Health Care Reform Where Are We Today?

Transcription

1 Health Care Reform Where Are We Today? Debra J. Linder Lisa S. Robinson Fredrikson & Byron, P.A. Compensation Planning & Employee Benefits

2 Section 6055/6056 Reporting Applicable large employers -- File information return for each full-time employee to certify whether offered group health coverage ( Form 6056 Reporting ) Employers who sponsor self-insured health plans -- File information returns providing information on each individual enrolled under a group health plan that provides minimum essential coverage ( Form 6055 Reporting ) Penalties apply for failing to comply with requirements Both requirements have been delayed to 2015

3 Section 6055/6056 Reporting Section 6056: Each applicable large employer must file Controlled groups Each member must file its own report, but can designate one member to prepare reports for all Governmental agencies may designate, in writing, another related agency as responsible for reporting Separate return required for each full-time employee

4 Section 6055/6056 Reporting Section 6056: Must include: Name, address, EIN of employer Name, phone number of contact person (including third-party) Certification regarding offer of coverage, by calendar month Number of full-time employees by calendar month

5 Section 6055/6056 Reporting Section 6056: Must include: For each full-time employee, number of calendar months for which minimum essential coverage was available For each full-time employee, employee s share of lowest-cost monthly premium for single coverage, by calendar month Name, address, TIN of full-time employee and number of calendar months during which employee was covered under employer-sponsored group health plan

6 Section 6055/6056 Reporting Section 6056: Use Form 1095-C, and transmit using Form 1094-C Must be filed by February 28th (March 31st if electronically) Must file electronically if file > 250 Section 6056 reports Employee statement provided by January 31st May provide electronically if employee consents and other conditions are met

7 Section 6055/6056 Reporting Section 6056: Alternative reporting methods if certain conditions met: Certify that made a qualifying offer of coverage for all months during which employee was full-time Certify that offered minimum essential coverage that was affordable to at least 98% of employees (and dependents) Applicable large employers with fewer than 100 full-time employees must certify eligibility for special transition rules in 2015

8 Section 6055/6056 Reporting Section 6055: Each applicable large employer must file Controlled groups Each member must file its own report, but can designate one member to prepare reports for all Governmental agencies may designate, in writing, another related agency as responsible for reporting

9 Section 6055/6056 Reporting Section 6055: Must include: Name, address, EIN of employer Name, address and TIN (or date of birth, if TIN not available) of responsible individual (typically, the employee) May, but need not, report TIN of responsible individual who is not enrolled in the plan

10 Section 6055/6056 Reporting Section 6055: Must include: Name, address and TIN (or date of birth, if TIN not available) of each individual covered under the plan For each covered individual, the months for which he/she was enrolled for at least one day Use Form 1095-C -- If subject to both Section 6055 and Section 6056 reporting, complete both portions to combine information

11 Section 6055/6056 Reporting Section 6055: Same filing deadlines as Section 6056 reporting Statement provided to responsible individual by January 31st May provide electronically with consent and if other conditions are met Must include name, phone number of contact person

12 Section 6055/6056 Reporting Section 6055: No reporting required for: Supplemental coverage, such as health reimbursement arrangements or coverage that supplements Medicare Coverage that is not minimum essential coverage, such as health savings accounts, on-site medical clinics and other excepted benefits Wellness programs no separate reporting if an element of other minimum essential coverage

13 HRAs Effective January 1, 2014, HRAs must be integrated with a group health plan Participation limited to employees who are actually enrolled in the group health plan HRAs cannot be integrated with individual insurance policies Premium reimbursement programs no longer permitted HRAs that provide certain excepted benefits (e.g., limited-scope dental and vision) may be permitted watch for more guidance

14 Automatic Enrollment Applies to large employers (i.e., those with more than 200 full-time employees) Must automatically enroll new employees in group health plan, subject to any waiting period Notice of enrollment must be provided, and the employee must have the opportunity to opt out Delayed until guidance issued

15 Nondiscrimination Applies to fully-insured health plans Proposed regulations issued, but implementation date postponed Employers are not required to comply with the new nondiscrimination requirements until final guidance issued May affect severance packages, executive benefits Final rules have not yet been issued

16 Preventive Care Nongrandfathered group health plans must provide coverage for preventive services, including contraceptive coverage, without imposing co-payments, co-insurance, deductibles, or other cost-sharing requirements Exemption for religious employers and other eligible organizations not required to provide contraceptive coverage if certain conditions are met If exempt, insurance carrier/tpa must arrange for or provide coverage without cost, and must notify participants of the separate arrangement

17 Design Changes Lifetime/annual limits prohibited Preexisting condition exclusions prohibited Certificates of creditable coverage no longer required Annual limit on out-of-pocket maximums -- $6,350 for single coverage, $12,700 for family coverage

18 90-Day Waiting Period Group health plans cannot impose waiting period longer than 90 calendar days Waiting period = Period before coverage becomes effective Measured from the date the employee is otherwise eligible for coverage If 90th day falls on a weekend or mid-month, may have to provide coverage earlier No violation if employee could elect coverage within 90 days, but takes longer to complete application forms

19 90-Day Waiting Period Other conditions permitted (such as job class) if not designed to avoid compliance Can have bona fide employment-based orientation period (generally, up to 30 days) Can apply new 90-day period to rehired employees if reasonable under the circumstances Late enrollee/special enrollee Generally no violation if coverage becomes effective within 90 days Variable-hour employees -- Coordinate with shared responsibility rules

20 An applicable large employer may be subject to penalties if it does not (i) offer minimum essential coverage to full-time employees and their dependents, or (ii) offers coverage, but that coverage is not affordable or does not provide minimum value Applicable large employer full-time employees and/or fulltime equivalent employees ( FTEs ) during the preceding calendar year No change to the number of employees Still 50

21 If do not offer coverage: $2,000 x number of full-time employees minus 30 (penalty is waived for the first 30 full-time employees) For 2015 plan year, reduction is 80 full-time employees Remember: All members of a controlled group share this reduction If offer coverage: $3,000 x number of full-time employees who receive premium tax credit

22 Delayed to 2015 for employers with 100 or more full-time employees/ftes Delayed to 2016 for employers with 50 to 99 full-time employees/ftes Determine number of FT/FTEs using the same rules for determining whether an applicable large employer From 2/9/14 to 12/31/14, cannot reduce workforce or overall hours of employees unless bona fide business reason Certification required

23 Delayed to 2016 for employers with 50 to 99 full-time employees/ftes (cont d) After 2/9/14, cannot eliminate or materially reduce any health coverage offered Employer share of single premium must be at least 95% of the dollar amount or is at least the same percentage contributed as of 2/9/14 If benefits change, must provide minimum value Cannot reduce or narrow the class(es) of employees

24 Am I an applicable large employer? Full-time employee : Works at least 30 hours per week (130 hours per month) Determined on a controlled group basis Based on employee count in prior calendar year New employers: based on number of employees reasonably expect to employ (and actually employ) during current year

25 Hours of service : Hourly employees: Actual paid hours, including vacation, holiday pay, paid leaves, etc. Salaried employees: Can use per-day equivalency of 8 hours per day or weekly equivalency of 40 hours per week so long as it does not substantially understate hours for the employee or for a substantial number of employees Must be credited with at least one hour per day/week Can apply different methods for different categories of salaried employees; can change method from year to year

26 Hours of service : Volunteer hours excluded Bona fide volunteer : Volunteer for government or tax-exempt and only receive expense reimbursements, nominal fees and reasonable benefits such as service awards On-Call: Use reasonable method At a minimum, must give credit for any on-call hour for which (i) payment is made, (ii) employee must remain on the employer s premises, or (iii) employee s activities are subject to substantial restrictions

27 FTEs : For each month, calculate total number of hours (but not more than 120 hours) for all employees who are not full-time Divide total hours by 120 Can round to the nearest one hundredth (e.g., becomes 3.56)

28 Seasonal Workers: Exception applies if employer uses seasonal workers for 120 days or less (or 4 months) Use good faith interpretation as to which employees are seasonal workers Exception must be based on a calendar year

29 Transition Rules Can use any period of at least 6 months in 2014 For first year in which employer becomes an applicable large employer, must offer coverage that provides minimum value by the following April 1st If coverage offered, no penalty assessed for January through March Only applies for the first year in which employer becomes applicable large employer, even if employer s size changes in later years

30 Example #1: In calendar year 2014, Employer C had 40 full-time employees who worked from January through December, none of whom were seasonal workers. Employer C also had 80 seasonal full-time workers who worked from September through December. Employer C had 40 full-time employees for eight months, and 120 fulltime employees for four months, resulting in an average of 66.6 fulltime employees. However, Employer C s workforce exceeded 50 for no more than four calendar months due to the seasonal workers. Employer C can rely on the seasonal worker exception, and is not an applicable large employer for 2015.

31 Example #2: Same facts as Example #1, but Employer C also had 20 full-time seasonal workers in August. Since Employer C s workforce exceeded 50 for five months due to the seasonal workers, the seasonal worker exception would not be available to Employer C, and Employer C is an applicable large employer.

32 Example #3: Employer D has 45 full-time employees who worked from January through December. Employer D also has 15 part-time employees, each of whom work 80 hours per month from January through December. Employer D is an applicable large employer, because Employer D has 55 full-time employees and FTEs each month: FTEs: 15 x 80 hours = 1200 hours 1200/120 = 10 FTEs FTEs = 55

33 Who are my full-time employees? Can use monthly measurement method or look-back method Monthly method: Generally, must offer coverage by first day of the fourth calendar month after the employee first becomes eligible to avoid penalty Applies once per period of employment Rehires: Must have at least 13 weeks break in service (or use rule of parity ) No special rules for unpaid leaves Can choose to use a weekly rule

34 Example #4 Monthly Measurement Period: Employer A hires Employee X on January 1, During 2016, Employee X works an average of 20 hours per week and is not otherwise eligible for coverage. On January 1, 2017, Employee X is promoted to a full-time position and now meets all eligibility conditions, subject to a 90-day waiting period. Employer A must offer Employee X coverage no later than April 1, If that coverage is affordable and provides minimum value, Employer A will not be subject to a penalty for January through March 2017.

35 Example #5: Starting June 25, 2017, Employee X takes a nine-week unpaid leave, and averages less than 30 hours per week during July and August. Employee A returns on August 26, 2017, and averages more than 30 hours per month from September through December Because Employee A s absence did not exceed 13 weeks, Employer A cannot treat Employee X as a new employee upon return, and must offer coverage no later than September 1, 2017

36 Look-back measurement method Ongoing employee General rules: Use measurement period of 3 to 12 months ( standard measurement period ) If determined to be full-time, remains full-time during stability period of 6 to 12 months Change in employment status is ignored Can use an administrative period of up to 90 days to determine eligibility and enroll employee Can use different time periods for different categories (union/nonunion, salaried/hourly, different states)

37 Example #6 Look-back Measurement Period: Employer A chooses a 12-month stability period starting January 1 st and a 12-month measurement period starting October 15 th. Employer A uses the period from the end of the measurement period (October 14 th ) to the beginning of the stability period (January 1 st ) to determine eligibility and enroll employees. Employer A has a calendar year group health plan. Employee X works, on average, 30 hours per week for the period beginning October 15, 2014, through October 14, Employee X must be offered coverage for the stability period starting January 1, 2016, even if Employee X s hours decrease during that time.

38 Example #7: Employer A also reviews Employee X s hours during the next standard measurement period beginning October 15, 2015, and ending October 14, During this period, Employee X does not work, on average, 30 hours per week. Employee X does not need to be offered coverage for the stability period beginning January 1, However, Employee X must be offered coverage through the end of 2016.

39 New employees General rules: If reasonably expected to work full-time, offer coverage within 3 months of date of hire Generally based on facts and circumstances Factors to consider include whether the employee is replacing a full-time employee, comparable positions, how the job was advertised or communicated Based on hours of service each month

40 New employees General rules: For variable hour employees: Can use initial measurement period of 3 to 12 months beginning on date of hire or first of next calendar month Can use administrative period of up to 90 days 90-day period includes days between date of hire and start of initial measurement period Initial measurement period and administrative period cannot exceed 13 months after date of hire (plus balance of month)

41 New employees General rules: Variable hour employees (cont d): If determined to be full-time -- Coverage must be offered during stability period of at least 6 calendar months and no shorter than initial measurement period If not full-time Stability period generally cannot exceed initial measurement period Cannot consider whether employee will terminate Additional factors for employees of temporary staffing agencies to determine if variable hour employee

42 New employees general rules: Variable hour employees (cont d): Same rules apply to seasonal employees Defined as customary employment of 6 months or less, beginning approximately the same time each year Also test variable hour employee s hours during the standard measurement period that begins after the employee s start date

43 Example #8: Employer A uses a 12-month initial measurement period beginning on the employee s start date, and an administrative period from the end of the initial measurement period to the end of the next calendar month. Employer A also uses a 12-month stability period for ongoing employees described in Example #6. Employee Y is hired on May 10, During the initial measurement period of May 10, 2014, through May 9, 2015, Employee Y works, on average, more than 30 hours per week. The administrative period ends on June 30, Employer A must offer coverage for the period July 1, 2015, through June 30, 2016.

44 Example #9: Employer A also tests Employee Y s hours using the standard measurement period beginning October 15, Employee Y continues to work, on average, at least 30 hours per week during this period. Employer A must offer Employee Y coverage for the remainder of calendar year 2016 (July 1 st through December 31 st ). If Employee Y did not work 30 hours per week during the standard measurement period, Employer A would still need to offer coverage through June 30, 2016, but would not have to offer coverage for the remainder of calendar year Thereafter, Employer A will test Employee Y s hours using the standard measurement period that applies to all ongoing employees.

45 Other Considerations: Rehired employees: Treat as new employee if no services performed for 13 weeks Alternative: Rule of Parity if no services for at least four weeks FMLA, USERRA, Jury Duty Leave Either ignore period or credit with average hours but only if use look-back method

46 Other Considerations: If part-time or variable hour employee changes to a full-time position during the initial measurement period, may have to offer coverage earlier If employee changes to a part-time position, can apply monthly measurement period if certain conditions are met Could accommodate phased retirements or lifestyle changes

47 Other Considerations: Can use different measurement periods/stability periods for salaried vs. hourly employees, employees in different states, union vs. nonunion, different members of the applicable large employer Can also apply different methods (look-back or monthly) to these categories, but complex rules apply if employee s position changes Special rules apply to avoid gaps between stability periods No special rules for short-term employees or high turnover positions

48 Do I offer coverage to all full-time employees? Yes, if offer coverage to > 95% of all full-time employees For 2015 plan year, must offer coverage to > 70% of employees (employers with > 100 FT/FTEs) Offer means giving the employee the opportunity to accept or decline coverage No option to decline required if coverage is free Evergreen elections are permitted

49 Do I offer coverage to all full-time employees? Must also offer coverage to full-time employees dependents Defined as dependent children to age 26, but: Excludes foster children Excludes stepchildren Coverage must be provided during the entire month in which the dependent child reaches age 26

50 Is my coverage affordable? Based on employee s portion of premium for self-only coverage for the lowest cost coverage option that provides minimum value Optional safe harbors -- Cost of coverage cannot exceed 9.5% of: Box 1 on employee s W-2, adjusted for partial year; however, employee s share must remain consistent amount or percentage of wages

51 Is my coverage affordable? Optional safe harbors -- Cost of coverage cannot exceed 9.5% of: Rate of Pay: Hourly employee: Monthly rate of pay on first day of coverage x 130 hours (or, if lower, the lowest hourly rate for the calendar month) Salaried employee: Monthly salary on first day of coverage -- not available if monthly salary is reduced, even if due to reduction in hours) Federal poverty level for single individual in state where employed

52 Is my coverage affordable? Can use different safe harbors for categories of employees, so long as categories are reasonable Job categories Salaried vs. hourly Geographic location Other bona fide business criteria

53 Does my coverage provide minimum value? Proposed approaches: Minimum value calculator Design-based safe harbors Employer contributions to HSAs and HRAs generally would be taken into account

54 Other Transition Rules Complex transition rules apply for non-calendar year health plans (determined as of December 27, 2012) Designed to avoid penalties until after beginning of 2015 plan year For 2014 only, may use measurement period of 6 to 12 months Must begin no later than July 1st and end no earlier than 90 days before the beginning of the plan year Applies to employees who are employed on the first day of the transition measurement period

55 Other Transition Rules For January 2015 only, if offer coverage by the first day of the first payroll period that begins in January, will be deemed to have offered coverage for the entire month If do not offer dependent coverage, no penalty assessed if take steps to add coverage during 2014 or 2015 plan year (but not available if offered dependent coverage in 2013 or 2014)

56 Fees PCORI: $1.00 x number of lives covered on health plan (employees, spouses, dependents) 2014, increases to $2.00 x number of lives; thereafter, per-life fee adjusted for cost-of-living increases Payment due July 31st after end of plan year; report on Form 720 Ends in 2019

57 Fees Transitional Reinsurance Fee: $63 x number of lives covered on health plan Applies for 2014, 2015 and 2016 Fee for future years expected to decrease Enrollment counts must be reported to HHS by November 15th each year; HHS will send notice of fee liability by December 15th; payment due within 30 days

58 Miscellaneous Health FSAs: Salary deferral contributions limited to $2,500 for plan years beginning on/after January 1, 2013 NEW: Can amend health FSA to allow carry over of up to $500 of unused amounts Cannot allow carry over if also provide 2-1/2 month grace period Amendment can be adopted for 2013 plan year, so long as amendment adopted by end of 2014 plan year; may be retroactively effective

59 Miscellaneous Fiscal year cafeteria plans may be amended to permit changes in premium elections once during the year Accommodates enrollment in exchange Amendment adopted by December 31, 2014, and must be retroactively effective to the beginning of the 2013 plan year May allow employee to prospectively revoke existing coverage and premium election but only for the 2013 plan year If employee did not elect health coverage, may allow employee to elect coverage prospectively and pay premiums pre-tax

60 Questions? Debra J. Linder Compensation Planning & Employee Benefits Fredrikson & Byron, P.A Lisa S. Robinson Compensation Planning & Employee Benefits Fredrikson & Byron, P.A Note: This presentation is not a substitute for legal advice. The requirements of the ACA are being refined by guidelines, regulations and other rulings, and the information discussed may change as implementation deadlines approach.