2014 Hill, Chesson & Woody

Transcription

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2 Topics for Today Healthcare Reform s Mandates Regulations, Taxes and Fees. Oh my!!! Key Trends What s next?

3 Healthcare Reform s Employer Mandate

4 Background The Employer Mandate portion (4980H) of the Patient Protection and Affordable Care Act (PPACA) requires employers with 50 or more full time equivalent employees to either offer minimum essential coverage (MEC) to full time employees (and dependents) or pay a tax penalty Penalties can be imposed in two ways: o 4980H(a) imposes a penalty for failure to offer coverage to substantially all full time employees o 4980H(b) imposes a penalty for offering coverage that is unaffordable or does not provide min. value

5 Determining Employer Size Full time employees + full time equivalents Part time employees are converted into full time equivalents (FTEs) by dividing the adding together the total number of part time hours of service in one month (up to 120 hours per individual) for each part time employee. This number is then divided by 120. The result is the number of FTEs for the calendar month. Total Part Time Hours of Service Full Time Equivalents The FTEs are then added to the number of full time employees for the month to get the proper count of full time employees for that calendar month

6 Impact of Controlled Group Rules Look to the number of employees in the entire controlled group to determine if any one member of the controlled group is subject to the employer mandate For penalty purposes, look to the number of employees in each member group separately

7 Penalty Amounts The Sledgehammer: Code 4980H(a) Penalties Apply when an employer does NOT offer MEC to substantially all full time employees o 2015: $2,000* per full time employee minus 30 (if under 100 FTEs) or minus 80 (if 100 or more FTEs) Substantially all means 70% of full time employees o 2016: $2,000* per full time employee minus 30 Substantially all means 95% of full time employees *Penalties to increase in 2015, but IRS has not released amount

8 Penalty Amounts The Icepick: Code 4980H(b) Penalties Apply when an employer offers coverage to substantially all full time employees, but coverage is not minimum value or affordable o $3,000* per full time employee who waives employer coverage and receives a tax credit for purchasing insurance through the Exchange *Penalties to increase in 2015, but IRS has not released amount

9 What is Minimum Value and Affordability? Minimum Value: o The plan pays for 60% of the total cost of the benefits This is NOT related to contribution strategy Related to actuarial value Affordability o Cost of coverage does not exceed 9.5% of an employee s household income Employers may use one of three affordability safe harbors since the employer will not know household income Focus on the cost of single, or employee only coverage

10 Overview of Affordability Safe Harbors Form W 2 Safe Harbor o 9.5% of the amount in Box 1 of the employee s W 2 Rate of Pay Safe Harbor o Hourly Employees: 9.5% of hourly rate x 130 o Salary Employees: 9.5% of monthly salary Federal Poverty Line Safe Harbor o 9.5% of the Federal Poverty Line

11 Common Questions Does the plan have to cover dependents? o YES, to avoid penalties. However, offering coverage to spouses is not required. Which hours are counted to determine if an employee is full time? o Hours of service: includes ALL paid time, such as sick leave, jury duty, PTO and holidays. Do non calendar year plans have to comply by January 1, 2015? o Maybe. Non calendar year plans may be able to take advantage of transition relief that would allow them to comply at renewal. Failure to comply at renewal may result in retroactive penalties. Does my company have to offer coverage to temporary staffers? o Maybe. Penalties may apply to common law employers for failure to offer compliant coverage to common law employees. A temporary staffer from a staffing agency may be your common law employee, even though they are paid by the staffing agency.

12 Measurement Methods Monthly Measurement Method o Identifying full time employees based on hours of services for each calendar month Look Back Measurement Method o Identifying full time employees for a future period based upon the hours of services in a prior period

13 Measuring Employees Full Time = 30 or more hours of service per week o or 130 hours per month Variable Hour and Seasonal Employees: Determine full time or part time status with Look Back Measurement Method o o o o o o Initial Measurement Period Initial Stability Period Optional Administrative Period Standard Measurement Period Standard Stability Period New variable hour employees are tested twice *CAUTION: Administratively complex

14 Why Is This Important? Employer preparation: o Which employees must be offered coverage when hired (subject to waiting periods)? o Which employees must be measured? o Can the employer pull the necessary reports from payroll to track hours of service? o Is the employer prepared for IRS reporting under Code 6055 and 6056 that will occur in January 2016 (for 2015 calendar year)

15 How Can You Minimize or Avoid Penalties? Plan design changes o Now or wait until plan year beginning in 2015? Workforce Planning o How many full time employees are required to run your business? Reverse discrimination of premiums o Charge more to your higher paid employees Reduce or eliminate family coverage subsidies o Use money to make single only coverage affordable

16 Modified Community Rating In The Small Group Market

17 Modified Community Rating Modified Community Rating o Experience rating prohibited o Rates cannot vary based on gender, industry, health status o Premium variation only allowed for age (3:1), tobacco use (1.5:1), family composition and geographic regions o Applies to the individual and small group markets Small group market defined as an average total number of employees of 50 or less (count full time equivalents) o Not applicable to grandfathered plans

18 Essential Health Benefits

19 HCR Mandates Small Employers/Individual Essential Health Benefits requires coverage of certain healthcare services without financial limits, as defined by a benchmark plan in each state Ambulatory patient services Emergency services Hospitalization Maternity and newborn care Mental health and substance use disorder services, including behavioral health treatment Prescription drugs Rehabilitative and habilitative services and devices Laboratory services Preventive and wellness services and chronic disease management Pediatric services, including oral and vision care

20 The Individual Mandate

21 The Individual Mandate Beginning January 1, 2014, taxpayers must either maintain minimum essential coverage (MEC) or pay a penalty for any months that they, their spouse, or dependents lack MEC Individuals may have a coverage gap of up to 90 days in a calendar year without incurring a tax penalty

22 Penalty Amounts Tax is the greater of (a) a flat dollar amount or (b) a percentage of income o Penalty capped at national average annual cost for a bronze plan Assessed for each individual without coverage o ½ the applicable amount for age 18 and under 2014: Greater of $95 or 1% of household income 2015: Greater of $325 or 2% of household income 2016: Greater of $695 or 2.5% of household income

23 Waiting Period Requirements

24 Prohibition On Excessive Waiting Periods Group health plans and insurers prohibited from applying a waiting period of more than 90 calendar days o Waiting periods of three months or first of the month following 90 days no longer permitted Applies for plan years beginning on or after January 1, 2014 o Grandfathered plans must also comply Cumulative service requirements still permissible (up to 1,200 hours) o One time eligibility requirement only (cannot require an individual to re qualify each year)

25 The New Orientation Period Substantive eligibility conditions still permitted o Eligible job classification or job related licensure requirements o A reasonable and bona fide orientation period of up to one month An orientation period does not violate the waiting period limit so long as: o The orientation period does not exceed one month; and o The maximum 90 calendar day waiting period begins on the day after the orientation period ends

26 Orientation Period Illustration Orientation period is no longer than 1 month Coverage begins on the first day of the 3 rd month beginning on or after the last day of an employee s orientation period 30 day Orientation Period Waiting Period = 87 days Full Time employee hired on 3/5/2015 Orientation Period ends on 4/4/2015 Coverage begins on 7/1/2015

27 PPACA Notice Requirements, Reporting Requirements and Fees

28 PPACA Notice Requirements, Reporting Requirements and Fees Notice of Grandfathered Status SBCs Annual Notices of Material Modification Notice of Exchange W 2 Reporting Minimum Essential Coverage Reporting PCOR Fees Reinsurance Fees Health Insurance Sector Fees

29 PPACA Notice Requirements Grandfather Status o o Notice of plan status and contact information for questions or complaints Provided in SPDs or benefit enrollment materials Summary of Benefits and Coverage (SBC) o Form, content and distribution requirements are highly regulated Advance Notice of Material Modification o Any mid year material change (to the SBC) must be noticed to plan participants no later than 60 days before the effective date of the modification (previously had 90 days after the effective date to give notice) Notice of Exchange (Marketplace) o o Form and content heavily regulated (expect model from HHS) Distribute to ALL new hires, even if not eligible for benefits

30 PPACA Reporting Requirements Form W 2 Reporting o The aggregate cost of employer sponsored health benefits o Not required of employers that filed fewer than 250 W 2s in the preceding tax year Minimum Essential Coverage Reporting (Code 6056) o o o Applies to employers with 50 or more full time equivalent employees Report to IRS: Return filed with IRS in 2016 for all months of 2015; includes information about minimum essential coverage is offered and plan specifics (monthly premium for lowest cost option, length of plan coverage, number of full time employees, the employer's share of total cost, etc.) Report to Employees: By January 31st of each year, report similar information to employees

31 PPACA Fees Patient Centered Outcome Research (PCOR) Fees o $1 for every covered life; $2 for plans ending on or after October 1, 2013 Reinsurance Fee (beginning 2014) o $63 for every covered life; drops to $44 in 2015 Health Insurance Sector Fees 2014 $8 Billion 2015 $11.3 Billion 2016 $11.3 Billion 2017 $13.9 Billion

32 Cadillac Tax 40% nondeductible excise tax on high cost employer provided health coverage over a certain dollar threshold Applies for taxable years beginning after 2017 Cost thresholds: Single $10,200; Family $27,500 o Multiply by health cost adjustment percentage If coverage is fully insured, the carrier pays and may pass through cost to the employer If coverage is self insured, the employer/plan administrator pays Applies to grandfathered plans

33 Impact of Fees on Employers PCOR o Relatively small amount; will not apply to plan years ending after October 1, Reinsurance o Will decrease each year; does not apply after 2016 Health Insurance Sector Fee o Only applies to fully insured groups consider changing funding arrangement? Cadillac Tax o Consider current cost of benefits, including FSA contributions and HRA reimbursements will your company meet or exceed the thresholds in 2018? o Plan ahead to avoid or mitigate the impact of the Cadillac Tax

34 Wellness Programs Carrot or Stick?

35 Wellness Program Incentives Participation based program o Incentives can include small rewards, reimbursements, waiver of co pays o Reward is not conditioned on satisfying a health standard Health contingent program (activity based or standards based) o Incentive = 30% or 50% reduction in the total cost of coverage o Reward is contingent on engaging in physical activity or satisfying a standard related to a health factor

36 Wellness Program Considerations Program must meet certain requirements to comply with HIPAA nondiscrimination rules o Compliance with these rules does not equal ADA or GINA compliance Use of premium differentials may cause loss of grandfather status Use of premium differentials may make coverage unaffordable, which could result in Employer Mandate penalties

37 Key Trends

38 Other Key Trends Redefining benefit norms HSAs Wellness and Disease Management Plans Telemedicine, Concierge programs, Health Advocacy Tiered benefits, high performance networks, tiered provider plans ACOs and patient centered care Defined contribution models Self funding for small employers Captives Private exchanges

39 Questions (919) Hill, Chesson & Woody