Health Care Reform Key Employer Concerns
Timeline Reform Overview 2010 2011-2013 Individual mandate Grandfather status No-pre ex for children < 19 Coverage for dependents <26 2014 Medical loss ratio rebates Summary benefit requirements (SBCs) Lifetime limit restrictions Annual max restrictions Medical device manufacturer tax No cost-sharing for preventive benefits W2 reporting Subsidies Insurer fee Essential Benefits FSA Cont. cap $2500 Non-discrimination (still delayed) Coming soon Employer Mandate for 100+ employees Employer mandate for 50+ Look back / measurement period in play Cadillac Tax kicks in - 2018 Exchanges Medicaid expansion Comparative effectiveness research fee 2015 No Pre ex for everyone 90 day max probationary period 30 hours = full time
Individual Mandate Beginning in 2014, if you are uninsured, not exempt from the new mandate, and refuse to sign up for health care coverage, there is a penalty collected by the IRS as part of your federal income taxes. The penalty will be the greater of: 1) A flat dollar amount per person. $95 in 2014; $325 in 2015; and $695 in 2016; increases indexed to inflation after that, subject to a cap. OR 2) A percentage of your taxable income fixed % of household income in excess of tax filing threshold equal 1% in 2014; 2% in 2015; 2.5% in 2016. For dependents under 18, the penalty is half the individual amount. Individual exemptions: Income does not meet the federal tax filing threshold In 2014 single under 65 $10,150
The Exchanges On line federally administered system to purchase individual health insurance policy. Moderately successful: WA STATE Washington Health Plan finder Open enrollment Nov 15th to December 23rd.closed on federal marketplace Tax credits potentially available for those making up to 400% of federal poverty level (roughly $46K for an individual) based on a sliding scale Note: 1. Premiums are paid with after tax dollars 2. Once open enrollment is complete, difficult to enroll on the plan cant just jump on. 3. Better know what your buying 4. Supreme Court agreed to hear a case that challenges the federal government s ability to provide subsidies to individuals in nearly three dozen states where the federal government operates the online marketplaces, or exchanges
Why the Individual Mandate matters to all employers The interaction between the exchanges and employers is increasing
Employer Mandate EMPLOYER SIZE 2015 Plan Year 1 49 Full time employees 50 99 full time employees 100 or more full time employees DOES NOT APPLY DOES NOT APPLY Employer must offer coverage to 70% of full time employees and dependents* to age 26 2016 Plan Year DOES NOT APPLY Employer must offer coverage Employer must offer coverage to 95% of full time employees to 95% of full time employees and dependents* to age 26 and dependents* to age 26
Am I am large employer or not? Calculating full time employees Number of Full time employees A full time employee is defined as an employee who is employed an average of at least 30 hours of per week. or 130 hours in a calendar month So for example: For part time employees, employer must also include them into the calculation to determine whether or not they are a large employer and 38 Full time employees therefore subject to the employer mandate. This is done by: 48 part time employees X 25 hrs on average = 1,200 1. Taking the total hours worked by all part time employees in any given month 1,200 / 120 = 10 2. Dividing that total by 120. 38 + 10 = 48 The result of this equation is the number of full time equivalent employees or FTEs. The FTEs then must be added back to the full time employee count
Understanding Employer Mandate Penalties Failing to offer coverage to full time employees $2,000 per full time employee (minus first 30) Failing to offer affordable or minimum essential coverage $3,000 per employee where this is applicable NOTE: At least one employee must qualify and purchase subsidized coverage in the exchange to trigger penalties These penalties are not tax deductible
QUICK FACTS: Employer Mandate What exactly am I required to do: 1. Offer a health insurance plan to employees and dependents Note dependents under the ACA is children under the age of 26 not spouses 2. Offer a plan that meets Minimum Essential Coverage every plan our we offer our clients meets this qualification. 3. Offer an Affordable Minimum Essential Coverage plan Affordability under the ACA is defined as the employees portion of the premium of the lowest cost plan, not exceeding 9.5% of their W2 earnings TIP: Make sure if employees elect not to come onto your plan, you get a signed waiver from them.
Measurement Periods What do you do with employees who come and go, are project based, or you in good faith upon hiring them do not know how long they will be employed? Put employees in separate buckets. 1. Full Time Employees employees are those that upon getting hired or currently employed are reasonably expected to work at least 30 hours a week or 130 hours in a month, on average. 2. Part Time Employees these employees are not expected to work on average 30 hours a week, or 130 in a month or are expected to work less than 120 days in the calendar year. You are not obligated to provide health insurance benefits to these bucket. 3. Variable Hour employees An employee is a variable hour employee if, based on the facts and circumstances at the employee s start date, the employer cannot determine that the employee is reasonably expected to be employed on average at least 30 hours per week / 130 hours per month on average
Measurement Period For a new variable hour employee, an employer may use an initial measurement period of between 3 and 12 months to track hours and make a determination on whether or not an employee is eligible for benefits.. employed an average of 30 or more hours of service per week / 130 hours per month during this period The 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 Stability Period If an employee is determined to be a full time employee during the initial measurement period, then the new employee must be offered coverage during the new employee stability period or else the employer could be liable for a penalty. In addition, this stability period must be at least 6 months and is no shorter in duration than the initial measurement period. Period TIP:Administration If your company decides to use a measurement time between measurement and stabilityaffected periods to make determinations, offer coverage period, you need to provide employees with and administer enrollments. Note that the initial measurement period andthem administration period may not extend this policy in writing and have sign it beyond 13 months. acknowledging they are not eligible for coverage.
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IRS reporting 2016 What exactly am I required to do: Effective 2015 (with the first cycle of reports due in early 2016), large employers (over 50 FTEs) have new reporting requirements. The IRS will use the new reporting requirements to verify that individuals have a minimum essential coverage, large employers are providing minimum essential coverage, and to determine potential penalties or tax consequences for the employer or individual should there be any. This general method uses Form 1094 C.info included: 1. the months MEC was available 2. the employee s share of the lowest cost monthly premium 3. name, address and social security number and the months, if any, when the employee was covered under an eligible employer sponsored health plan TIP: Make sure your payroll vendor or your internal team understands this requirement
National Issues that affect everyone. Support for wellness programs at work o As of 2014, participants in wellness programs generally can get discounts from their employers of up to 30% of the cost of their health care premiums. o Consider small steps to encourage employees Smokers can be charged more o As of 2014, employers can charge smokers up to 50% more than non smokers for their health insurance. Out of pocket Max Limits: o In 2014, all plans will have out of pocket maximums of $6,350 for an individual and $12,700 for a family. o In 2015 $6,600 and $13,200 o Note this includes all copays, deductible.all expenses Summary of Benefits and Coverage o Standard document outlining plan designs that all employers must provide at certain points throughout the year Minimum Loss Ratios: where is my rebate check? o Insurance Carriers, by law, must now spend a certain % of every dollar they receive on claims and medical expenses or else issue rebates for the difference. o 80% for the small group market ( > 50 employees) and 85% in the large group (< 50). 14
National Issues that affect everyone. Probationary periods o Maximum of 90 days period Full time hours = 30 hours Cadillac Tax It is a 40% tax on employers that provide high cost health benefits to their employees. o Beginning in 2018, on the cost of coverage for health plans that exceed $10,200 for individual coverage and $27,500 for self and spouse or family coverage. Health insurer fee o Annual fee of 2.5% of premiums in 2014. Expected to go up to 4% by 2017. Insurers will pass this fee through to employers. Transitional reinsurance fee o fee will imposed on employers for the next three years and will go towards helping the state based insurance exchanges. o The fee will be $63 per insured member in 2014, but is expected to decrease in the latter two years. (HHS estimates the 2015 fee to be $44 per covered life, per year) Small Group definition o Starting in Jan of 2016, employers with 50 100 employees will be considered small group 15
TOP TEN QUESTIONS: Will we be able to continue to offer multiple plans? YES Will the basis for affordability be calculated on the least expensive plan? YES How does the HSA plan fit in to the calculation? NO different for MBA / BIAW / NMTA Plans. However they are being debated in the small group / individual market. Will the affordability be calculated on employee only rates or on the rates including applicable dependents? EE coverage is the basis for affordability calculation. Currently our full time requirement is 35 hours a week, it appears that we will need to change that to 30, is that correct? YES Currently we have employees opt out for various reasons; other coverage via spouse, individual coverage purchased elsewhere or no coverage due to cost. Can they still elect to opt out and what are requirements? YES. All employer is required to do is: 1) Offer coverage (if more than 50 EEs) 2) Pass the minimum essential coverage and affordability threshold but you better make sure you have a waiver
TOP TEN QUESTIONS: Currently waiting period is 1st of month following 120 days. With the change to 90 days, is it still 1st of month following 90 days or specifically 90 days? Exactly 90 days Can we charge employees different rates based on their income? YES, but this is very likely to be changed. We are awaiting further guidance on Non Discrimination rules for eligibility or contribution determinations I currently have several different companies under one ownership structure, can I break them up to avoid having to comply with Employer Mandate No due to common ownership clause. However this is complicated. We have further guidance Can I provide my employees with a stipend to buy their own insurance? Yes, but note the stipend can not be made pre tax and should be treated at income for the employee.
Take A ways, Tips, and opinions Group Selection by deductible 1.8% 9.9% 1.9% 0.5% 7.3% $0 9.6% $500 $1,000 10.1% $1,500 $2,000 $2,500 7.7% $3,000 34.9% 16.3% $3,500 $5,000 $6,350 18
Take A ways, Tips, and opinions 1. EMPLOYERS Understand this changes the dynamic between employee and employer. Shift towards employees.. 2. HSA Accounts and lower cost / higher deductible plans are inevitable for most all employers / employees. 3. Employers must have their paperwork and systems ready. Waivers, hours tracking, etc. 4. You can not over communicate with your employees. 1. EMPLOYEES Ownership of health care / health insurance will become a reality. Can no longer tune this out. 2. Most cost sharing or skin in the game, forces better decision making. 3. Knowledge base on health insurance will increase Generic vs. Brand Shopping around Say something 19
Question we all must ask.. What to expect in the future
Capital Benefit Services / EPK Benefits 800-545-7011 www.capitalbenefitservices.com www.epkbenefits.com Will Compton 425-283-0204 wcompton@capitalbenefitservices.com