Looking for a Life Vest?

Looking for a Life Vest? November 20 th, 2014 @thomasharte

Agenda: Looking for a Life Vest? Health Care Reform: What s new with ACA?? Provisions Already in Effect Preparing for Health Care Reform Primary Issues of Concern Pay or Play Compliance Defining and Calculating Employees Strategies for Employers 2

Disk: Reference Documents Compliance: 5500 Filing Exchange Notice Cover Letter Large Employer Reporting Model Notice I Model Notice II Top Audit Omissions Employer Notices: CHIPRA Spanish / English Combined Notice Newborn & Mothers Women s Cancer PPACA: Factors Affecting Premium Marketplace & FAQ s Provider Fee Employer Mandate PCORI 3

Health Care Reform What is your concern? What don t you understand? 4

What s NEW with Health Care Reform? 5

Supreme Court November 7 th, 2014 Announcement by the Court King v. Burwell (DC Court) RULING: Subsidy ONLY allowed where State has set up a State Exchange 2015 Docket 37 States (including NH) MAY be prohibited What are the triggers for a penalty?? Unaffordable or does not meet minimum value AND Employee receives a SUBSIDY Employer Mandate Subsidy 6

Genesis of the Supreme Court Case Lawsuits challenging the subsidies in States that did NOT establish their own exchange i.e. States with a Federally Facilitated Marketplace (FFM) Maine and New Hampshire (partnership) 17 State Marketplaces 7 Partnership Marketplaces 27 Federally Facilitated Marketplaces July 22 nd, 2014 Two Federal Appeals Courts King v. Burwell, 4 th Circuit Court unanimously upheld the availability of subsidies Halbig v. Burwell, DC Circuit Court - 2 to 1, declared the ACA clearly restricts the subsidies September 4 th, 2014 DC Circuit Court Agreed to Reconsider resulting in the initial ruling to be vacated AND removing the inconsistency between the courts. November 7 th, 2014 Supreme Court Announcement December 17 th, 2014 Scheduled date for re-hearing @ D.C. District Court 8

Why is the Court Case Important? If the issuance of subsidies is considered illegal in States that did not create their own Marketplace: Individuals: Will not be able to receive subsidies The Federal Government MAY be required to collect subsidies ALREADY paid The individual mandate would fall apart The pre-existing condition portion of the law would be removed Employers: One trigger for the Employer Mandate is the Subsidy The employer Mandate would be forced to be removed Employers would not be subject to any penalty 9

Question #1 If an employer cancels their group health plan but reimburses the employees for premiums to pay health insurance on the exchange does that satisfy market reforms?? 10

Employer Payment Plans NO!! Employer compensation to employees to purchase health insurance are referred to as - Employer Payment Plans This compensation arrangement is considered group health plans BUT does NOT satisfy market reforms Why is this important? Penalties of $100 / day per applicable employee = $36,000 per year per applicable employee 11

$36,000 per employee penalty??? Tax imposed on Plan Sponsor (employer) Excludes Government Employers Reported on IRS Form 8928 (Return of Certain Excise Taxes) $100 per individual, per day for violation of any of the following: Coverage for Adult Children to Age 26 No lifetime or annual limits on essential benefits No Pre-Existing Conditions Preventive Health Services @ $0.00 PROVIDE Summary Benefits Coverage Non-Discrimination Rules (delayed) Limits on cost sharing Coverage for approved clinical trials Essential Health Benefits 90 Day Waiting Period 12

Employer Reporting WHY Employer Reporting (according to the Federal Government)? Provide transparency of health coverage and costs Provide government with information to administer mandates Employer Shared Responsibility Individual Mandate Section 6055: health insurance issues, Self Insured health plan sponsors, government agencies, and any other entity that provides minimum essential coverage Section 6056: Applicable Large Employers (ALE s) that are subject to Pay or Play Effective Date: 2015 (First returns will be due in 2016 for coverage provided in 2015) 13

TYPE OF REPORTING AFFECTED EMPLOYERS REQUIRED INFORMATION Forms EFFECTIVE DATE Code 6055 Reporting of health coverage by health insurance issuers and sponsors of self-insured plans Employers with self-insured health plans Information on each individual provided with coverage (helps the IRS administer the ACA s individual mandate) 1094-B: Transmittal AND 1095-B (non-ale) or 1095-C (ALE s) Delayed until 2015 Code 6056 Applicable large employer (ALE) health coverage reporting Applicable large employers (those with at least 50 full-time employees, including full-time equivalents) Terms and conditions of health plan coverage offered to full-time employees (helps the IRS administer the ACA s employer shared responsibility penalty) 1094-C: Transmittal 1095-C: Employee Statement The first returns will be due in 2016 for coverage provided in 2015 14

Employer Reporting: Section 6056 WHO is an Applicable Large Employer? Employers with at least 50 Full Time Equivalent (FTE s) Employees Reporting is only required on Full Time employees Filling Deadline? No later than February 28 th (March 31 st if filed electronically) of the year immediately following the calendar year. Electronic is mandatory for employers > 250 Full time employees Employee Statements: Must be furnished annually to full time employees on or before January 31 st of the year following the calendar year. Non-Calendar Year Plans? No option for alternative filing date 15

Employer Reporting: Medium Sized Employers Medium Sized Employers? Must comply No Delay!!! Must Certify on 6056: Employs between 50 and fewer than 100 employees during 2014 (yes, 2014) Between February 9, 2014 and December 31, 2014 they did not reduce the size of the workforce or overall hours of service for employees In 2015, the Company did not eliminate or materially reduce health coverage from February 9 th, 2014 16

Employer Reporting: Information Employer name, address, and EIN Name / Telephone Number for contact person Calendar year Certification that full time employees were given the opportunity to enroll in minimum essential coverage (MEC) Months during the year that MEC was available EACH full time employee s share of the LOWEST cost monthly premium for self only coverage Number of full time employees during each month Name, address and Tax Identification Number (TIN) for each Full time Employee Any other information required by the IRS 17

Employer Reporting July 24, 2014 DRAFT Versions of forms SELF FUNDED (6055) Form 1094-B: Transmittal of Health Coverage Information Returns Form 1095-B and 1095-C: Health Coverage FULLY INSURED (6056) Form 1094-C: Transmittal of Employer Provided Health Insurance Offer and Coverage Information Return Form 1095-C: Employer Provided Health Insurance Offer and Coverage HRA s and H.S.A. s are excluded from reporting!! 18

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Adjustments in 2015 2015 Out of Pocket Limit: $6,600 / $13,200 ($6,350 / $12,700 in 2014) Individual Mandate: 2014: $95 or 1.00% of income (up to national average of BRONZE premium) 2014 Bronze Plan Premium is $2,448 single / $12,240 family (Question 2) 2015: $325 or 2.00% of income (up to national average of BRONZE premium) PCORI: (due by July 31 st up to plan years to 9.30.19 Form 720) $2.00 (Plan years 10.1.13 to 10.1.14) $2.08 (plan years 10.1.14 to 10.1.15) Affordability Guideline: 9.56% of Household Income (9.50% in 2014) Flexible Spending Accounts: $2,550 Health Savings Account Contributions: 2015 Annual Contribution: $3,350 / $6,650 ($3,300 / $6,550 for 2014) 2015 Deductible: $1,300 / $2,600 ($1,250 / $2,500 for 2014) 20

Planning for Cadillac Tax Beginning in 2018 PERMANENT Tax Expected to generate $80,000,000,0000 (Billion!!) over 10 years Includes EMLOYEE and EMPLOYER Contributions 40% EXCISE TAX on high cost group health coverage Some of the EXCLUSIONS include: Disability, Dental,, Vision, liability, and worker s compensation Limits (Higher Limits apply to high risk occupations) $10,200 for Individual $27,500 WHO PAYS? Insured: Employer calculates / Insurer Pays Self Funded: Employers Calculate / Employer Pays 21

Calculating the Cadillac Tax Employer Sample Group: 50 Single / 50 Family NOT TAX DEDUCTIBLE!! Type of Coverage Single Family Health Plan Premium $10,000 $25,000 FSA Contributions $2,500 $2,500 HRA Contributions $2,000 $2,000 TOTAL $14,500 $29,500 Limit $10,200 $27,500 Excess $4,300 $2,000 TAX (40% of Excess) $1,720 per Single $800 per Family Subtotal $86,000 $40,000 TOTAL TAX $126,000 22

Provisions to Date Dependents to Age 26 Summary of Benefits and Coverage * Medical Loss Ratio: 85% for Large Group 80% for Small Group W2 Reporting * Preventive Care Services No pre-existing conditions for Children (under 18) Flexible Spending Account Maximum of $2,500 (now $2,550) for Health Care Plan years beginning after January 1, 2013 BY THE WAY - $500 Rollover Benefit for FSA only 23

Individual Mandate Jan. 1, 2014: Individuals must enroll in coverage or pay a penalty Penalty amount: Greater of $ amount or a % of income 2014 = $95 or 1% 2015 = $325 or 2% 2016 = $695 or 2.5% Example: $30,000 single employee: 2014 = $95 or $300 2015 = $325 or $600 2016 = $695 or $750 Maximum Penalty: National Average for BRONZE plan 24

Summary of Benefits and Coverage Simple and concise explanation of benefits Applies to GF and non-gf plans Model template and guidance available Instructions, Sample language, and Uniform glossary of terms Final guidance specifies compliance deadlines Original deadline was March 23, 2012 Health plans to enrollees: Open enrollment: 1st day of the 1st open enrollment period that begins after 9.23.12 Annual Open enrollment Upon Application and Prior to Effective Date 25

What Else to Worry About? 26

W2 Reporting Does not change the tax rules for health coverage coverage is still NOT taxable Employers must report aggregate cost of group health plan coverage on each employee s Form W-2 Mandatory for 2012 tax year (W-2 Forms provided in January 2013) For small employers (filed fewer than 250 W-2 Forms last year), reporting requirement is delayed until further guidance issued 27

W2 Reporting What must be reported? Total cost of employer-sponsored health coverage Group health plan coverage to includes insured and self-funded plans Total cost = employer portion + employee portion Report in box 12 with code DD 28

PCORI Patient-Centered Outcomes Research Institute Created to improve informed health decisions Research funded by a fee paid by insurers and plan sponsors of self-funded plans Effective date Plan years ending after Sept. 30, 2012 Does not apply for plan years ending after Sept. 30, 2019 For calendar year plans apply for 2012-2018 plan years Amount of fee: $1 per covered life WHAT ABOUT THE DOUBLE DIP? Increases to $2 Indexed for CPI 29

60 Day Notice of Material Modification Material modifications not in connection with renewal must be described in a summary of material modifications (SMM) or an updated SBC Material modification: Enhancement of covered benefits or services Material reduction in covered benefits or services More stringent requirements for receipt of benefits Must be provided at least 60 days BEFORE modification becomes effective ESPECIALLY important for early (December) or early (January) plan changes!!! 30

Calculating the Number of Employees Employee category Full-time Part-time Seasonal Temporary Agency How is this category of employee used to DETERMINE large employer? Counted as one employee, based on a 30-hour or more work week Pro-rated (calculated by taking the hours worked by part-time employees in a month divided by 120) Not counted, for those working less than 6 months in a year Generally, counted as working for the temporary agency (except for those workers who are independent contractors) Once an employer is determined to be a large employer, could the employer be SUBJECT TO A PENALTY if this type of employee received a premium credit? Yes No Yes, for the month in which the seasonal worker is full-time Yes, for those counted as working for the temporary agency 31

Calculating the Number of Employees: EXAMPLE Employee category Number of Employees Full Time Equivalent (FTE) Full-time 40 (30 or more hours) 40 Part-time 25 (Total monthly hours of 2,166) 18 Seasonal 20 (less than 120 days in a year) 0 Temporary Agency 0 0 TOTAL 58 32

Employer Pay or Plan Large employers subject to Pay or Play rule Offer coverage of a certain quality or possibly pay a penalty Applies to employers with 50 or more fulltime equivalent employees in prior calendar year FT employee: Employed for an average of at least 30 hours of service per week Penalties apply if: Employer does not provide coverage to all FT employees and any FT employee gets subsidized coverage through exchange OR Employer does provide coverage and any FT employee still gets subsidized coverage through exchange BELOW THE LINE DEDUCTION!! 33

Employer Penalties Employers that do NOT offer coverage to all full-time employees: $2,000 per full-time employee Excludes first 30 employees (80 for 2015 for employers Employers that offer coverage: $3,000 for each employee that receives subsidized coverage through an exchange Capped at $2,000 per full-time employee (excluding first 30 employees) 34

Employer Requirements: Pay or Play Affordability safe harbors Three different safe harbors for determining affordability W-2 income rate of pay, and federal poverty line Waiting periods Cannot exceed 90 days No penalty for employees in waiting period Offer of Coverage: 2015 must offer coverage to 70% of Full Time Employees 2016 and beyond must offer coverage to 95% of Full Time Employees 35

Penalty Flowchart: Do you have at least 50 FTE s? No Are any of your FULL TIME employees receiving a subsidy? No Do you have more than 30 (80) Full Time Employees? No No Do you provide health insurance? Yes Penalty: 1/12 x $2,000 x # Full Time Employees - 30 Penalty: lesser of 1/12 x $2,000 x # Full time employees - 30 or 1/12 x $3,000 x # full time employees receiving subsidy 36

Large Employer Shared Responsibility (ESR) When? The ESR requirement takes effect on 1/1/14* Who & How Determined? Employers having 50 or more full-time employees (FTE s) or a combination of FTE s and part-time employees (delayed to 1/1/16 for 50 to 99). In 2014, Employers, using employment information from 2013, must average the number of employees across the months in the year (delayed to 1/1/15). Who & How Determined? Offer FTE s and their dependents employer sponsored coverage that is affordable and provides minimum value. Affordable Coverage: Employee s share of premium cannot exceed 9.5% of Employee s annual income. Minimum Value: Cover at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan. 37

Notification of ESR Penalty How? IRS will contact employers to inform them of potential liability and provide opportunity for response. If Employer Shared Responsibility liability is confirmed, IRS will send notice and demand for payment. When? After the employees individual tax returns are due claiming premium tax credits and after the due date employers must file the information returns identifying their FTE s and describing any coverage offered. 38

Transitional Relief December 27 th, 2012 Provides RELIEF to employers additional time to ensure affordability and minimum value Fiscal Year vs. Calendar Year Plans 39

Look Back Periods: Transition Measurement Period To Determine Employee Status: Full time or Part Time Employers may adopt a Transition Measurement Period Shorter than 12 months, but not less than 3 month long; AND Begins no later than July 1, 2013 and ends no earlier than 90 days before the first day of the first plan year beginning after January 1, 2014 EXAMPLE: Renewal Date of July 1, 2014 Allowed Period: Longest: April 1 st, 2013 to March 31 st, 2014 Shortest: January 1 st, 2014 to March 31 st, 2014 40

Look Back Periods: Standard Measurement Period For Ongoing Employees: Full time or Part Time Employers will establish a Standard Measurement Period (SMP) 3 to 12 consecutive calendar months Chosen by Employer Did employee average 30 hours per week? Minor adjustments are allowed to SMP to accommodate payroll frequency If employee is considered FULL TIME the employee will be considered full time for a set period Referred to as a Stability Period MUST be at least 3 months AND MUST be as long as the SMP 41

Exchange Subsidy Primary Rule: Employee SUBSIDY triggers employer penalties To be eligible for a subsidy #1: Employee is not offered coverage Not eligible for government programs (like Medicaid) Must meet income requirements (less than 400% of FPL) #2: Employee who is offered coverage Not enrolled in employer s plan Not eligible for government programs (like Medicaid) Meet income requirements (less than 400% of FPL) Employer s coverage is unaffordable (greater than 9.5% of income) or not of minimum value (covers less than 60% of cost of benefits) 42

Exchange Notice Affected Groups: Employers with more than $500,000 in Sales Must provide all employees with a written notice of the Exchange / Marketplace Notice is available online (on disk) May be provided by 1 st Class Mail or Electronically (if DOL requirements are met) Must provide the following content: Existence of the Exchange MAY be eligible for tax credit or cost sharing reduction Inform employees that they MAY lose employer contribution Contact information for the Exchange Explanation of appeal rights 43

Exchange Notice 44

Employer Reporting Employers will have to report certain information about health coverage to the government and individuals Applies to: Applicable large employers generally, employers with at least 50 fulltime equivalent employees Applies to coverage offered after Jan. 1, 2014 First returns to be filed in 2015 45

Employer Reporting Employer Data: Employer identifying information Whether employer offers health coverage to FT employees and dependents Number of Full Time employees for each month Length of any waiting period Monthly premium for lowest-cost option in each enrollment category Employer s share of cost of benefits Names and contact info of employees and months covered by employer s health plan 46

2014 Plan Changes No pre-existing condition exclusions or limitations Cant deny coverage or charge HIGHER premiums Wellness program changes - maximum reward increases to 30% Limits on out-of-pocket expenses and cost-sharing No waiting periods over 90 days Coverage of clinical trial participation Guaranteed issue and renewal No annual limits on essential health benefits Insurance premium rating restrictions 47

Dependent Coverage Beginning in 2014 Large employers must offer health coverage to DEPENDENTS If NOT, subject to a shared responsibility penalty No REQUIREMENT of Employer Contribution to Dependent Coverage Does NOT include SPOUSE Specifically Omitted 48

Non Discrimination Rules WAITING on Final Guidance Applies to NON-Grandfathered, Fully Insured Health Plans PROHIBIT discrimination in favor of Highly Compensated Individuals (HCI s) Prohibited from Discrimination for ELIGIBILITY Prohibited from Discrimination for CONTRIBUTIONS and BENEFITS WILL be subject to ADVERSE TAX CONSEQUENCES Highly Compensated Individuals: One of the FIVE highest paid officers; Shareholder with more than 10% ownership; OR Highest paid 25% of all employees NOTHING prevents Reverse Discrimination 49

Employer Strategies to Avoid Penalties Reducing the number of hours to UNDER 30 Reducing the size of the workplace to UNDER 50 FTE s Reducing benefits to reduce premium Is it cheaper to NOT offer health insurance? INCREASING contribution for single employees and REDUCING for dependents Wage Weighted benefits Reverse Discrimination Dual Option: High Plan / Low Plan Bottom Line: Avoid the Subsidy 50

List Billing PRE-Healthcare Reform Rating Category Premiums Single $500 Employee & Spouse $1,000 Employee & Child(ren) $1,000 Family $1,500 51

List Billing Post-Health Care Reform Name Premiums Employee #1 $700 Spouse #1 $750 Dependent #1 $500 Dependent #1 $500 Total $2,450 Employee #2 $600 Spouse #2 $550 Dependent #1 $500 Total $1,650 52

What is an Exchange? Public health insurance exchange required by ACA Primarily online marketplace for purchasing health insurance (Qualified Health Plans) Run by state or federal government with consumer assistance from other entities For individuals and small employers (generally up to 50 employees) OR the traditional market 53

When is Open Enrollment for the Exchange? Annual Enrollment Period: November 15 th to February 15 th Special Enrollment Rights for Qualifying Events 54

Questions?? Thank you for attending!! Thomas Harte tharte@landmarkbenefits.com Landmark Benefits, Inc. www.landmarkbenefits.com @thomasharte 55