ACA for Employers Employee Benefits Conference May 15, 2015 Presented by: Norma Shirk 1 Agenda Generally Applicable Information Employers & Employees Employer Penalty & 2015 Relief Miscellaneous 2 GENERALLY APPLICABLE INFORMATION 3 1
Minimum Essential Coverage Ambulatory patient services Emergency services Maternity & newborn care Pediatric services, including dental & vision care Rehabilitative/ habilitative services & devices Mental health & substance use disorder services, including behavioral health treatment Preventive & wellness services and chronic disease management Prescription drugs Laboratory Services Hospitalization 4 Affordability The premium amount contributed by the employee for employee-only coverage must be 9.56% or less of W-2 wages in 2015 Examples: $35,000 annually $2,917/month x 9.56% = $279/month for self-only premium $12/hour x 130 hours = $1,560/month $1,560/month x 9.56% = $149/month for self-only premium 5 Actuarial Value of the Benefits Employee s share of the costs of health services paid via co-pays, deductibles and co-insurance. Employers have plans that split the costs: 80/20-70/30-60/40 Minimum value (MV) under the ACA: 60/40 6 2
Changes Applicable to all Coverage Annual & lifetime limits prohibited Pre-existing condition exclusions prohibited Preventive care 100% covered 90 calendar days maximum waiting periods Guaranteed availability & renewal Children up to age 26 may stay on parent s plan even if eligible to enroll in other coverage Internal & external appeals process for denied claims 7 Changes Applicable to All Coverage Medical Loss Ratio 85% of each premium $ spent on health services (large employer plans) 80% of each premium $ spent on health services (individual policies and small employer plans) MLR Rebate Employer & employees pro-rate based on premium contribution percentages If not cost effective to pro-rate, apply to future premiums or benefit enhancements 8 Premiums & Deductibles - 2015 Premiums for individual & small employers (Community Rating): Family size Geographic Area Age Tobacco Use Deductibles 2015 Individual: included in out-of-pocket limits Small Employer: limits removed on 4/4/2014 9 3
Out-of-Pocket Costs - 2015 ACA limit on Out-of-Pocket Costs (deductibles, coinsurance & co-pays) for High Deductible Health Plans $6,600 Individual $13,200 Family IRS limit on OOP for HSA-qualified HDHP $6,450 Individual $12,900 Family Out-of-Network charges do not count toward the OOP 10 Grandfathered Plans A grandfathered plan: In effect since March 23, 2010, continuously covering at least one employee Disclose status using model notice in regulation Maintain records of coverage details in effect on 3/23/2010 Status not affected by: Changing insurers, as long as coverage stays the same Adding or terminating employees & dependents 11 Grandfathered Plans ACA rules that apply Annual & lifetime limits prohibited 90 days waiting period Adult child up to age 26 can stay on parent s plan even if eligible to enroll in other coverage (a change from prior rule) ACA rules that don t apply Essential health benefits (don t have to offer all 10 categories) Metal levels Deductibles & out-ofpocket limits Community rating Exchange open enrollment period 12 4
Employer Responsibilities Notice to Employees about Exchange Within 14 days of hire date Mail, company email, personal email (by permission) W-2: 250 or more employees Box 12 Cost of health coverage: major medical, health FSA Not taxable income to the employee Summary of Benefits & Coverage (SBC) 6056 reporting for large employers 13 Summary of Benefits & Coverage (SBC) Proposed 12/30/14 (79 FR 78578) 60 days advance notice of material changes in coverage (benefits or cost sharing) unless change at renewal/reissue Say if the coverage meets MEC and minimum value Add 3 rd example: simple foot fracture (emergency room visit) Revised SBC will not be implemented until January 2017 14 6056 Reporting Large employers must report (initial report in 2016 covers 2015 calendar year) To IRS by February 28 th (Form 1094-C) To employees by January 31 st (Form 1095-C) Self-funded plans use 1094-B & 1095-B Employers can mail W-2 & 1095 forms together Email with employee s consent Employers with 50 99 employees don t have to file this report for 2015 calendar year 15 5
6056 Reporting To IRS: Employer name, address, FEIN Contact name & phone # # of full-time employees each month & if offered MEC Employee s share of lowest cost monthly premium for self-only coverage Employee name, address, TIN & months when covered To Full-time Employee: MEC coverage offered to employee-only, employee + dependent, employee + spouse, or family MEC coverage not offered & reason why Employee was covered Employer met affordability safe harbor 16 EMPLOYERS & EMPLOYEES 17 Defining Employer Who is an employer? Employer means any entity with W-2 employees For Profit Non-Profit Federal, State, Local Governments Churches 18 6
Who is an Employee Employee includes: W-2 s H-2A & H-2B visa holders Employee transferring from foreign to US-based job Employee may include: Bona fide volunteers (volunteer firefighters or paramedics) if they are compensated by: (a) reimbursed expenses or (b) reasonable benefits, like length of service awards 19 Who is NOT an Employee Employee does not include: Independent contractor (1099 s) Leased employee (think about who issues W-2) Partner in a partnership 2% shareholder in an S-Corp 3508 worker (real estate agent or direct seller) Students in federal work study program Special issue: Home care workers: employer is the person/entity that controls & directs work 20 More Issues about Employees Temporary employees 3 months or less: not included in employer penalty 3 months or more: may be included in penalty count Seasonal employees If these employees cause the employer to exceed 50 employees for at least 120 days, then large employer Seasonal means customary annual employment at a particular time of year for 6 months or less High turnover jobs use variable hour employee rules 21 7
Counting Employees Count hours of service: Every hour for which an employee is paid or entitled to be paid include holiday, vacation, sick, jury duty, disability, layoff, military duty, or leave of absence Hourly workers: count actual hours Salaried workers: count actual hours or use equivalency test 22 Reasons for Counting Employees Reason # 1 Determine if employer is small (less than 50) or large (50 or more ) employees Only time full-time equivalents are counted Reason # 2 Determine which employees are full-time: Eligible for an offer of coverage Counted if an employer penalty is assessed 23 Reason #2 - Counting Methods Monthly Measurement Method Month with 4 weeks: 120 hours is full-time Month with 5 weeks: 150 hours is full-time Include the week with either the 1 st day of the month or the last day of the month Look-Back Measurement Method Standard Measurement Period Administrative Period (not required) Stability Period 130 hours per month = full time under either method 24 8
Look-Back Measurement Periods 1. Standard Measurement Period 3-12 consecutive months chosen by employer Measurement period begins/ends in regular payroll period Used to determine each employee s on-going status as an employee 2. Stability Period Greater of 6 consecutive months or the Standard Measurement Period Employee s on-going status does not change during Stability Period (even if averaged hours change) 25 Look-Back Measurement Periods 3. Administrative Period 90 day period between Standard Measurement Period & Stability Period Allow employer to determine which ongoing employees are eligible for coverage and to notify & enroll them Can t reduce or lengthen other measuring periods 26 Counting Questions New Hires What factors should employers consider when deciding if a new hire is full-time? 1. Is the new hire replacing a full-time employee? 2. Are employees in the same or comparable positions full-time? 3. Does the job description say the position is fulltime? 4. Was the job advertised as full-time? A new hire reasonably expected to be full-time must be offered coverage after initial 3 full calendar months of employment 27 9
Counting Questions Variable Hour Variable hour employees what if the employer can t be sure the employee will be full-time? Employer must consider the new hire factors Employer may use an initial measurement period, including administrative period, that ends on the last day of the calendar month after the employee s first anniversary (13 months) Example: Employee began work on 2/1/2014. The measurement period ends on 3/31/2015. 28 Counting Questions Status Change What if a variable hour or seasonal employee changes status from part-time to full-time during the initial measurement period? General rule: Employee must be offered coverage by the earlier of: (a) 4 th full calendar month following the status change, or (b) the 1 st day of the 1 st month following the initial measurement period 29 Counting Questions Status Change What if an employee moves from full-time to parttime after the initial measurement period? Monthly measurement method: Employee can be treated as part-time (not eligible) beginning the 4 th month after the change if employee: (a) averages less than 30 hours/week for the 3 months after the change and (b) was offered coverage before the status change Look Back Measurement Method: Employee keeps the same on-going status until the next standard measurement period is completed 30 10
Counting Questions Rehired Employees How should rehired employees be treated? General rule: If rehired within 13 weeks (26 weeks for educational organizations), treat as a continuing employee not as a new hire Monthly Measurement Method: Don t credit unpaid leave (FMLA, USERRA, jury duty) or employment break Look Back Measurement Method: May credit employee for unpaid leave or employment break 31 EMPLOYER PENALTY 2015 TRANSITION RELIEF 32 Definitions for 4980H (Employer Penalty) Full-time Employee means: 30 hours per week average Dependent means: Biological or adopted child up to age 26 Dependent does not include: Foster child or stepchild or spouse 33 11
Penalty under 4980H(a) Health coverage not offered to 95% of full-time employees + dependents Penalty assessment: Subtract 30 full-time employees Multiply remaining full-time employees by 1/12 of $2,000 34 Transition Relief in 2015 4980H(a) Percentage Coverage need only be offered to 70% of full-time employees + dependents (rather than 95%) Employers with more than 100 employees Subtract 80 employees (rather than 30) Don t change plan year s start date after 2/9/2014 35 Penalty under 4980H(b) The coverage offered to employee + dependents (i) is not affordable, or (ii) does not offer minimum value benefits AND one or more employee is certified for premium tax credit or cost-sharing subsidy via the Exchange, OR The coverage offered to employee + dependents (iii) is offered to less than 100% of all full-time employees AND one or more of the employees not offered coverage receives a premium tax credit or a cost-sharing subsidy via the Exchange 36 12
Penalty under 4980H(b) Penalty assessment Multiply the number of full-time employees receiving premium tax credit or cost sharing subsidy from Exchange by 1/12 of $3,000 The amount of penalty under 4980H(b) can never be more than the penalty amount under 4980H(a) 37 Affordability Safe Harbors - 2015 W-2 Wages Employee-only premium is 9.56% or less of wages Rate of Pay Hourly wages x 130 hours a month or monthly salary x 130 hours: employee-only is 9.56 % max Federal Poverty Level Calculate 9.56% of single individual FPL: employee-only premium can t be greater than that amount 38 Affordability Safe Harbors W-2 safe harbor: ignore salary reduction elections for 401(k) and cafeteria plans Rate of pay safe harbor: can t be used with tipped or commission-only employees Federal poverty level safe harbor: use the poverty guidelines in effect 6 months prior to the plan year start date An employer can use different safe harbors for different categories of employees 39 13
Transition Relief: 50 99 Employees No penalty in 2015 if: Don t reduce workforce size or overall hours of service, except for bona fide business reasons from 2/9/2014 to 12/31/2014; Don t eliminate or materially reduce health coverage during the Coverage Maintenance Period (2/9/2014 to 12/31/2015; or date the 2015 non-calendar plan year ends in 2016); and Employer certifies to IRS that it is eligible for relief Don t change plan year s start date after 2/9/2014 40 Transition Relief Non-Calendar Year Plans No penalty for the months in 2015 before the noncalendar year renewal date if: Plan was non-calendar year plan as of 12/27/2012 and Plan year was not modified after 12/27/2012 to begin on a later calendar date Relief applies to employees who: Are eligible on the first day of the 2015 plan year Based on the eligibility rules in effect on 2/9/2014 Coverage has minimum value & is affordable 41 MISCELLANEOUS 42 14
FSA s Flexible Spending Account Cafeteria plans Pre-tax contributions by employee via a salary reduction $2,550 annual contribution per employee in 2015 Employer s choice to allow either $500 carry over to next plan year or a 2 ½ month grace period Amend Plan Doc before end of plan year to which this applies 43 HSA s Health Savings Account Employer contributions or pre-tax contributions by employee via payroll deductions Must have a high deductible health plan (HDHP) HSA qualified HDHP out-of-pocket 2015 maximums $6,450 individual 12,900 family Carry over to next plan year After retirement remaining funds can pay expenses not covered by Medicare 20% penalty if not used for qualified medical expenses 44 HRA s Health Reimbursement Account Employer contributions only Integrated with the health plan: Employer s current year contributions are included in: Minimum value (60/40) calculations: cost-sharing Affordability (9.56%) calculations: premium payments HRA can t be used to pay employee s individual policy premium 45 15
Discrimination Testing IRS - delayed General rule: The plan can t favor highly compensated employees based on Eligibility to participate and Benefits provided under the plan Highly compensated employee: 5 highest paid officers 10% shareholders (if offered health coverage) Highest paid 25% of all employees 46 Discrimination Testing IRS - delayed Self-test using one the following: Are at least 70% of all employees eligible to participate? Are at least 80% of all eligible employees participating in the plan? Ineligible employees: less than 3 years of service, under age 25, part-time or seasonal, union workers, or non-resident aliens Percentages & ineligible employee definition must be revised 47 Discrimination Testing HIPAA enforced General Rule All similarly situated employees must be treated the same for purposes of eligibility and participation in the group health plan Bona fide employmentbased classes: Full time v. part-time Different geographic location Union v. non-union Date of hire Length of service Current v. former employee Different occupations 48 16
Fees and Taxes Comparative Effectiveness Research Fee (PCORI) Paid by insurer & selffunded plans; includes retiree-only plans Plan years ending before 10/1/2019 $2 per member for plans ending before 10/1/14 $2.08 before 10/1/15 HRA s - count covered employees only Due 7/31/15 IRS Form 720 Annual fee treated as a tax Transitional Reinsurance Program (2014 2016) Paid by insurer & selffunded plans; includes retiree-only plans Covers plan years 2014 2016 Amount: $63 (2014) $44 (2015) $27 (2016) Based on members covered Tax deductible annual fee 49 Fees and Taxes Medicare Tax: 3.8% Medicare Tax on High Earners (0.9% plus 2.9% paid by employer & employee) $250K filing income taxes jointly $200K filing income taxes individually Cadillac Tax: 40% excise tax, inflation indexed beginning 2018 Assessed against employer contributions to: premium that exceeds $10, 200 (individual) or $27,500 (family); and Archer MSA & HSA 50 Norma Shirk J.D., Univ. of Tennessee College of Law Licensed in Tennessee, Colorado, Texas Experience includes Federal banking laws and regulations Insurance defense Employment law and Human Resources issues, including EEOC compliance Educational seminar topics include Healthcare reform issues Medicare Secondary Payer rules & group health plans 5 Reasons Employees Steal from their Employers Corporate Compliance Risk Advisor, LLC www.complianceriskadvisor.com norma.shirk@complianceriskadvisor.com www.hrcompliancejungle.com Phone: 615-479-1832 Follow me on Facebook & Twitter! Employment includes Manager/Owner, Corporate Compliance Risk Advisor, LLC Chief Compliance Officer, First Horizon Insurance Group Corporate Counsel and Assistant Corporate Secretary, Direct General Corp. Claims Attorney, Fidelity & Deposit Company of Maryland Staff Attorney, FDIC @CorpCompRiskAdv 51 17
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