Affordable Care Act: Evolving Requirements & Compliance Implications

Transcription

1 Affordable Care Act: Evolving Requirements & Compliance Implications Peggy Baron Bricker & Eckler LLP 100 South Third Street Columbus, OH 43215

2 Employer Shared Responsibility Assessable Payments Beginning in 2015, two potential penalties for large employers: Failure to offer minimum essential coverage to full-time employees Failure to offer affordable and minimum value coverage to full-time employees 2

3 Failure to Offer Minimum Essential Coverage The penalty for failure to offer minimum essential coverage applies if: Employer is a large employer Employer fails to offer at least 95% of its full-time employee (and dependents) the opportunity to enroll in minimum essential coverage Full-time employee qualifies for premium tax credit or cost-sharing reduction and purchases coverage on exchange 3

4 Calculation of Penalty for Failure to Calculation: Offer Coverage $2,000 x (# FT employees 30) (per year) $167 x (# FT employees 30) (monthly) **The first 30 FT employees don t count in the calculation Substantial Compliance: if offer coverage to all but 5% of FT employees 4

5 Full-time Employee An employee who is employed an average of 30 hours per week with an employer 130 hours of service in a calendar month is treated the equivalent of at least 30 hours of service per week 5

6 Dependents MEC must be offered to FT employees and dependents Dependent is defined as children under age 26 Does NOT include spouses 6

7 Look-Back Method Measurement Period: Able to use look-back method to determine whether an individual is a full-time employee Stability Period: Must offer coverage to individuals found to be full-time employees during measurement period for associated stability period May use optional administrative period Must begin tracking hours in 2013 if using lookback method and calendar year stability period 7

8 Possible Pitfalls or Planning Control Group Opportunities Common law employee Eligibility provision of GHP Interplay with COBRA Transition rules Limiting hour strategy: Tracking? ERISA 510 concerns? 8

9 Control Group Determination of Large Employer Calculated on a controlled group basis Penalty is determined separately for each member of the controlled group Rules for allocating 30 excluded employees (EEs) Example: For 2014, Company A owns 100 percent of Company S and Company T. A has no EEs in For every month in 2014, S has 40 full-time EEs and T has 60 full-time EEs. A, S and T are a controlled group 9

10 Full-time Employee Common Law Employee Standard Common law standard: Who has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which the result is accomplished? Is the individual subject to the will and control of the employer not only as to what shall be done but how it shall be done? IRS Form SS-8 & Pub

11 Eligibility Provisions of Group Health Plan Most employers need to amend their eligibility provisions in group health plan effective January 1, 2015 Once begin using look back period for measuring eligibility, can no longer draft eligibility on a current year basis Effective January 1, 2015, all newly hired employees who are expected to perform, on average, 30 or more hours of service per week and all employees who averaged 30 or more hours of service per week during the most recent look-back measurement period (initial or standard). 11

12 COBRA Coverage Counts as offering minimum essential coverage Is EE permitted to stay on GHP during non- FMLA leave of absence? Caution: May not be able to charge 102% if employee elects single coverage under lowest cost coverage 12

13 Transition Rules Transition Rules: Fiscal year plans <12 months measurement period Ignore duration of employment for variable hour employees These rules are date specific do not apply unless IRS issues further guidance 13

14 Possible Pitfalls or Planning Opportunities Measurement of hours New FT employees/ongoing employees Variable hour and seasonal employees Rehired employees Temporary employees Leaves of absences Change in employment status 14

15 New Non-Variable Hour and Non- Seasonal Employees If an employee is reasonably expected at his start date to be a FT employee, the employee must be offered coverage at or before the conclusion of the employee s initial three full calendar months of employment Caution: conflicts with 90-day waiting period guidance 15

16 New Variable Hour and New Seasonal Employees Initial measurement period Must begin on any date between the employee s start date and the first day of the first calendar month following the employee s start date Administrative period When combined with initial measurement period, cannot extend past last day of 13 months after employee s start date 16

17 New Variable Hour and New Seasonal Employees Stability period Must be the same length as the stability period for ongoing employees If new variable hour employee is FT: must be at least six months but no shorter than duration of initial measurement period If new variable hour employee is not FT: must not be longer than initial measurement period plus 1 month Must re-test during first standard measurement period 17

18 Rehired Employees Rehired employee may be treated as new employee if: The employee did not have one hour of service for a period of at least 26 weeks; or Shorter period designated by employer (that is at least four weeks long) that exceeds the employee s period of employment immediately preceding the break in service 18

19 Rehired Employees If rehired employee cannot be treated as new employee, must retain status that employee had prior to termination of employment 19

20 Special Leaves of Absence Must exclude special unpaid leaves for employees who are not new employees Includes FMLA, USERRA and jury duty 20

21 Special Leaves of Absence Employers have two options: Exclude any special unpaid leave during the measurement period and use average for the entire measurement period Treat the employee as credited with hours of service during the special leave of absence at the rate equal to the average weekly rate at which the employee was credited with hours of service during the measurement period that are not special unpaid leave 21

22 Change in Employment Status Ongoing employee: change does not impact the employee s classification as FT or non-ft employee for the remaining portion of stability period What about ongoing employee who is on leave of absence? 22

23 Change in Employment Status New variable hour or seasonal employee: if employment status changes before end of initial measurement period, must be offered coverage by the earlier of: first day of the fourth month following change in status, or first day of the first month following the end of the initial measurement period including any administrative period (if employee averages more than 30 hours per week during initial measurement period) 23

24 Failure to Offer Affordable & Minimum Value Coverage The penalty for failure to offer affordable and minimum value coverage applies if: Employer is a large employer Employer s coverage is not affordable or does not provide minimum value Full-time employee qualifies for premium tax credit or cost-sharing reduction and purchases coverage on exchange 24

25 Calculation of Penalty for Failing to Offer Affordable and MV Coverage The amount of the assessable payment is equal to the lesser of: $3,000 x # FT employees who receive a premium tax credit or cost-sharing reduction (per year) $167 x # FT employees who receive a premium tax credit or cost-sharing reduction (monthly); or Amount of penalty for failure to offer minimum essential coverage 25

26 Affordable Coverage Employee s required contribution does not exceed 9.5 percent of the employee s household income Three safe harbors: 1. Form W-2 2. Rate of pay (prospective) 3. Federal poverty line (prospective) 26

27 Affordable Coverage Safe harbors look at employee s cost for self-only coverage for employer s lowest cost option that provides minimum value Planning opportunity Cost of family coverage Offer low cost option Designed based options 27

28 Affordable Coverage Wellness incentives Plan Years Beginning Before 1/1/15: assume the employee satisfies the requirements of any wellness program if the wellness program was in effect on May 3, 2013 and the employee is in a category of employees eligible for the program as of May 3, 2013 Plan Years Beginning On or After 1/1/15: assume the employee fails to satisfy the requirements of a wellness program, except wellness program that relates to tobacco use 28

29 Affordable Coverage Employer contributions to HRAs Amounts newly made available under an integrated HRA for the current plan year are taken into account if the employee may use the amounts only for premiums or for either premiums or cost-sharing Employer contributions to HSAs Do not affect affordability because HSA contributions cannot be used to pay premiums 29

30 Minimum Value Plan pays at least 60 percent of the total allowed costs of benefits Three methods available for determining percentage of allowed costs paid by plan: 1. Department of Health and Human Services (HHS) calculator 2. Design-based safe harbor 3. HHS calculator and/or certified actuary 30

31 Minimum Value Wellness incentives Incentives related to wellness programs that affect deductibles, copayments, or other cost-sharing are treated as not earned in determining MV percentage, except wellness program incentives that relate to tobacco use 31

32 Minimum Value Employer contributions to HRAs Amounts newly made available under an integrated HRA for the current plan year are taken into account in determining MV percentage if the newly available amounts may be used only to reduce cost-sharing for covered medical expenses Employer contributions to HSAs For current plan year, are taken into account in determining MV percentage 32

33 Next Steps for Employers Establish administrative procedures to determine fulltime employees Establish procedures for new hires, rehires, and employees on leaves of absence If implementing a limiting hours strategy, develop administrative procedure to ensure that hours limit is not exceeded Review GHP for affordability and minimum value Review GHP to determine if eligibility provisions need amended 33

34 How Penalties Assessed Two avenues through which IRS could determine penalties apply When Employee seeks coverage through exchange When IRS reviews information reported at end of year Prompts IRS contact Employer must show proof: Declination forms Documentation 34

35 IRC 6055 and 6056 Reporting IRC 6055 imposes reporting requirements on persons who provide MEC Includes employers that sponsor self-insured plans IRC 6056 imposes reporting requirements on large employers 1 st information returns will be filed in 2016 Reporting optional for

36 IRC 6055 Reporting Proposed regulations issued 9/9/13 Return used to satisfy the requirements of 6055 must: Include name, address and EIN of ER Include name, address and TIN of EE Include name and TIN of each individual covered Include the months individual covered Whether coverage is a QHP enrolled in through SHOP Any other information required by forms or guidance 36

37 IRC 6056 Reporting Proposed Regulations issued 9/9/13 Return used to satisfy the requirements under 6056 must: Include name, address and EIN of ER Include name, telephone number for contact person Include calendar year for which information reported 37

38 IRC 6056 Reporting Certify whether ER offers its FT EEs (and dependents) the opportunity to enroll in minimum essential coverage under an eligible employersponsored plan Months during calendar year when coverage under plan was available EE share of monthly premium for lowest cost option Report number of FT EEs each month of the calendar year 38

39 IRC 6056 Reporting For FT EEs: report name, address, TIN of the EE and months (if any) during which FT EE (or any dependents) were covered under eligible employer-sponsored plan Any other information required by Sec. of Treasury 39

40 Reinsurance Fee To help stabilize premiums in the individual market Collected during st payment due January 1, 2015 Collected from insurers, for fully insured health plans, and from TPAs, for self-insured health plans Current amount is $5.25 per member per month or $63 annually For employer with 500 participants adds $31,500 to cost of providing coverage 40

41 PCORI Fee Fee on specified health insurance policies for each policy year ending on or after October 1, 2012, and before October 1, 2019 To fund the Patient-Centered Outcomes Research Trust Fund Specified health insurance policy includes: Health insurance policies Self-insured health plans 41

42 PCORI Fee Fee is $2 ($1 for policy years ending before October 1, 2013) multiplied by the average number of covered lives Four alternatives to determine average number of covered lives Fee adjusted for policy years ending on or after October 1, 2014, based on the increase in projected national health expenditures Fee paid by filing Form 720: must be filed annually no later than July 31st of the calendar year immediately following the last day of the plan year or policy year to which the fee applies 42

43 Health Insurers Fee Number of billable members enrolled through the exchange each month times user fee (set annually) User fee for 2014 equal to 3.5 percent Used to fund the exchanges Collected from insurers participating in the exchanges Also, includes dental and vision plans! Limits family size (for purposes of fee) to three 43

44 FLSA Notice to Employees of Coverage Options 18B of FLSA provides that an applicable ER in accordance with regulations promulgated by the DOL must provide each EE at time of hiring or current EEs no later than March 1, 2013, a written notice: Informing EE of existence of Marketplace ( Exchange ) If ER plan s share of total allowed costs of benefits provided under the plan is less than 60% of such costs, that the EE may be eligible for a premium tax credit under IRC 36B if the EE purchases a qualified health plan through the Marketplace If EE purchases qualified health plan through Marketplace, EE may lose ER contribution (if any) to any health benefits plan offered by the ER and that all or portion of such contribution may be excludable from income for Federal income tax purposes 44

45 FLSA Notice to Employees of Coverage Options DOL delayed March 1, 2013 deadline of notice until regulations are issued Required to be provided October 1, 2013 Issued model notices Required to be provided to new EEs by October 1, 2013 and current EEs no later than October 1,

46 Revisions to Model COBRA Notices DOL Technical Release Revisions made to the model notice to help make qualified beneficiaries aware of other coverage options available in the Marketplace If use model election notice, good faith compliance with election notice requirement of COBRA 46

47 Automatic Enrollment DOL Technical Release Guidance will not be ready for 2014 Employers not required to comply with automatic enrollment provision until final regulations are issued and become applicable 47

48 90-Day Maximum Waiting Period For plan years beginning on or after January 1, 2014, GHP and health insurance issuer shall not apply any waiting period that exceeds 90 days IRS Notice Remains in effect through end of 2014 Proposed regulations issued on March 19,

49 90-Day Maximum Waiting Period Lapse of time provisions are okay as long as time period does not exceed 90 days Other conditions for eligibility okay unless the condition is designed to avoid compliance with 90 day rule Coordinates with new variable hour employee measurement period rules Eliminates requirement to issue certificate of creditable coverage effective December 31,

50 Cost-Sharing Limits For plan years beginning on or after January 1, 2014, the final regulations confirm that the out-of-pocket limits for cost-sharing apply only to non-grandfathered plans and include large group health plans Cost sharing includes deductibles, coinsurance and copayments for in network providers Does not include premiums, non-covered services, balance billing amounts, or cost-sharing for out-of-network providers The cap on out-of-pocket limits will be the highest out-of-pocket limits permitted for an HSA-compatible high deductible health plan. For 2013, those amounts are $6,250 for single coverage and $12,500 for family coverage (indexed for 2014 and later years) 50

51 Cost-Sharing Limits Requires GHP to include copayments in figuring out-of-pocket maximums Most GHP do not credit copayments towards the out-of-pocket limits This change will require ERs to modify plan design and will most likely increase costs 51

52 Cost-Sharing Limits Transition Rule for 2014 Plan Year: DOL FAQ PART XII For the first plan year beginning on or after January 1, 2014, where GHP utilizes more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums, the annual limitation on out-of-pocket maximums will be deemed to be satisfied if both of the following conditions are satisfied: The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such outof-pocket maximum does not exceed the dollar amounts set forth in section 1302(c)(1). 52

53 Application of ACA to HRA, FSA, & EAP IRS issued Notice HRA: If integrated with GHP, does not violate annual limit and preventive services requirement (if non- GF) 2 methods to integrate with GHP If not integrated with GHP, must follow market reforms 53

54 FSA: Application of ACA to HRAs & FSAs If HIPAA excepted benefit, not subject to market reforms Excepted Benefit = maximum benefit payment cannot exceed 2x participant s salary reduction election for the year (or, if greater, cannot exceed $500 + amount of participant salary reduction election) If not HIPAA excepted benefit, subject to preventive services requirements 54

55 EAP: Application of ACA to HRAs & FSAs Amending HIPAA to provide that EAP is excepted benefit Only if program does not provide significant benefits in the nature of medical care or treatment Not subject to market reforms 55

56 Wellness Programs Final regulations issued on May 29, 2013 Apply to grandfathered and nongrandfathered plans Effective for plan years beginning on or after January 1,

57 Wellness Programs Two categories of wellness programs: Participatory Health contingent (used to be called standards based) Activity-only: must perform or complete activity related to a health factor in order to obtain reward (ex: exercise program) Outcome-based: must attain or maintain a specific health outcome in order to obtain reward (ex: not smoking) 57

58 Wellness Programs Size of reward increased: Health-contingent wellness rewards increase to 30% Programs designed to prevent or reduce tobacco use increase to 50% 58

59 Wellness Programs Reasonable Alternative Standard available if: Automatically if fail standard in outcomes based health contingent wellness program; or If unreasonably difficult due to a medical condition to satisfy condition If medically inadvisable to attempt to satisfy the standard Notice of availability of reasonable alternative standard New sample language 59

60 Cafeteria Plan Health flexible spending account limit required to be reduced to $2,500 effective January 1, 2013 IRS Notice : cafeteria plan may be amended by December 31, 2014 to comply with IRC 125(i), provided that the cafeteria plan operates in accordance with the requirements of 125(i) (including the guidance under this notice) for plan years beginning after December 31, 2012 Optional amendment for employer shared responsibility provisions for fiscal year group health plans Employee wanting to purchase through Marketplace or avoid individual mandate 60

61 Additional Medicare Tax.9% increases to 2.35% An employer must withhold the additional Medicare Tax from wages it pays to an individual in excess of $200,000 in a calendar year, without regard to the individual s filing status or wages paid by another employer. Businesses-&-Self-Employed/Questions-and- Answers-for-the-Additional-Medicare-Tax 61

62 Pre-Existing Conditions Must be eliminated for plan years beginning on or after January 1,

63 Dependent Coverage Grandfathered plans must offer coverage to dependent children through age 26 regardless of whether the adult dependent children have coverage available through their employer 63

64 Annual Limits For plan years beginning on or after January 1, 2014, no annual dollar limits on essential health benefits 64

65 Additional Reforms Guaranteed availability/issue Guaranteed renewability Modified community rating No discrimination based on health status 65

66 Additional Reforms No discrimination against providers who act within scope of license Coverage for participation in clinical drug trials (non-grandfathered plans) Disclosure of information by health insurance issuers 66

67 Additional Reforms Exchanges Open Individual coverage mandate Updated requirements for Summary of Benefits and Coverage 67

68 Cadillac Tax High cost plans: $10,200 for individual coverage and $27,500 for family coverage 40% excise tax on amount in excess of limits Begins in

69 Summary Next Steps Numerous and significant provisions of the ACA go into affect in 2014 Employers need to have a firm understanding of what ACA provisions apply to them Strategic planning should not be delayed as the ACA provisions impact multiple aspects of the employer s group health plan benefits and internal functions: Group health plans (eligibility, benefits, cost sharing) Financial Payroll & reporting systems Notifications to employees 69

70 More Information IRS: Act-Tax-Provisions DOL: CMS: and-initiatives/health-insurance-market- Reforms/index.html 70

71 Questions?