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THE AFFORDABLE CARE ACT IN LAYMAN S TERMS Chris Rivard, Partner Moss Adams 2
WE RE HERE TO HELP The material appearing in this communication is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although this information may have been prepared by professionals, it should not be used as a substitute for professional services. If legal, accounting, investment, or other professional advice is required, the services of a professional should be sought. 3
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THREE ANSWERS TO EVERY QUESTION The Regulatory Answer The Legal Answer The Practical Answer 5
AGENDA Where Do We Stand? Basics and the Exchanges Establishing a Company Demographic Cost of Coverage Impact of Offering Coverage Record Keeping The Body Politic Q & A 6
THE UNIVERSE OF ACA Providers Consumers ACA Insurance Companies Employers 7
IS IT WORKING? Insurance reform Massive change in markets delivery, price, eligibility Rate increases modest, HD plans, narrow networks Reducing the uninsured population Number of uninsured estimated at 45 million Approximately 11.4 million people have purchased health care policies through the public exchanges (87% eligible for tax credits/subsidies) 8.6 million in states using HealthCare.gov platform Medicaid enrollment grew by approximately 8 million people 35% under 35 years of age 8
THE HEADLINES 800,000 taxpayers received incorrect tax info from Health Insurance Marketplace. DHHS aims to shift 50% of Medicare FFS payments to alternative payment models that emphasize quality and value by 2018. Major providers, insurers plan aggressive push to new payment models 75% of business to contracts with incentives for quality and lower cost by 2020. 9 million people lose health insurance. 9
THREE TIERS OF EMPLOYERS Effective date of shared responsibility provisions Small (less than 50 FTEs) Medium (50-99 FTEs) Large (100 or greater) NONE January 1, 2016* January 1, 2015* *or first day of plan renewal in that year 10
REQUIREMENTS TO QUALIFY FOR TRANSITION Limited workforce size calculations indicate FTEs between 50 and 99 during 2014 Maintenance of workforce and hours of service From 2/9/14 to 12/31/14 no reduction Maintenance of previously offered coverage From 2/9/14 to 12/31/14 no reduction Certification of Eligibility for Relief 11
LARGE EMPLOYER CALCULATION Prior calendar year is look-back period (2014) Determined monthly; then totaled and averaged annually MAY JUN JUL AUG SEP OCT Full-time employees (30 or > hours per week avg): 44 43 43 44 45 46 46 52 Part-time employees (10 employees aggregating 600 hours per month/120): 5 5 5 5 5 5 Total 48 48 49 50 51 51 = 577 12 48.1 12
SEASONAL CALCULATION FOR ALE STATUS Prior calendar year is look-back period Determined monthly; then totaled and averaged annually MAY JUN JUL AUG SEP OCT Full-time equivalent employees: 40 40 40 40 40 40 40 40 Seasonal employees (30 or > hours per week avg): 20 30 5 20 30 20 Total 60 70 45 60 70 60 Months > 49 employees: 1 2 3 4 > 4 5 = 605 12 50.4 13
APPLICABLE LARGE EMPLOYER PENALTIES Does the employer OFFER a health plan to at least 95%** of FT employees and dependents? MEC No Yes Unavailable penalty $2,000* Unaffordable penalty $3,000* If ONE FT employee goes to exchange and receives a subsidy, penalty triggered for ALL FT employees (less the first 30***) *Non-deductible and measured and assessed monthly (1/12 th ) **Transitional rules allow 70% for 2015 ***Transitional rules allow deduction of 80 for 2015 Plan must meet minimum value requirements If ONE FT employee opts out of plan and goes to exchange and receives a subsidy, penalty triggered for that employee only IF: Employee share of premium for employee only coverage exceeds 9.5% of employee s W-2 wages MVP 14
TYPES OF WORKERS Full Time (30 or more hours of service per week or 130 hours per month) Part Time (less than 30 hours of service per week) Variable Hour (unable to determine at hire date) Seasonal Temporary (Someone else s common law employee) Currently in plan 15
SEASONAL WORKERS The IRS has indicated that any interpretation of the term seasonal probably would not be reasonable if it included a working period of more than six months. If an employee terminates and returns, the break in service (BIS) must be at least 13 weeks to qualify as a new employee (unless Rule of Parity applies BIS > 4 weeks and as long as employed period). 16
EXCHANGE (MARKETPLACE) Family of 4 Single $94,200 $45,960 Subsidies/Credits (penalty trigger) 400% of FPL Expanded Medicaid Traditional Medicaid 100% of FPL 138% of FPL 100% of FPL $32,500 $15,856 $23,550 $11,490 $0 17
THE EMPLOYER DEMOGRAPHIC # already in plan 400% Family of 4 Single $94,200 $45,960 Subsidies/Credits # at subsidy level 138% $32,500 $15,856 Medicaid # qualifying $0 18
DEPENDENT COVERAGE # of employees likely to fall into subsidy tier Many dependent children will likely qualify for some type of Medicaid assistance Spouses may not qualify for any subsidy or Medicaid This impacts the potential cost to any employee 19
POTENTIAL IMPACT TO EMPLOYEES QUALIFYING FOR SUBSIDIES (BASED ON 35 Y/O AT $30K PER YEAR) Plan Offered No Plan Offered Savings Total Premium **$6,500 **$ 6,500 Employer (employee only premium) [75%] ***3,000 *3,077 (77) Employee [25%] 1,000 ****1,800 (800) Dependents Employee Cost Savings (Cost) 4,000 0 4,000 Total Employee Savings 3,200 * $2,000 penalty after adjusting for non-deductibility at 35% corporate rate **Kaiser Family Foundation (kff.org) Subsidy Calculator. Premium is for a couple no children. ****Assumes employee only at $4,000 premium ****After Subsidy 20
OPTIONS Offer no plan Offer MVP plan Defined contribution plan Self-insure Self-insure with MEC 21
RUN THE NUMBERS 10 in current plan Family of 4 Single $94,200 $45,960 Subsidies/Credits 50 at subsidy level $32,500 $15,856 Medicaid 150 qualifying $0 22
COST ANALYSIS OFFER PLAN Existing plan (10) New plan (*50): Employee Only Monthly Premium Employer 75% 12 months (per employee) $ 100,000 333 250 3,000 Total Cost $ 250,000 * Assumption is that all employees above Medicaid threshold opt into plan and, conversely, all employees that qualify for Medicaid opt-out. 23
COST ANALYSIS NO PLAN Eligible employees 210 Less first 30 **(30) 180 Penalty $ 2,080 Tax effect of non-deductibility $ 3,200 $ 576,000 Compensation in lieu of medical plan (10) $ 10,000 *118,064 Total cost * Grossed up for FICA at 15.3% ** 80 in transition year 2015 $ 694,064 24
OTHER ISSUES What happens if an employee opts out of plan? As long as plan is affordable no impact If unaffordable trigger for $3k penalty Discriminatory plans No stand alone HRAs or anything that resembles them Cash in lieu of benefits Tracking and reporting The notices are already in the mail 25
DISCRIMINATORY PLANS ACA disallowed discriminatory plans after September 23, 2010, unless grandfathered. Grandfathering does not mean you don t have to offer coverage to previously uninsured. Critical Point! If you have a discriminatory plan regardless of grandfathered status, consult legal counsel experienced with health care reform! 26
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MEASUREMENT PERIODS Current Standard Measurement Period April 1, 2015 March 31, 2016 Administrative Period April 1, 2016 May 31, 2016 Stability Period June 1, 2016 May 31, 2017 Standard Measurement Period April 1, 2016 March 31, 2017. Stability Period June 1, 2017 May 31, 2018. Standard Measurement Period April 1, 2017 March 31, 2018 2015 2016 2017 New Variable or Seasonal Initial Measurement Period May 10, 2015 May 9, 2016 Administrative Period May 10, 2015 June 30, 2016 Initial Coverage Stability Period July 1, 2016 June 30, 2017 28
IRS REPORTING Providing insurance? No No filing necessary No Yes Self-insured? No Yes Carrier offering insurance in an Exchange? No Insurance carrier/issuer outside an Exchange (excludes self-insured)? No Subject to Employer Shared Responsibility Provisions (employer with 50 or more FTEs)? Yes Yes Yes IRS Form 1094A 1095A IRS Form 1094B 1095B IRS Form 1094C 1095C Filed by sponsor Filed by sponsor including Mcare and Mcaid. File one copy for each policy holder. To be used for tax return. Complete for each employee. If one employee works for two aggregated ALE members, two 1095C s must be filed. If one employee works for two divisions of a single ALE, info must be aggregated on a single 1095C. 29
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QUESTIONS? Chris Rivard, Partner 509-834-2456 Chris.Rivard@mossadams.com 34