Health Care Reform Exchanges, Penalties and Employer Responsibility

Transcription

1 Health Care Reform Exchanges, Penalties and Employer Responsibility as of January 21, 2013

2 Exchanges Individuals Initial open enrollment will run October 1, 2013 through March 31, 2014 Coverage effective dates beginning January 1, 2014 To be eligible for the premium tax credit: a taxpayer must enroll in one or more qualified health plans through an Exchange cannot be eligible for minimum essential coverage (including government-sponsored programs such as Medicare or Medicaid as well as minimum and affordable employer-sponsored plan) must have household income for the year between 100% (138% in NY) and 400% of the Federal Poverty Level (FPL) 2

3 Employer Penalty Applicable Large Employer employed an average of 50 FT (including FTE) employees on business days during preceding calendar year (transition rule allowing 6 month average in 2013 only) Full-time employee defined as 30+ hours per week Calculate the total number of full-time employees by adding together: Full-time employees (averaged 30 hours per week or 130 hours per month), plus Full-time equivalent employees (total of all hours for part-time employees for the month divided by 120 Example Company has 40 full-time employees and 65 part-time employees: 65 part-time x 86 hours each per month = 5,590 / 120 = 46 FTEs 40 FT + 46 FTE = 86 Total full-time employees 3

4 Employer Penalty Controlled Group Rules For purposes of counting the number of FT and FTE employees to determine if applicable large employer, all employees of a controlled group or an affiliated service group are taken into account as a whole For purposes of determining liability for and amount of assessable penalty, each commonly owned/controlled employer within a corporate group is assessed and pays its own penalties separately (even if less than 50)

5 Employer Penalty Large Employer Penalty Trigger May be subject to penalty if either of the following apply: Employer does NOT offer minimum essential coverage or offers coverage to less than 95% of its FT employees (and dependent children) and at least one FT employee receives premium tax credit through Exchange, or Employer offers minimum essential coverage to at least 95% of its FT employees (and dependent children) and at least one FT employee receives premium tax credit through Exchange, because Employer coverage does not provide minimum value, or Employer coverage is considered unaffordable to the employee Applicable large employer will not be subject to penalty if offering minimum essential coverage providing minimum value (60%) that is affordable (9.5%) 5

6 Employer Penalty Minimum Value Employer Coverage The plan s share of total allowed costs of benefits provided under the plan is at least 60% of those costs (i.e. 60% actuarial value) Proposed methods to determine value (to be further defined by HHS/Treasury): Minimum Value Calculator Design-Based Safe Harbor Checklists (no need for calculations or actuary) Actuarial Certification

7 Employer Penalty Affordable Employer Coverage Employer sponsored coverage is considered affordable if: the employees contribution for self-only coverage of the lowest cost plan providing minimum value does not exceed 9.5% of the employee s W-2 wages for the current year, or the employees monthly contribution for self-only coverage of the lowest cost plan providing minimum value does not exceed 9.5% of the employees computed monthly wages, or Salaried employees use monthly salary Hourly employees determine monthly wage amount by multiply employee s hourly rate of pay by 130 hours per month the employees monthly contribution for self-only coverage of the lowest cost plan providing minimum value does not exceed 9.5% of the FPL for a single individual

8 Employer Penalty Affordable Employer Coverage Example: Employer makes 70% contribution towards single premium for HDHP with $2,000 single deductible Total premium cost is $ per month Employee contribution is $95.25 per month All salaries above $12,031 would meet the 9.5% affordability test

9 Employer Penalty - NOT Offering Coverage Employer does not offer minimum essential coverage or offers coverage to less than 95% of full-time employees (and dependent children) AND At least one full-time employee receives a premium tax credit from the Exchange Annual penalty is: Equal to the number of full-time employees (minus 30) X $2,000 The penalty will be adjusted for inflation after 2014 Example Company has 100 full-time employees = 70 x $2,000 = $140,000 9

10 Employer Penalty - Offering Coverage Employer offers minimum essential coverage to at least 95% of full-time employees AND At least one full-time employee receives a premium tax credit from the Exchange (because coverage is unaffordable or does not provide minimum value) Annual penalty is the lesser of: $3,000 for each full-time employee who receives a premium tax credit, or Number full-time employees (minus 30) x $2,000 Example - Company has 500 full-time employees, where 40 receive premium tax credit through the Exchange 40 x $3,000 = $120, = 470 x $2,000 = $940,000 Penalty = $120,000 10

11 Determining Full Time Status Ongoing Employees Measurement/Stability Safe Harbor Standard Measurement Period 3-12 consecutive calendar months Average hours Stability Period Minimum 6 calendar months not shorter than measurement period Administrative Period Up to 90 days (overlap with prior stability period)

12 Determining Full Time Status New Variable Hour/Seasonal Employees Seasonal Employee through at least 2014 employers permitted to use reasonable good faith interpretation of the term seasonal employee (does not include employees of educational organization) Initial Measurement Period 3-12 consecutive months No penalty assessed during initial measurement period Stability Period Minimum 6 calendar months not shorter than measurement period Administrative Period Up to 90 days Combined with initial measurement period cannot exceed 13 months

13 Determining Full Time Status Hours of Service 30 hours of service per week = 130 hours of service per calendar month Includes: each hour for which an employee is paid, or entitled to payment, including vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence

14 Non Calendar Year Plan Transition Rule Transition relief applies with respect to employees who would be eligible for employer-sponsored coverage as of the first day of the fiscal plan year starting in 2014 under the plan s eligibility terms as in effect on December 27, 2012 No penalty assessed if these employees are offered affordable, minimum value coverage no later than the first day of the plan year starting in 2014

15 Cafeteria Plan Transition Rule Transition rule allows non-calendar year cafeteria plan to permit employees to change salary reduction elections for accident and health coverage during the plan year that begins in 2013 in order to: Revoke or change his or her election for accident and health coverage once during that plan year, or Make a prospective salary reduction for accident and health coverage on or after the first day of the 2013 plan year Written cafeteria plan document must be amended by December 31,2014 effective retroactively

16 Taxes and Fees to be aware of Comparative Effectiveness Research Fees Plan Years ending after October 1, 2012 $1 per covered life / $2 per covered life in 2013 Indexed to national health expenditure until 2019 when expires Insured plans paid by the carrier Self-insured plans paid by the plan sponsor HRA and certain FSA paid by plan sponsor if not integrated with other self-insured plan 16

17 Taxes and Fees to be aware of Transitional Reinsurance Program To help stabilize premiums for coverage in individual market $12 Billion for 2014, $8 Billion for 2015, $5 Billion for 2016 Proposed Regulations $63 per covered life per year, payable annually Insured plans paid by the carrier Self-insured plans paid by the plan (TPA can be used to remit contributions)

18 Taxes and Fees to be aware of Annual Fee on Health Insurers Begins in 2014 Self-Funded Plans are exempt $8 billion 2014, $11.3 billion 2015, $13.9 billion 2017, $14.3 billion 2018 Indexed based on premium growth in future Each carriers fee will be determined based on their percentage of total premium paid nationally 18

19 Taxes and Fees to be aware of Excise Tax on High-Cost Health Plans (Cadillac Tax) 2018 An excise tax will be charged on high cost plans Single: $10,200 / Family: $27,500 40% Tax on premium that exceeds thresholds above Includes medical, prescription, HRA, FSA and HSA Example: Single Plan Annual Premium in 2008 is $12,000 ($12,000 - $10,200 = $1,800 x.40 = $720) Calculated and reported by employer Prorated amount paid by coverage provider (fully insured) and employer/plan administrator (self insured) 19

20 Thank You.