NEW YORK STATE AUTOMOBILE DEALERS ASSOCIATION & SYRACUSE AUTO DEALERS ASSOCIATION September 16, 2014 Meeting Syracuse, New York Affordable Care Act Update Are We There Yet?
Topics to be Covered Review of the significant ACA requirements that are first effective in 2014 Preparation for the employer mandate, taking into account the compliance delays, final regulations Reporting requirements Look ahead at what is still to come 2
2014 Requirements The following significant ACA requirements are first/fully effective in 2014: o Individual mandate and health insurance exchanges o Limit on out-of-pocket costs o Prohibition on annual limits o Prohibition on waiting periods in excess of 90 days o Transitional Reinsurance Fee 3
Individual Mandate Each citizen and legal resident (and his/her dependent(s)) must be covered under minimum essential coverage each month, beginning in 2014 Certain exceptions apply o Not required to file return based on income o Short coverage gaps o Coverage options are unaffordable 4
Individual Mandate Minimum tax imposed for failure to maintain coverage: o 2014: $95 o 2015: $325 o 2016 and later: $695 (indexed after 2016) o 50% less for dependents under age 18 o If greater, penalty tax based upon a percentage of household income applies (1% in 2014; 2% in 2015; and 2.5% after 2015) 5
Health Insurance Exchanges Health insurance exchanges were established to provide a marketplace through which individuals may purchase coverage o Coverage is available in several tiers of coverage and cost o 2014 open enrollment ended on March 31, 2014 o 2015 open enrollments begins on November 15, 2014 Exchange coverage can be obtained outside of the open enrollment period only if individual has a qualifying life event 6
Health Insurance Exchanges Federal assistance is available to certain individuals to help offset the cost of exchange coverage o Premium tax credit o Cost sharing reductions Generally available to individuals with household income between 100% and 400% of poverty level and for whom the cost of coverage exceeds 9.5% of household income 7
Out-of-Pocket Maximums Annual out-of-pocket costs may not exceed $6,350 for individual coverage or $12,700 for family coverage o Applies to plan years beginning in 2014 o Maximums subject to increases in 2015 and later years ($6,450 and $12,900 for 2015) Not tied to HDHP/HSA out-of-pocket maximum increases o Applies to all non-grandfathered group health plans, including insured and self-funded plans 8
Out-of-Pocket Maximums Maximum applies to deductibles, co-insurance and copayments o Premiums and balance-billing amounts are not included Maximum applies only to in-network coverage o Plan may apply unlimited out-of-pocket costs for outof-network coverage 9
Out-of-Pocket Maximums 10 Transition Rules for 2014 Only o If employer-provided coverage uses separate administrators for major medical coverage and prescription drug coverage, and the drug coverage currently includes an out-of-pocket limit, the ACA outof-pocket maximum may be applied separately to the major medical and prescription drug portions of the plan For a plan with separately administered major medical and prescription drug coverage, the combined out-ofpocket maximum for 2014 could be $12,700 for single coverage and $25,400 for family coverage
Prohibition on Annual and Lifetime Limits Applies to all group health plans, including grandfathered plans Lifetime dollar limits on essential health benefits have been prohibited since 2011 Annual dollar limits have been phased out over a three year period Annual dollar limits are completely prohibited effective January 1, 2014 11
Prohibition on Annual and Lifetime Limits Prohibition applies to essential health benefits o Ambulatory patient services o Emergency services o Hospitalization o Mental health and substance abuse services o Prescription drugs o Rehabilitative services and devices o Laboratory services o Preventative and wellness services o Pediatric services 12
Prohibition on Annual and Lifetime Limits Non-essential health benefits may be subject to lifetime and annual limits Prohibition on limits generally applies to all group health plans, including account-based and limited reimbursement plans o Health reimbursement accounts (HRA) o Employer payment plans Prohibition on limits does not apply to: o Flexible spending arrangements o Health savings accounts 13
Prohibition on Annual and Lifetime Limits Application to HRAs o An HRA is subject to the prohibition on annual and lifetime limits, unless the HRA is integrated with another group health plan o Plan with which the HRA is integrated, impacts scope of HRA eligible reimbursements 14
Prohibition on Annual and Lifetime Limits An HRA will be considered integrated if: o The employer offers a non-hra group health plan that provides minimum value o The employee covered by the HRA actually enrolls in another employer-sponsored group health plan that provides minimum value Can be a plan of another employer Cannot be exchange coverage o The HRA is available only to employees enrolled in another group health plan that provides minimum value 15
Prohibition on Annual and Lifetime Limits 16 An HRA will be considered integrated if: o The employer offers a non-hra group health plan that does not consist solely of excepted health benefits o The employee covered by the HRA actually enrolls in another employer-sponsored group health plan that does not consist solely of excepted health benefits Can be a plan of another employer Cannot be exchange coverage o The HRA is available only to employees enrolled in another group health plan o Reimbursements under the HRA are limited to copayments, co-insurance, deductibles and premiums
Prohibition on Annual and Lifetime Limits Under either type of integrated HRA, employees must be permitted to permanently opt-out of and waive future reimbursements from the HRA at least annually and at termination of employment o This rule is necessary to avoid exclusion from future subsidies in connection with exchange coverage An integrated HRA is also exempt from ACA preventative services requirements 17
Waiting Period Rules 18 In general, a group health plan must not apply a waiting period that exceeds 90 days A waiting period is the period that must pass before coverage for an individual who is otherwise eligible to enroll can become effective o Being eligible to enroll means having met the plan s substantive eligibility conditions, such as: Being in an eligible job classification Achieving job-related licensure requirements Satisfying a reasonable and bona fide employmentbased orientation period (of not longer than one month)
Waiting Period Rules The use of a measurement period of up to 12 months over which hours of service are counted to determine the eligibility of a variable hour or seasonal employee is permissible, provided that coverage is made effective no later than 13 months from the employee s start date plus, if the employee s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month 19
Transitional Reinsurance Fee The transitional reinsurance fee is levied on employers and insurers to finance a temporary reinsurance fund designed to stabilize premiums in the individual insurance market Fees will be imposed for 2014, 2015 and 2016 Fees are imposed on health insurance issuers and self-funded group health plans 20
Transitional Reinsurance Fee Fee applies to plans providing major medical coverage The following plans and arrangements are exempt: o Health flexible spending accounts o Integrated health reimbursement accounts o Stand-alone dental and vision plans o Health savings accounts o Employee assistance plans o Prescription drug coverage 21
Transitional Reinsurance Fee Fee for 2014 is $63 ($5.25 a month) per covered life o Spouses and dependents will generate additional fees o Annual enrollment count must be submitted to HHS by November 15 o Fee will be assessed by December 15, with payment required within 30 days of assessment 22
Employer Mandate Originally to be effective January 1, 2014 Implementation of employer mandate has been delayed until January 1, 2015 No employer will be subject to any penalties for the failure to provide affordable, minimum value coverage to full-time employees for 2014 o Delay does not affect the individual mandate or other ACA changes effective in 2014 23
Employer Mandate 24 The implementation of the employer mandate is further delayed until January 1, 2016 for employers with between 50 and 99 full-time employees (including full-time equivalents) during 2014, if certain requirements are satisfied o The employer must not reduce the size of its workforce or the overall hours of service of employees in order to qualify for the implementation delay o The employer must not eliminate or materially reduce health coverage o The employer must certify its eligibility for the delay
Employer Mandate/ Play or Pay An applicable large employer is subject to an assessable payment if: o The employer fails to offer to at least 95 percent (70 percent for 2015) of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employersponsored plan and any full-time employee is certified to receive a premium tax credit or cost-sharing reduction in connection with exchange coverage; 25
Employer Mandate/ Play or Pay An applicable large employer is subject to an assessable payment if: o The employer offers at least 95 percent (70 percent for 2015) of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, but the coverage either is not affordable or does not provide minimum value, and any full-time employee is certified to receive a premium tax credit or cost-sharing reduction in connection with exchange coverage 26
Employer Mandate Temporary reduction in coverage threshold o For 2015 only, an employer will not be subject to the coverage-related penalty if it offers coverage to at least 70 percent of its full-time employees (and their dependents) o After 2015, required percentage reverts to 95 percent 27
Employer Mandate Penalty for Failing to Offer Coverage: $2,000 times number of full-time employees in excess of 30 (80 for 2015) o Penalty is triggered if any full-time employee gets subsidized coverage through an exchange Penalty for Offering Deficient Coverage: $3,000 times actual number of full-time employees who get subsidized coverage through an exchange 28
Employer Mandate Penalty Example A Employer fails to offer Minimum Essential Coverage Example assumes payment for 12 months: o Employer has 100 full-time employees o Employer does not offer any health insurance coverage o One full-time employee purchases health insurance on an exchange and receives a federal subsidy (premium credit or cost-sharing reduction) o Employer is subject to penalty tax of $2,000 times number of full-time employees (first 30 employees not counted) o Penalty tax = $140,000 (70 x $2,000) 29
Employer Mandate Penalty Example B Employer offers Deficient Coverage Example assumes payment for 12 months: o Employer has 100 full-time employees o Employer offers minimal essential coverage o Employer s coverage is unaffordable o Twenty employees decline company coverage and purchase health insurance on an exchange and receive a federal subsidy (premium credit or cost-sharing reduction) o Employer is subject to penalty tax of $60,000 ($3,000 x 20 employees enrolled in exchange with subsidy) Penalty subject to cap of [total FT employees 30 x $2,000] 30
Who Must be Offered Coverage? To avoid mandate-related penalties, at least 95 percent (70 percent in 2015) of actual full-time employees (and their dependents) must be offered affordable coverage that provides minimum value. Actual full-time employees only (as defined by ACA). No requirement to offer coverage to FTEs 31
Who Must be Offered Coverage? ACA generally requires that coverage be offered to full-time employees and their dependents Coverage need not be offered to dependents for the plan year that begins in 2015, if: o Dependent coverage is not offered o Dependent coverage is offered for some, but not all, dependents o Dependent coverage is offered, but the coverage is not Minimum Essential Coverage 32
Who Must be Offered Coverage? Full-time status is based on an employee s service during the applicable measurement period If an employee is considered full-time during the applicable measurement period, then the employee must be treated as full-time for the ensuing stability period 33
Who Must be Offered Coverage? New concepts for health plans: o Measurement period - must be at least 3 months and cannot exceed 12 months o Stability period - may be between 6 months and 12 months, but may not be shorter than the measurement period o Administrative period - may be up to 90 days, but must overlap prior stability period (optional) 34
Who Must be Offered Coverage? Generally, the length of the measurement period and the length of the stability period will be the same Twelve-month periods (for each) likely makes the most sense for most employers Special rule for the first stability period (in 2015) 35
Who Must be Offered Coverage? Example: Assuming a January 1 December 31 plan year, an example of viable standard measurement, administrative, and stability periods might be as follows: o Measurement Period November 1, 2013 to October 31, 2014 o Administrative Period November 1, 2014 to December 31, 2014 o Stability Period January 1, 2015 to December 31, 2015 36
Who Must be Offered Coverage? 37 ACA Full-time Employee o Credited with an average of at least 30 Hours of Service per week during the measurement period. Hours of Service o Each hour for which an employee is paid or entitled to be paid. o For hourly employees, count actual hours. o For non-hourly employees, count actual hours or use one of two permitted equivalencies - 8 hours per day or 40 hours per week.
Who Must be Offered Coverage? Measurement and Stability Rules for New Employees o New employee generally means an employee who was not employed during the 13-week period immediately prior to rehire or (optionally) whose period of zero hours (before re-hire) exceeds the most recent prior work period. o If a new employee is reasonably expected to work on average at least 30 hours per week during the measurement period, then the employee must be treated as a full-time employee within 3 months 38
New Variable Hour and Seasonal Employees Variable Hour and Seasonal Employees o Each new employee who is not reasonably expected to work on average at least 30 hours per week generally will be considered a variable hour employee or a seasonal employee o An employee can be a variable hour employee if initially hired at 30 or more hours per week, but that schedule is expected to be of a limited duration and it can t be reasonably determined that the employee is expected to continue work at 30 hours per week o Final regulations define a seasonal employee as an employee who is employed in a position for which the customary annual employment period is six months or less 39
Who Must be Offered Coverage? Each new variable hour or seasonal employee will have his or her own initial measurement period, which means a time period of at least 3 (but not more than 12) consecutive calendar months to be used to determine whether the new employee is a full-time employee Initial measurement periods of 12 months likely make the most sense for most employers 40
Who Must be Offered Coverage? The final regulations permit employers to place new hires into groups for initial measurement and stability period purposes o An employer could establish 12-month initial measurement periods that begin on the first day of the first calendar month following the employee s start date (or, if later, on the first day of the first payroll period beginning on or after the employee s start date) o For example, all variable hour and seasonal employees hired in May could have a 12-month initial measurement period beginning on June 1 41
Who Must be Offered Coverage? Initial and standard measurement periods may overlap, requiring the measurement of an employee s service during both measurement periods 42
When is Coverage Affordable? The cost for self-only coverage under the employer s lowest cost option may not exceed 9.5 percent of household income o IRS Affordability Safe Harbor A required contribution for self-only coverage is affordable if it does not exceed 9.5% of employee s Form W-2 wages o Alternative rate of pay and poverty line safe harbors available Rate of Pay Safe Harbor: monthly premium cannot exceed 9.5 percent of product of employee s hourly rate of pay times 130 (or monthly salary for salaried employees) 43
When Does Coverage Provide Minimum Value? A plan provides minimum value if the plan s share of the total-allowed costs of benefits provided under the plan is at least 60 percent of those costs o Minimum value calculator has been made available by HHS o HHS/ IRS to issue alternative safe harbor checklists for determining minimum value o Minimum value may be certified by actuary 44
Reporting Requirements Code Section 6055 Reporting o Insurers and sponsors of self-funded health plans must report information to the IRS for each individual to whom they provide minimum essential coverage Information identifying the filer (employer or health insurance issuer) Information identifying each employee covered under the plan and months during which each employee was covered o This reporting is intended to support IRS enforcement of the individual mandate 45
Reporting Requirements Code Section 6055 Reporting o IRS forms to be issued (IRS Forms 1094-B/C and 1095-B/C) o Forms must be filed with IRS by February 28 (March 31 if filed electronically) of year following calendar year to which the form relates o A statement must also be provided to the covered individual by January 31 46
Reporting Requirements 47 Code Section 6056 Reporting o Applicable large employers subject to employer mandate must report to the IRS information about the health care coverage provided to full-time employees Information identifying the employer A certification as to whether the employer offered its full-time employees the opportunity to enroll in minimum essential coverage Each full-time employee s share of the lowest cost monthly premium for minimum value coverage offered to the employee Number of full-time employees for each month Information identifying each full-time employee and the months, if any, during which employee was covered under the plan
Reporting Requirements Code Section 6056 Reporting o This reporting will support IRS enforcement of the employer mandate o Reporting to be made on IRS Forms 1094-C and 1095-C o Forms must be filed with IRS by February 28 (March 31, if filed electronically) of year following calendar year to which form relates o A statement must also be provided to the covered individual by January 31 48
Reporting Requirements Code Section 6055 and Code Section 6056 reporting may be made using a single combined form Simplified reporting options are available to employers who can certify that they offered and/or provided qualifying coverage to a sufficient percentage of its employees 49
Nondiscrimination Requirements For Insured Health Plans General statutory rules o Insured group health plans generally must comply with nondiscrimination requirements similar to those that apply to self-funded plans o No discrimination in favor of highly compensated individuals regarding eligibility or benefits The application of the nondiscrimination requirements to insured group health plans has been delayed until regulatory guidance is issued No regulations have been issued 50
Cadillac Plan Excise Tax 51 Cadillac plans generally are high-cost policies with low deductibles and comprehensive coverage Beginning in 2018, a 40 percent excise tax is generally imposed on the aggregate value of employer-sponsored health plan coverage to the extent the value exceeds a threshold amount In 2018, the threshold amount is $10,200 for individuals and $27,500 for families (subject to certain cost adjustment factors)
Automatic Enrollment An employer with more than 200 full-time employees generally must automatically enroll new full-time employees in its health plan Employer must provide notice and an opportunity to opt-out Likely to function similarly to automatic enrollment in 401(k) plans This requirement will not be enforced until the EBSA issues regulations 52
Affordable Care Act Update Are We There Yet? Presented by: Stephen C. Daley Bond, Schoeneck & King, PLLC One Lincoln Center Syracuse, New York 13202 Direct Dial Telephone: 315-218-8237 E-Mail: sdaley@bsk.com
2015 Affordable Care Act Reporting Requirements for Large Employers
Background Starting 2016 Self Funded groups of all sizes and employers with over 50 full time employees will be required to report information about Health insurance coverage provided in 2015. Reporting is designed to assist the Federal Government in: Enforcing compliance for both Employer Mandate & Individual Mandate Reporting IRC (Internal Revenue Code) Sections: 6055 = All Self Funded employers 6056 = Large employer reporting
Due Dates Code 6055 & 6056: File reports on or before February 28 th by paper or March 31 st electronically Employers may apply for a 30 day limited extension Employee Statements: On or before January 31 st
Forms for Reporting Employer Type 6055 6056 IRA Report Employee Statement Small Fully Insured No No N/A N/A Small Self-Insured Yes No Form 1094-B Form 1095-B Copy of Form 1095-B Or Substitute Large Fully Insured No Yes Form 1094-C Form 1095-C (6056 section only) Copy of Form 1095-C Or Substitute Large Self-Insured Yes Yes Form 1094-C Form 1095-C (both sections) Copy of Form 1095-C Or Substitute
DATA NEEDED 6056 REPORTING 1. Employer s name, address & EIN 2. Employer s contact person, name, & phone # 3. Calendar year for information filing 4. Number of full time EE s for each month during calendar year 5. Months during the calendar year that minimum essential coverage was available 6. Certification as to whether employer offered Full Time employees (FTE s) & dependents the opportunity to enroll by calendar month 7. Each FTE s share of minimum essential coverage self only premium by calendar month 8. Name, address and TIN (or DOB) of each FTE employed during the calendar year
SIMPLIFIED REPORTING Eligible for Simplified Reporting if: Employer makes a qualified offer to all FTE s and dependent and the employee only cost does not exceed 9.5% of the Federal Poverty Line, (approximately $1,100 in 2015). The offer needs to be made to at least 95% of all FTE s Employer offers minimum value and minimum essential coverage that is affordable under one of the IRS Safe Harbors to at least 98% of all FTE and their dependents The reporting requirement is only to report; Employee s name, address, TIN An indication (indicator code) that a qualifying offer was made for all 12 months
IRC Section 6721 & 6722 PENALTIES Failure to execute reporting 6055 & 6056 $200 per year; maximum penalty $3 Million For 2015 reporting only No penalties will apply where the employer makes a good faith effort to comply The employer can escape penalties for incorrect or incomplete reports but not for a total failure to file