40% of the amount exceeding the $10,200 Some employers are starting to adjust plan designs now to avoid this tax in the future. 20

21 What's Next for Health Care Reform? Repeal and Replace? Piecemeal Changes? 40 Hour Workweek? King v. Burwell? Program Conclusion Thank you for your attention and participation Joel Cullum, Senior Vice President 21