Health Care Reform Update. August 27, 2015

Transcription

1 Health Care Reform Update August 27, 2015

2 Agenda Health Care Reform Year in Review PCORI TRF MLR SCOTUS Employer Mandate 6056 Reporting C Forms 2015 Draft Forms and Instructions Looking Ahead in Health Care Reform Cadillac Tax Legislative Activity 2

3 HCR Year in Review: PCORI Patient-Centered Outcomes Research Institute (PCORI) Fee applies to policy years ending after 9/30/12 and before 10/1/19. $2.08 per member fee for third plan year ending after 9/30/14. Paid for each covered life ( belly buttons ) Who is required to pay? Fully-insured plans carrier pays Self-insured plans employer pays & files form 720 For HRAs and FSAs, employer pays on subscribers only Due July 31 3

4 HCR Year in Review: TRF Transitional Reinsurance Fee (TRF) 3 year program designed to stabilize premiums resulting from influx of newly insured as a result of the ACA. Paid in 2 installments Year 1 - $63 per member per year or $5.25 pmpm (2014). Year 2 $44 per member per year or $3.67 pmpm (2015). Counts were due November 15, st installment due January 15, nd installment due 4 th quarter of 2016 Year 3 Proposed at $27 per member per year or $2.25 pmpm (2016). Only applies to minimum essential medical coverage (not ancillary benefits, accidentonly, HSAs, HRAs, FSAs, etc.) Who pays? Fully-insured plans carriers pay. Self-insured plans Plan / Employer pays. Paid using Pay.gov 4

5 HCR Year in Review: MLR Medical Loss Ratio (MLR) Regulation on insurance carriers, requiring them to achieve loss ratio targets or issue premium refunds. 80% Medical Loss Ratio target for small / individual market. 85% Medical Loss Ratio target for large group market. Refunds will be issued to the policy holder (typically the employer) Employer has an obligation to allocate the rebate to participants Ex: if employer pays 75% of premium, employer keeps 75% of rebate Remaining portion may be paid to participants under equitable method chosen by the employer (refund check, apply amount to rebate future premium, use amount to provide enhanced benefits). Carriers required to issue by July 31; Employers must utilize within 90 days. 5

6 HCR Year in Review: SCOTUS June 25: Supreme Court (SCOTUS) upheld ACA subsidies (6-3) Majority held that ACA structure and context supported interpretation that exchange subsidies were available in all exchanges, not just in states running their own exchanges. June 26: SCOTUS strikes down state law bans on same-sex marriage (5-4) Majority held that state law bans violated the 14 th Amendment s Due Process and Equal Protection clauses. What does it mean for employers? ACA is here to stay (subject to any future legislative modifications). Unless you are a religious institution, no reasonable basis for extending benefits to opposite-sex spouses but not same-sex spouses. Re-examine domestic partner benefit offerings? 6

7 Employer Mandate: Who is impacted? 2015: Employers with 100+ FTEs must comply 2016: FTEs must comply 1 st renewal in applicable calendar year FTE = Full Time Equivalent Look to prior calendar year FTE calculations to determine whether the mandate applies. Ex: Your plan renews 12/1/15 and you are unsure if the mandate will impact your business. Full-time employees in 2014 (anyone who averages 30 or more hours per week during the calendar year): 30 for all 12 months Calculate average FTEs in Add all hours worked by non-full-time employees by month: 1,920 Divide by 120: 16 Calculate total equivalents by month, then add and divide by 12. (Assume 16 was the average for all 12 months in this example) Add full-time employees and equivalents: = 46. Not subject to the mandate in

8 Employer Mandate: Who is impacted? IRS Example of FTE calculation: 8

9 Employer Mandate: Employee Issues Full-Time or Variable Hour? Upon hire, if the employee is reasonably expected to work full-time (30+ hours / week) they should be treated as full-time and offered coverage no later than 90 days after hire. If they are not reasonably expected to work full-time, the employer can use either the monthly or look-back measurement periods to determine full-time status. Seasonal: No ACA definition Employers may use good-faith interpretation. Only relevant to determining if employer is subject to the mandate (50 FTE threshold). Include seasonal hours in equivalency calculation BUT if employer is over 50 FTEs by only 120 days or fewer in the prior year due to seasonal employees, employer is not subject to the mandate. If truly seasonal, then employer may treat as variable hour Look to start and stop of employment, length of tenure (but distinguish from temporary employees) Student employees Students employed through a federal or state work-study program provided as financial aid are not employees. 9

10 Employer Mandate: Measurement Period Only applies to variable hour employees Monthly: Full-time employees are identified based on actual hours of service each month. Administratively burdensome, but adjusts quickly. Look-Back: Employees hours are averaged retroactively over a period of time selected by the employer (3 12 months). Administratively easier, delays potential benefit obligation, status fixed during stability period. Employers using a 6 month look-back or more must have a matching stability period. Ex: employer with a 1/1 plan year uses 12 month look-back period and 30 day administrative period; Employer must also use 12 month stability period. 10

11 Measurement Period Stability Period Administrative Period 11

12 Look Back: Transitional Periods 1/1 Plan Year 12 month look back and stability periods 30 day administrative period 7/1 new hire date 12

13 Employer Mandate: Look-Back Issues Employee on Leave Paid Leave employee is credited hours of service during paid leave (vacation, sick leave, PTO) up to 501 hours per year. Ex: if employee takes a week of vacation, the employee is credited with the hours for which he or she was paid, not the hours on or off the job. Special Unpaid Leave FMLA, USERRA and jury duty. Employer s choice: credit the employee with an hour of service (like paid leave) or exclude the special unpaid leave from the measurement period. No limit on hours per year. Break in Employment If an employee does not have any hours of service for 13 weeks, he or she may be treated as a new hire upon return. For educational institutions, the period is 26 weeks. 13

14 Employer Mandate: Compliance Employer Obligations 2015: offer affordable, minimum essential coverage to 70% of full-time employees and minimum essential coverage to dependents. 2016: offer affordable, minimum essential coverage to 95% of full-time employees and minimum essential coverage to dependents. What is Minimum Essential Coverage Providing Minimum Value? Satisfies 60% actuarial value test 60% of medical expenses covered for a standard population. Government health plans, most employer plans, exchange plans. What s not? Disability coverage, stand-alone dental or vision, certain Medicaid coverage. What is Affordable Coverage? Employee share of cost for self-only coverage on the lowest offered plan cannot exceed 9.5% of the employee s household income. 3 safe harbors to substitute for household income (cannot exceed 9.5% of): W-2 Wages: look at box 1 of the current year s W-2. Rate of Pay: employee s rate of pay multiplied by 130 hours per month. Federal Poverty Line: federal mainland poverty line for a single person for the current year ($11,770 for 2015) 14

15 Employer Mandate: Stability Period Employee Status is Locked During Stability Periods Ex: if variable hour employee qualifies as full-time during look-back period and is offered coverage, that employee is full-time during the entire stability period, regardless of the actual hours worked. Look-back measurement period forces variable hour employees to wait up to 12 months before qualifying for coverage to balance against that, once they have earned an offer of coverage, the employer cannot take it away for a present drop in hours. If an employee s status changes during a stability period, it will not affect the employee s classification as full-time. BUT, if an employee transfers to a job that would have been considered part-time if the employee was originally hired into that job: Employer can use the monthly measurement period beginning 1 st day of 4 th month after transfer if: Employee averages less than 30 hours for each week of the first 3 months, AND Employer has continuously offered coverage for the first 3 months. Extremely narrow exception. 15

16 ACA Reporting: 6056 ACA has 2 reporting obligations: 6055 and 6056 (IRS code sections). 6056: reporting compliance with the employer mandate. Who Must Comply? Any employer with 50+ FTEs in Employers with FTEs must file even though the mandate does not apply until When? Filing based on 2015 calendar year data. January 31, 2016: copies of 1095-C forms must be distributed to employees. Actually have until February 1, 2016 (January 31 is a Sunday). Consider distributing with W-2s. February 29, 2016: deadline for filing with the IRS if filing by mail. March 31, 2016: deadline for filing with the IRS if filing electronically. Employers filing 250+ forms must file electronically. Affordable Care Act Information Returns (AIR). What Should You Distribute to Employees and What Should You File? Each employer must file a 1094-C form with the IRS. Transmittal / cover letter information about the employer. Each employer must file a 1095-C for each full-time employee (regardless of enrollment status). Each full-time employee should receive a copy of his or her 1095-C (proof of insurance). 16

17 ACA Reporting: Glossary ALE: Applicable Large Employer (50+ FTEs). Aggregated ALE Group: A group of employers that are part of a controlled group as defined by the IRS regulations. ALE Member: Employer part of an Aggregated ALE Group. Limited Non-Assessment Period: most often refers to the initial waiting period for full-time employee coverage. Multiemployer plan: union health plan. The employer is credited with making an offer of coverage to an employee (even though it does not actually make an offer to that employee) if it makes contributions to the union on behalf of that employee. Qualifying Offer: minimum essential coverage providing minimum value offered to full-time employee at no more than 9.5% of the federal poverty line and an offer of minimum essential coverage to spouse and dependent(s). Employers using this option are not required to report the lowest employee cost for employee-only coverage on line 15 of 1095-C. Section 4980H Transition Relief: available in 2015 to employers with FTEs; no penalty for failing to comply with the mandate in % Offer Method: employer verification that it offered affordable coverage to 98% of the employees for whom it is filing a 1095-C. Employers using this option are not required to list monthly full-time employee counts on Part III of 1094-C. 17

18 ACA Reporting: C Forms B Forms 1094B / 1095B used by employers who: Offer coverage to employees; and Are self-insured; and Have less than 50 full time equivalent employees. Fully-insured employers with under 50 employees = insurance carrier reports. C Forms 1094C / 1095C used by ALEs. If employer has 50+ FTEs, it will use the C forms regardless of self-funding / fully insured status. 18

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20 Did you offer coverage to 95% of full time employees? 2 types: FTEs (not subject to the mandate in 2015) 100+ FTEs (offered to 70% of full time employees or invoking phased-in penalty calculations) 20

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22 Complete 1 for every full-time employee Only Completed by Self-Insured Employers 22

23 Line 14 Asks was an offer made, and if so, what type? Use A code series. Commonly-used codes: 1A: Qualifying Offer 1C: MEC to employee and dependents 1E: MEC to employee, spouse and dependents 1H: No offer 1I: Transition Relief 2015 Line 15 Asks for the lowest employee share of premium that was offered. If 2 plans (both MEC and minimum value) are offered, use the lower plan. Leave blank if using codes 1A or 1H in line 14. Union: use 1H in line 14 and 2E in line 16 Use only if the employee waives coverage Line 16 Asks for an explanation of line 14 response. Use B code series. Commonly-used codes: 2A: Not employed during month 2B: Not a full-time employee 2C: Enrolled 2D: Limited Non- Assessment Period 2E: Multiemployer Plan 2F: Offer affordable under the W-2 safe harbor 2G: Offer affordable under federal poverty line safe harbor 2H: Offer affordable under rate of pay safe harbor 23

24 ACA Reporting: Draft 2015 Forms 1094 C Final 2014 form Draft 2015 form 1095 C Final 2014 form Draft 2015 form Instructions Final 2014 Instructions Draft 2015 Instructions Lines 14 and 16 codes on pages 10 and

25 Cadillac Tax: Coming Soon What is it? 40%, non-deductible, annual excise tax on high-cost employer-sponsored health coverage. Tax applies only to amounts in excess of thresholds. When does it take effect? January 1, 2018 What is a high-cost employer plan? Currently, $10,200 for individual coverage and $27,500 for family coverage. Cost of coverage includes total premiums paid by employer and employee (but not deductibles, coinsurance and copays). Thresholds will be indexed for inflation beyond May be increased for high risk professions (law enforcement, construction) and for group demographics (age, gender). Currently $11,850 for individual coverage and $30,950 for family. Who is responsible? Fully-insured employers: employer calculates and insurer pays. Self-funded employers: employer calculates and pays. 25

26 Cadillac Tax: Coming Soon What plans are included in the cost calculation? Employer-provided health plans, government provided health plans for government employees, multi-employer / Taft-Hartley plans, FSAs, HSAs, HRAs, MSAs (employer pre-tax contributions only), on-site medical clinics providing more than de minimis care. Excluded: Liability insurance, short and long term disability plans, workers compensation, stand alone dental and vision, employee assistance programs, government sponsored plans for military personnel, long term care, employee after-tax contributions to HSAs and MSAs. 7/30/15: IRS released new guidance on implementation of the Cadillac Tax What if carriers pass on the cost of the tax? IRS wants comments on how to prevent the tax from being a revenue driver. Contemplating excluding the increased plan cost from the calculation of cost of applicable coverage. What about HSAs, FSAs and HRAs? Cost of coverage determined on a monthly basis employer contributions to be counted on a pro rata monthly basis. How is the tax paid? Employer must notify the IRS as to the amount of the Cadillac tax. Payment of tax on Form 720 (same form used for PCORI fees). 26

27 Looking Ahead: Legislative Activity ACA Repeal? Anything s possible, but wholesale repeal is very unlikely. Kaiser Family Foundation: 28% of Americans favor full repeal, but that faction is divided on a replacement plan (if any). Republican Presidential Candidate Scott Walker unveiled a plan to replace the ACA. Proposes a federal system of tax credits for purchasers of health care calculated by the age of the purchaser. Critics (including other Republican candidates) doubt the plan is economically viable. Republican Presidential Candidate Marco Rubio touted his plan to fix healthcare in an op-ed in Politico recently. Largely repeats prior position of using refundable, advanced tax credits to assist purchasers of healthcare coverage. ACA Taxes Repeal or Modification? House of Representatives Ways and Means Committee targeting ACA tax provisions in fall session. No details on which ACA taxes will be discussed, but it s anticipated that the Cadillac tax will be among them. Prior legislative efforts have targeted the Medical Device Tax, the Health Insurance Tax, Cadillac Tax, 30 hour full-time definition, and the Independent Payment Advisory Board (IPAB or Sarah Palin s death panel ). Some bipartisan support for repealing the Cadillac Tax. Repeal bill introduced by Democratic Representative Joe Courtney has 118 Democratic co-sponsors. President Obama has indicated he will veto a repeal that does not replace the estimated $87 billion expected from the Cadillac Tax in the next decade. 27

28 Healthcare Reform: Stay Connected J.W. Terrill s Seminar Series and TerrillConnect help employers stay on top of HR, compliance and healthcare reform issues. Subscribe to TerrillConnect for weekly updates. 28

29 Questions? 29