Affordable Care Act: The Road to Compliance Continues

Transcription

1 A p r i l Affordable Care Act: The Road to Compliance Continues Presented by: Ralph A. Sepe Partner, Health & Benefits Jill R. Bergman Vice President, Compliance

2 SHRM Credit This program has been approved for 1.5 hours of general recertification credit hours toward PHR, SPHR, and GPHR recertification through the HR Certification Institute The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute's criteria to be pre-approved for recertification credit.

3 Today s Agenda What we have implemented ACA fees & taxes Pressure on costs and budgets 2014: An important year for change and planning Individual mandate Employer responsibilities ID your full-time workforce, transition rules, reporting Marketplaces Benefit trends, strategic planning & action steps

4 What We Have Implemented Plan Design No lifetime dollar limits Children to age 26 FSA limit to $2,500 Same limit for 2014 NEW: $500 carryover provision Eliminate pre-existing condition limitations Preventive services Women s services (2012) NEW: Certain beast cancer drugs (9/24/14) Administration Standard benefit summaries New info for 2014 W-2 s include reporting of healthcare costs 250 W-2s in prior calendar year until further guidance Medicare payroll taxes.9% on pay > $200K Exchange notices October 1, 2013 MLR rebates Insured plans

5 Fees & Taxes Increase Costs Patient Centered Outcomes Research Fund $1: plan year end 1/1/13 9/30/13 $2: plan year end 10/1 /13 12/31/13 Carrier and/or sponsor files by July 31 Reinsurance Fee ( ) $25B over 3-years (front-loaded) $63 per member (2014)/ $44 (2015) Carrier or sponsor/ 2 installments in 2015 Industry taxes ( ) Pharmaceutical, insurance, medical devices Medical, dental, vision Plan or Policy Year End Filing Due Date PCOR FEES Jan 1 Dec 31 Apr 1 Mar 31 July 1 June 1 Oct 1 Sept $1 n/a n/a n/a $2 $1 $1 $ $2+ $2 $2 $ $2+ (final year is 2018 due July 2019) $2+ (final year is 2019 due July 2020) $2+ (final year is 2019 due July 2020) $2+ (final year is 2019 due July 2020)

6 Fees & Taxes Increase Costs Cadillac tax on health coverage providers (2018) 40% excise tax on excess value of aggregate healthcare plans $10,200 (single); $27,500 (other) Coverage provider Insurer Employer (HSA contributions) Plan administrator for self-funded plans including FSA & HRA Exclude excepted benefits such as stand-alone dental & vision Adjustments Inflation to 2018 Demographic and job-category Not geographic regions

7 Affordable Care Act Where We Stand Now 2014 Planning Is Critical

8 Individual Mandate In Effect 2014 US citizens and legal residents Minimum Essential Coverage (MEC) or pay a tax Exemptions may compromise effectiveness Unaffordable, short lapse in coverage (3 months), certified hardship (plan cancellation), incarcerated, etc. Tax penalty = Greater of: 2014 Penalty: $95/adult; $47.50/child ($285/family); 1.0% of family income* 2015 Penalty: $325/adult; $162.50/child ($975/family); 2.0% of family income* 2016 Penalty: $695/adult; $347.50/child ($2,085/family); 2.5% of family income* *Amount in excess of filing threshold. Penalty not greater than national average premium for Bronze level coverage in Exchange. After 2016, penalty amounts are increased annually by the cost of living.

9 Employer Concerns & Challenges Strategic planning across C-Suite management team is critical Cost control Mandated benefit plan changes, fees and taxes Rules keep changing and changing and changing Much of current guidance is temporary In the news: Washington DC is spinning Policy vs. politics; keep an eye toward mid-term elections Workforce management and engagement Competition for talent Properly staff business Track full-time employees/hours of service Payroll/HRIS system review and/or upgrades for reporting Help employees separate fact from fiction, communication challenges

10 Employer Responsibilities Employer Responsibilities (Original Effective Date) Employer Mandate (2014) Automatic Enrollment (2014) 90-day Waiting Period (2014) Elapsed Time Measurement and Stability Periods Small Employer (< 50 Employees) No No Yes Large Employer Yes Enforcement Delay 2015/2016 Yes (200+ employees) No rules to date Yes Marketplace Notice to ALL new hires (2013) Yes Yes Reporting Requirements (2014) Nondiscrimination Testing (2010) Maybe Yes No rules to date Yes Enforcement Delay 2015 Yes No rules to date Required plan design changes (2014) Yes Yes/more flexibility

11 Employer Mandate 2015 (With Transition Rules) Nondeductible penalties in calendar 2015 on applicable large employers for failing to either offer: Minimum Essential Coverage (MEC) to 95% 70% of FT employees & dependents $2K* x (FT minus 30 80) 1 FT employee certified for Marketplace premium assistance Minimum value/affordable plan to 95% 70% of FT employees & dependents $3K* x FT certified for Marketplace premium assistance * Penalties subject to inflation adjustment; expected to be 4% to 5% for 2015

12 Minimum Value and Affordability Minimum Value 60% of plan costs Affordability 9.5% household income Employer Affordability Safe Harbor Factors 9.5% Wages paid by employer Employee cost Single coverage Lowest Minimum Value option Employer Affordability Safe Harbor Methods Box 1 W-2 Wages End-of-year Base Pay Hourly Rate x 130 Federal Poverty Line $92 per month

13 Employer Mandate 2015 Applicable large employer (ALE) 50+ full-time equivalent employees Prior calendar year Monthly counting for 2015 begins in 2014 Transition relief 6+ consecutive calendar months Apply seasonal adjustment

14 Employer Mandate 2015 Controlled group rules Assessment and penalties by member company New 2015 reporting by member company Dependents Children to age 26 Exclude foster and stepchildren Coverage through end of month in 2015 Does not include reference to spouse

15 Transition Relief Smaller Employers (ALEs) No penalty until 2016 and certify that ALL conditions are met: 1. Employ FTEs/business days during Maintain workforce size/hours of service 2/9/14 12/31/14 No monkey business to get below the 100 threshold 3. Cannot eliminate/materially reduce coverage in effect 2/9/14 - end of plan year beginning in Maintain Plan eligibility; cannot alter eligible class at 2/9/14 Minimum value plan Employer contributions toward coverage at 2/9/14 either: 95% of $ amount for single coverage Same or higher % of single coverage

16 Transition Relief Non-Calendar Year Plans Avoid penalties prior to start of 2015 plan year Minimum value/affordable coverage to 70% of FT employees Based on plan eligibility at 2/9/14 Health coverage in effect 12/27/12 Plan year not changed since 12/27/12 to later in calendar year Significant portion of FT population not eligible 2/9/14 >= 25% of ALL EEs enrolled/any date 2/10/13 2/9/14, or >=33% of ALL EEs eligible /open enrollment ended before 2/9/14 Significant portion of workforce part-time/seasonal Alternative test: substitute FULL-TIME for ALL employees and percentages in two tests as 33% and 50%, respectively

17 Carefully Count Full-Time Employees Full-time employee 30 hours of service per week 130 hours of service per calendar month Monthly or Look-Back (LB) Measurement LB tracks hours in prior period (Measurement Period) to determine offer of coverage in successive period (Stability Period) 3 to 12 months Seasonal, part-time, variable

18 Carefully Count Full-Time Employees Common Law Standard Exclude: partners, 2% shareholders, leased, sole proprietors Degree of control and independence Behavioral: Does company control or have right to control what the worker does; how the worker does the job? Financial: Are business aspects of job controlled by payer? How worker is paid, are expenses reimbursed, who provides tools/supplies, etc. Type of Relationship: Written contracts or benefits Pension, insurance, vacation Review contracts/relationship with staffing agency/peo

19 Carefully Count Full-Time Employees BEWARE 1099 employees Staffing agency/peo employees When client considered common-law employer Coverage from agency/peo is offer from client IF client pays more for employee enrolled in health plan Seasonal employees Less than 6 months Hired same time each year Short-duration/high-turnover employees 12 months considered short-duration NO special treatment

20 Carefully Count Full-Time Employees Student employees/interns No exceptions Paid summer interns may be considered seasonal Variable hour employees Cannot determine if Full-Time at date of hire Other Adjunct faculty, transfer between foreign/domestic ALEs, home health workers, etc.

21 New Reporting for Calendar 2015 IRC 6055 Information Reporting of Minimum Essential Coverage IRC 6056 IRS to determine individual mandate penalty Information Reporting by Applicable Large Employers on Health Insurance Coverage IRS to assess employer mandate penalties Payable on demand after submission of returns IRS to review individual federal subsidies

22 New Reporting for Calendar 2015 What must be filed/issued for 6055 & 6056 Information return to IRS and employee statements Time to file with IRS February 28 Electronic filing: March 31 File returns Time to issue employee statements No later than January 31 Single statement if 6055 and 6056 reporting

23 New Reporting for Calendar 2015 WHO MUST FILE/REPORT BEGINNING 2015 CALENDAR YEAR Type of Employer Small employer < 50 full-time equivalent employees Employer full-time equivalent employees Employer 100+ full-time equivalent employees Insured Plan Self-Funded Plan No Coverage Offered Insured, Self-Funded or No Coverage Offered Carrier Employer n/a n/a Carrier Carrier Single Employer Member Company Single Employer Member Company Consolidated form/filing for employers required to file under 6055 and 6056 Filing and furnishing requirements apply separately to member companies of controlled groups Employers subject to 2015 transition relief (smaller employers and non-calendar year plans) must report for the entire 2015 calendar year First reports and statements due 2016 n/a n/a Single Employer Member Company Single Employer Member Company

24 IRC 6055 MEC Information for enrollees during calendar year Name, address, tax identification number (i.e. SSN) Employee, former employee (includes deceased) Name and SSN for all dependents Date of birth if SSN not available DEMONSTRATE REASONABLE EFFORT TO OBTAIN SSN 2 solicitation minimum Employer/multiemployer information Name, address, employer identification number (EIN) Coverage dates Months for which individual is enrolled in and entitled to coverage at least one day in the month

25 IRC 6056 for Applicable Large Employers General Method and Simplifying Alternatives Alternative 1: Certification of Qualifying Offers All months during calendar year FT employee Offered minimum value coverage Single coverage cost <= 9.5% of mainland federal poverty line ($92) Coverage offered to spouse and dependents Provide general information Name, SSN, address Coverage offer made for 12-months Waiting or measurement period (most likely using coding system) Qualifying offer in 2015 to 95% of FT employees and dependents also eligible for simplified reporting

26 IRC 6056 for Applicable Large Employers Alternative 2: Report Without Identifying FT Employees Minimum value/affordable coverage offered to 98% of employees (and dependents) on whom you report Regardless of FT status Represent that those not offered coverage are not FT Will not need to Separately identify FT employees Report number of FT employees May need to report for those not enrolled Await issuance of forms and instructions Employer may be permitted to use different reporting methods for different groups of employees?

27 IRC 6056 for Applicable Large Employers General Method for Calendar Year when Alternative will not do Employer name, address, EIN, contact person information Certify offer FT employees (and dependents) opportunity to enroll in employer MEC plan by calendar month Number of FT employees each calendar month For each FT employee Name, address, and taxpayer identification number (SSN) Months during calendar year Employer MEC plan was available Employee was covered under the plan Employee contribution for lowest cost MEC plan NOT necessarily contribution for plan in which employee is enrolled

28 IRC 6056 for Applicable Large Employers More General Method Information (indicator codes) Does plan provide Minimum Value Did employee have ability to enroll spouse For each calendar month Total number of employees Was an employee in waiting/measurement period Employer part of controlled group of corporations Name and EIN of each employer member company of the controlled group on any day of the calendar year for which the information is reported Third party information Name, address, and ID (such as a TPA) reporting on behalf of employer Employers may contract with third parties to facilitate filing and issue statements

29 IRC 6055 and 6056 Penalties Similar to W-2 rules Failure to timely file/issue correct & required information to IRS and employees $100 per return not greater than $1,500,000 $30 up to $250K for corrections w/in 30 days Some exceptions for insignificant errors Short-term penalty relief for 1 st year No penalties for good faith effort to comply Incorrect or incomplete information No relief for failing to timely file or issue statements

30 A Little Bit About Marketplaces Open enrollment has concluded Special enrollment only Non-calendar plans offering unaffordable coverage Certify eligibility and subsidies May request additional employer input Supposed to be self-sustaining in 2015 State based: user fees, taxes, etc. Federal: 3.5% user fee

31 NY Standard Plans & Costs (Individual) Costs shown represent the lowest and highest cost for single standard coverage - Long Island (subject to change) Bronze (60%) Silver (70%) Gold (80%) Platinum (90%) Provision $ / $ $ / $ $ / $ $ / $ Deductible $3,000/$6,000 $2,000/$4,000 $600/$1,200 none Out of Pocket $6,350/$12,700 $5,500/$11,000 $4,000/$8,000 $2,000/$4,000 Office Visit Primary Care/Specialist 50% coinsurance after deductible (both) $30 copay/$50 copay after deductible $25 copay/$50 copay after deductible $15 copay/$35 copay Preventive Care Covered in full Covered in full Covered in full Covered in full Inpatient Hospital 50% coinsurance after deductible $1,500 per admit after deductible $1,000 per admit after deductible $500 per admit Rx $10/$35/$70 after deductible $10/$35/$70 no deductible $10/$35/$70 no deductible $10/$30/$60 no deductible

32 Affordable Care Act Benefit Trends leading To Strategic Planning and Action Steps

33 Continued Enrollment In High Deductible Plans

34 Growth of Private Exchanges More flexible than ACA exchanges No underwriting restrictions No federal subsidies Offer more benefit options and choices for the consumer Ancillary products Consumers tend to buy-down Integrate technology tools Online enrollment and guidance Customer support Mobile applications Implement flexible/defined contribution strategies Employer can control costs Pre-tax bass

35 Cost Control: Spousal Benefits Charge higher premiums Up to 100% for spouse/family coverage No ACA penalty risk No spousal coverage or surcharge Health plan available at spouse s workplace Eliminate spouses from plan altogether Beware: May impact ability for simpler Alternative 1 reporting

36 Cost Control: Benefit & Contribution Strategies High deductible plans Eye toward Cadillac Tax Salary-based safe harbors Low option plan Salary-banded Higher earners pay more

37 Cost Control: Self-Funding Risk tolerance and philosophy Cash flow Availability of insurance plan options Desire for flexibility Administrative savings NO: state premium taxes NO: ACA insurance fees Reduced: risk charges from insurer

38 Cost Control: Self-Funding and the ACA No requirement for all minimum essential benefits Plan design flexibility Not subject to certain insurance reforms Medical loss ratio Relieved from new insurance industry taxes $8 billion (2014) - $14 billion (2018) Additional ACA fess/reporting/filing requirements PCOR, reinsurance

39 Cost Control: Pay or Play Offer Benefits Plan design and cost projections/options Fees and taxes Funding alternatives Administration costs Safe harbors Penalty Compensation structure Competition for talent Future penalty increases Marketplace options

40 Workforce Composition Is healthcare reform a catalyst shifting the nation to a part-time workforce? Mandates 30-hour rule Fees and taxes Pushback to 30-hour rule Labor unions Bipartisan legislation

41 Action Steps: Putting It All Together Determine large employer status In 2014 for 2015 employer mandate Clarify controlled group structure Amend benefit eligibility and waiting periods Develop overall benefits strategy Plan design/contribution structures HRAs: complex integration rules High deductible plans Insured or self-funded Consider wellness initiatives

42 Action Steps: Putting It All Together Review workforce composition Full-time Part-time, seasonal and/or temporary Assess technology needs Robust and scalable system solutions (HRIS) Manage and track workforce Measurement and stability periods Prepare for new reporting requirements Begin to capture 2015 data Avoid penalties

43 Action Steps: Putting It All Together Understand potential risks Pay-or-play analysis Explore options Exchanges and marketplaces Plan, prepare and communicate Open enrollment Employee questions Stay Tuned!

44 Contact Information RALPH SEPE JILL BERGMAN