Separating Unicorns from Facts: Navigating ACA as a Staffing Company

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Separating Unicorns from Facts: Navigating ACA as a Staffing Company Aaron Lesher, Executive Vice President, Essential StaffCARE Scott Hudson, VP of Sales, Equifax Workforce Solutions Tweeting? #EFXFORUM14

Introductions Aaron Lesher Executive VP of IAG 20 years experience in employee benefits business Spearheaded design and launch of original minimed plan Joined IAG in 2004 to build Essential StaffCARE Scott Hudson VP of Sales for Equifax Workforce Solutions Analytics Group 6 years with Chally Group Worldwide 20 years with Reynolds and Reynolds leading Sales, Marketing and Product Management roles Led the partnership integration between Equifax and IAG 2

Myth: ACA, PPACA, and ObamaCare are not the same Equifax Confidential and Proprietary 3

Who We Are The largest provider of benefits to the staffing industry Enrolling over 500,000 temporaries each year. Blue Cross Blue Shield President s Honor Council 6 consecutive years (highest award given) Inc. Magazine 500/5,000 fastest growing companies (2009, 2011, 2012, 2013) Golden Eagle Award (2011-2013) by the National Association of Health Underwriters (NAHU) for Demonstrating outstanding leadership within the Health Insurance Industry. Soaring Eagle Award (2012, 2013) the highest award presented by (NAHU) for Achieving the greatest success in demonstrating professional knowledge and outstanding client service. Top of the Table Award (2012, 2013) by The Million Dollar Round Table (MDRT) is an independent association of the world s leading life insurance and financial services professionals. Top of the Table members must meet or exceed six times the production levels required for MDRT membership.

Staffing Companies Currently Offering Essential StaffCARE 5

UNICORNS AND MYTHS DISPELLED Equifax Confidential and Proprietary 6

Myth: Everyone up to 400% of Federal Poverty Level will have coverage in 2014. FACT Not necessarily, most lower income people are living paycheck to paycheck and they will make their decision based on cost Subsidies dry up quickly for singles earning more than $20,000 Families get larger subsidies Single employee earning $33,510è Cost = $3,098 (Silver Plan) Tax Cost = $95 or 1% of earningsè Deducted from tax refund (no pain). Source: Kaiser Family Foundation Health Subsidy Calculator Pay now vs. pay later? What do you think? 7

Myth : We will offer a Minimum Value (MEC) plan to full time low wage temps and who cares if nobody signs up? FACT It is difficult for staffing companies to get quotes on their full time temps. Many have come up empty handed in 2011, 2012, & 2013 despite lots of promises Enrollment does matter- (strong enrollment is needed to spread risk) Minimum participation has always been the Golden Rule of group health insurance Gov t is forcing insurance companies to quote without min. participation Could easily blow up at renewal Don t expect it to last long if you throw it against the wall to see what sticks 8

Myth : We have the secret MEC solution, but I need you to give me ALL of your insurance first FACT Why can t brokers just give you an MEC quote without the catches? If it doesn t feel right, don t do it. Wait and watch. You have time. Soon MEC quotes will become more common, as carriers are forced to quote Price will be the key How will they administer; high turnover temps, handle missed deductions, coverage gaps? If it has never worked before, why would it work now? Demand to see real results, not hype. 9

Cont., Use Common Sense When Evaluating MEC Proposals Are they explaining the potential downside, or all upside? Does it make sense or sound confusing? Contract language and fine print? How will it be administered? Potential for future rate increases? Have they delivered anything yet, or just future promises? Ask for references Do you have real MEC quotes from major health insurance companies, or are they from life insurance / worksite marketing companies? 10

Myth : "I'll just extend my internal health plan to my temps" FACT Extending your internal (corporate) plan to your temps could sink current plan Especially when the new population is 1000% larger than the existing It might be better to offer temps a separate plan and see how it runs (at least while you still can, since the non-discrimination rule has been delayed) Several large staffing companies reversed course after looking closer at the risks No claims experience = no idea how plan will perform. Unlimited claims risk. It s hard to get a stop loss carrier to underwrite without catches or exclusions Make sure stop loss carrier is financially stable Read stop loss contract thoroughly and ask for second opinion Pay bills on time, every time, or risk becoming liable for claims 11

Myth : We can join an off-shore captive to get health insurance for our temps FACT Bad idea- combining 100 bad risk groups into one big group does not magically turn it into good risk Same risks apply with captives as with health insurance companies You can t train away health risk like you can with Workers Comp Adverse Selection issues remain Your money could be spent by other companies employees Never been done successfully-no track record and high risk of failure MEWA issues- combining groups for health insurance is not the same as combining groups for workers comp/property & casualty insurance 12

Myth : If we use the Look-Back Rule, we can accurately project our costs FACT Using the Look-Back Rule on prior year s data might not accurately predict future full time numbers (constantly changing) Offering health insurance to temporaries could increase your % of full time employees (by attracting more longer term employees) and reduce incentive for employees to shift over to clients. Clients may send you more permanent full time employees in future if you offer health insurance. You really need a systemic process for measuring and reporting employee status and projecting costs 13

Equifax Workforce Solutions -Who We Are Equifax Workforce Solutions acquired ethority in 2011 ACA Management Platform - Launched in 2012 HRE Product of the Year in 2013 Leading Staffing Firms signed up for Our ACA Management Platform Manpower Snelling Staffing Services Randstad North America Express Employment Professionals Select Staffing Staffmark TrueBlue 14

Myth : These delays are giving us time to relax. FACT The rule reduces the % of employees that large employers must cover in 2015 to avoid penalties. Large employers who offer coverage to at least 70% of their full time employees will not face tax penalties under 4980H(a) in 2015 (failure to offer MEC). However, the final rules clarify they will face penalties under 4980H(b) if they offer coverage that is either unaffordable or does not meet MV beginning in 2015 IRS Section 6055 & 6056 still require employers to report on benefit and employee information starting January 1, 2015 By developing an infrastructure now your organization will be enabled to make smarter decisions w/out the risk of fines Since staffing firms have such a transient population and a larger amount of variable hour employees, it is all the more critical you get organized as early as possible.

Who must be measured? Full-time: reasonably expected to work at least 30 hours per week Part time: reasonably expected to work less than 30 hour per week Variable: unclear at time of hire whether the employee will work at least 30 hours per week Seasonal: hired to work for a period of less than six months The final regulations contemplate that employers will track hours of service for all employees, even part-time and full-time. 16

Myth : Given the 70% threshold, it is unlikely we will incur fines associated with not providing coverage. FACT Large employers must offer; Qualified coverage to at least 70% of the full-time population in 2015 and 95% in 2016 Affordable, minimum value coverage to all full-time employees or pay fines of $2,000-$3,000 per employee Employers cannot withhold an offer of coverage to a targeted group of eligible employees will be in violation of ERISA and face potential lawsuits/fines 17

Myth : If an employee works >1560 hours throughout the year, they are considered full-time. FACT 11/1/13 Standard Measurement 10/31/14 Assignment 1. [5 week break] Assignment 2. [3 week break] Assignment 3. (4 weeks @ 32 hrs./ wk.) (22 weeks at 42 hrs./ week) (18 weeks at 29 hrs./ week) Variable Hour Employee Eligible? 1,574 hrs. > 1,560 hrs./yr. (Total hrs. worked) (Full Qme threshold) This Myth is not always TRUE- This employee would not have to be offered benefits.

Miscalculating Eligibility is Expensive 10/15/13 Standard Measurement Period 10/14/14 Standard Measurement 7,000 total FTEs Miscalculation: Incorrectly classified as full-time, enrolls in employer sponsored coverage Est. Cost: $4,500 Type: Employer premium Miscalculation: Incorrectly classify one individual as parttime who then receives a subsidy from the exchange Est. Cost: $3,000 ($250/month) Type: 4980H(b) penalty Miscalculation: 30% of FTEs ar not offered affordable coverage and at least one qualifies for a subsidy Est. Cost: $13.84 MM Type: 4980H(a) penalty

Myth : Our current vendor (payroll/benefits broker) and/or our IT Dept. is solving our ACA compliance. Have you seen it and tested it? FACT Most likely the reports are based on hours worked during a pay period, and not measurement periods, which are the basis for tracking eligibility Does the solution factor in breaks in service rules and account for protected leave of absence? The legislation will continue to evolve; is your solution nimble and flexible enough to adapt quickly? Will this solution manage details related to the 6055/6056? The only certainty about ACA is it will continue to CHANGE 20

Key things to consider as you develop/implement your ACA Strategy 1. Modeling Cost to Pay vs. Play Plan Affordability Budgeting for ACA Costs 2. Eligibility Who is eligible Who is trending eligible Managing Hours Modeling 3. Compliance Offering Benefits Federal Reporting Tracking / Auditing Employee Notifications Eligibility Compliance 21

Thank you! Q & A 22