2010 Patient Protection & 2010 Patient Protection & Affordable Care Act:Affordable Care Act:

2013 Updates, Extensions, 2013 Updates, Extensions, and Deadlines – and Deadlines –

What Employers Need to KnowWhat Employers Need to Know

By: Casey S. Stevenson

Patient Protection and Affordable Care ActPatient Protection and Affordable Care Act

Colloquially referred to as “Obamacare”Colloquially referred to as “Obamacare” Employer MandateEmployer Mandate

– Originally Scheduled to take effect in Originally Scheduled to take effect in January, 2014January, 2014

““Pay or Play” and employer reporting Pay or Play” and employer reporting requirementsrequirements

Penalty provision, and employer mandate Penalty provision, and employer mandate and reporting requirements effective date and reporting requirements effective date has been extended to until January, 2015has been extended to until January, 2015

The Employer Mandate, GenerallyThe Employer Mandate, Generally

Applicable Large EmployersApplicable Large Employers Minimum Essential CoverageMinimum Essential Coverage

– Minimum ValueMinimum Value– AffordableAffordable

Must meet certain reporting Must meet certain reporting requirementsrequirements

Pay a penaltyPay a penalty

Not All Provisions of the ACA Not All Provisions of the ACA have Been Extendedhave Been Extended

Health Care Marketplaces (formerly health care Health Care Marketplaces (formerly health care exchanges) are scheduled to open their virtual exchanges) are scheduled to open their virtual doors on January 1, 2014doors on January 1, 2014

Open enrollment for Health Care Marketplaces is Open enrollment for Health Care Marketplaces is October 1, 2013October 1, 2013

Premium subsidies are scheduled to become Premium subsidies are scheduled to become effective in 2014effective in 2014

Individual mandate is scheduled to become Individual mandate is scheduled to become effective in 2014effective in 2014

The Employer MandateThe Employer MandateApplicable Large EmployerApplicable Large Employer

Applicable Large EmployerApplicable Large Employer– Employers with 50 or more full-time or full-time Employers with 50 or more full-time or full-time

equivalent employeesequivalent employees Full-time: average of 30 or more hours of service per week Full-time: average of 30 or more hours of service per week

calculated on a monthly basis, or 130 hourscalculated on a monthly basis, or 130 hours Full-time equivalent employees (“FTE”): FTE is determined based Full-time equivalent employees (“FTE”): FTE is determined based

upon the total number of hours of service each month by part-time upon the total number of hours of service each month by part-time employees divided by 120employees divided by 120

– Employers can calculate the monthly average of full-Employers can calculate the monthly average of full-time employees and FTEs on business days during any time employees and FTEs on business days during any consecutive six-month period in the prior yearconsecutive six-month period in the prior year

If that number is more than 50 then the employer is an Applicable If that number is more than 50 then the employer is an Applicable Large EmployerLarge Employer

The Employer Mandate The Employer Mandate Applicable Large Employer (cont.)Applicable Large Employer (cont.)

Who’s an employee?Who’s an employee?– Common law standardCommon law standard– So this is something that has not changedSo this is something that has not changed

Hours of service Hours of service is not is not hours worked.hours worked.– An employee's hours of service include: An employee's hours of service include:

each hour for which an employee is paid, or each hour for which an employee is paid, or entitled to payment, to perform duties for entitled to payment, to perform duties for the employerthe employer

each hour of paid leaveeach hour of paid leave

The Employer Mandate The Employer Mandate Applicable Large Employer (cont.)Applicable Large Employer (cont.)

Aggregate employers: companies under common Aggregate employers: companies under common control are combined together for purposes of control are combined together for purposes of determining whether they meet the 50 full-time determining whether they meet the 50 full-time (or equivalents) threshold (or equivalents) threshold – Common ownership:Common ownership:

““Parent-subsidiary” Parent-subsidiary” ““Brother-sister” Brother-sister” ““Affiliated service group” Affiliated service group”

– Each entity considered an “applicable large employer Each entity considered an “applicable large employer member” member”

– But each individual company will have penalties, if But each individual company will have penalties, if applicable, calculated separatelyapplicable, calculated separately

The Employer Mandate The Employer Mandate Full-Time EmployeesFull-Time Employees

Full-time employees: Any employee that averages Full-time employees: Any employee that averages more than 30 hours per week based upon a more than 30 hours per week based upon a monthly basis, or 130 hours in a monthmonthly basis, or 130 hours in a month

Hours of part-time workers are counted for Hours of part-time workers are counted for purposes of determining whether an employer is purposes of determining whether an employer is Applicable large employerApplicable large employer

But penalties only apply to full-time employeesBut penalties only apply to full-time employees So, the determination of whether or not an So, the determination of whether or not an

employee is full-time versus part-time employee is full-time versus part-time is criticalis critical

The Employer Mandate The Employer Mandate Full-Time Employees (cont.)Full-Time Employees (cont.)

Penalty regulations require determination of Penalty regulations require determination of employee status on a month-by-month basisemployee status on a month-by-month basis– Problematic for many reasons:Problematic for many reasons:

Some employers may not know until month is over which Some employers may not know until month is over which employees are full-timeemployees are full-time

Work for employees may vary considerably from month to monthWork for employees may vary considerably from month to month

Safe harbor provision allows full-time status to be Safe harbor provision allows full-time status to be determined based on a “look back” perioddetermined based on a “look back” period– Differing categories of employees are contemplated:Differing categories of employees are contemplated:

On-going employeesOn-going employees New variable hour employeesNew variable hour employees Seasonal employeesSeasonal employees

The Employer Mandate The Employer Mandate Full-Time Employees (cont.)Full-Time Employees (cont.)

Look back:Look back:– Measurement Period: Period of 3 months to 12 months Measurement Period: Period of 3 months to 12 months

in which hours are calculatedin which hours are calculated Standard Measurement Period (for ongoing employees)Standard Measurement Period (for ongoing employees) Initial Measurement Period (for new variable hour employees)Initial Measurement Period (for new variable hour employees)

– Stability Period: period in which employee status is Stability Period: period in which employee status is locked in. locked in.

Permissible length varies but length must be same for new variable Permissible length varies but length must be same for new variable hour and ongoing employees hour and ongoing employees

– Administrative Period: period after measurement period Administrative Period: period after measurement period but before stability period for determination of full-time but before stability period for determination of full-time status and enrollment of eligible full-time employeesstatus and enrollment of eligible full-time employees

The Employer Mandate The Employer Mandate Full-Time Employees (cont.)Full-Time Employees (cont.)

Hours of service:Hours of service:– Hourly employees: hours worked and hours for which Hourly employees: hours worked and hours for which

pay is received, including vacation, disability, holiday, pay is received, including vacation, disability, holiday, illness, layoff, paid leave illness, layoff, paid leave

Special rules for certain unpaid leaves of absenceSpecial rules for certain unpaid leaves of absence

– Non-hourly (salaried) employees: have three options:Non-hourly (salaried) employees: have three options: Count actual hours Count actual hours Count 8 hours/day in which 1 hour of service is performedCount 8 hours/day in which 1 hour of service is performed Count 40 hours/week in which an hour of service is performedCount 40 hours/week in which an hour of service is performed

Counting hours of service using pay periods (for Counting hours of service using pay periods (for ongoing employees only):ongoing employees only):

The Employer Mandate The Employer Mandate Calculating Full-Time and EquivalentsCalculating Full-Time and Equivalents

Full-time employees: Any employee that averages Full-time employees: Any employee that averages more than 30 hours per week based upon a more than 30 hours per week based upon a monthly basis, or 130 hours in a monthmonthly basis, or 130 hours in a month– Four weeks in SeptemberFour weeks in September

Week 1 – 20 hoursWeek 1 – 20 hours Week 2 – 25 hoursWeek 2 – 25 hours Week 3 – 40 hoursWeek 3 – 40 hours Week 4 – 40 hoursWeek 4 – 40 hours

Total of 125 hours/4 weeks = 31.25 (more than 30 hours per week Total of 125 hours/4 weeks = 31.25 (more than 30 hours per week so this is a full-time employee)so this is a full-time employee)

– Let’s suppose you have 45 full-time employeesLet’s suppose you have 45 full-time employees

The Employer Mandate The Employer Mandate Calculating Full-Time and Equivalents (cont.)Calculating Full-Time and Equivalents (cont.)

Full-time equivalent employee: Full-time equivalent employee: – Four weeks in SeptemberFour weeks in September

Week 1 – 25 hoursWeek 1 – 25 hours Week 2 – 30 hoursWeek 2 – 30 hours Week 3 – 30 hoursWeek 3 – 30 hours Week 4 – 25 hoursWeek 4 – 25 hours

Total of 110 hours/4 weeks = 27.5 (less than 30 hours per week so Total of 110 hours/4 weeks = 27.5 (less than 30 hours per week so this is a part-time employee)this is a part-time employee)

– 20 part-time employees that work 110 hours 20 part-time employees that work 110 hours per month per month

The Employer Mandate The Employer Mandate Calculating Full-Time and Equivalents (cont.)Calculating Full-Time and Equivalents (cont.)

45 full-time employees45 full-time employees 20 part-time employees that work 110 hours per 20 part-time employees that work 110 hours per

month month

Are you an Applicable Large Employer??Are you an Applicable Large Employer??– Yes.Yes.– Why?Why?

20 part-time employees x 110 hours worked = 2,20020 part-time employees x 110 hours worked = 2,200 2,200/120 (the statutory magic number) = 18.3333 FTE’s2,200/120 (the statutory magic number) = 18.3333 FTE’s 18.3333 + 45 full-time employees = 63.3333 or more than 5018.3333 + 45 full-time employees = 63.3333 or more than 50

What that mean for you?What that mean for you?

The Employer Mandate The Employer Mandate Minimum Essential CoverageMinimum Essential Coverage

Employers meeting the “50 employee” threshold must offer Employers meeting the “50 employee” threshold must offer minimum essential coverage to employeesminimum essential coverage to employees– Minimum essential coverage generally includes Minimum essential coverage generally includes

coverage under an “eligible employer-sponsored plan”coverage under an “eligible employer-sponsored plan”– An eligible employer-sponsored plan is defined to mean:An eligible employer-sponsored plan is defined to mean:

a group health plan or group health insurance a group health plan or group health insurance coverage offered by an employer to an employee coverage offered by an employer to an employee which is a governmental plan orwhich is a governmental plan or

any other plan or coverage offered in the small or any other plan or coverage offered in the small or large group market orlarge group market or

grandfathered plan offered in the group marketgrandfathered plan offered in the group market– Minimum essential coverage must be offered to all but Minimum essential coverage must be offered to all but

5% of employees and their dependents5% of employees and their dependents

The Employer Mandate The Employer Mandate Affordability AssessmentAffordability Assessment

Determining whether offered coverage is Determining whether offered coverage is affordable:affordable:– If an employee’s share of the premium for employer-If an employee’s share of the premium for employer-

provided coverage would cost the employee more than provided coverage would cost the employee more than 9.5% of the employee’s annual household income, the 9.5% of the employee’s annual household income, the coverage is not considered affordable  coverage is not considered affordable 

– If an employer offers multiple healthcare coverage If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost options, the affordability test applies to the lowest-cost option available to the employee that also meets the option available to the employee that also meets the minimum value requirementminimum value requirement

– There are safe harbors for affordabilityThere are safe harbors for affordability

Determining minimum value:Determining minimum value:

– A plan fails to provide minimum value if the plan’s share A plan fails to provide minimum value if the plan’s share of the total allowed costs of benefits provided under the of the total allowed costs of benefits provided under the plan is less than 60% of such costsplan is less than 60% of such costs

– A minimum value calculator is downloadable as an Excel A minimum value calculator is downloadable as an Excel spreadsheet at spreadsheet at http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mv-calculator-final-4-11-2013.xlsm

The Employer Mandate The Employer Mandate Minimum ValueMinimum Value

Penalties will be levied by the Internal Revenue Penalties will be levied by the Internal Revenue Service if:Service if:– Employer does not offer minimum essential coverage; orEmployer does not offer minimum essential coverage; or– Employer offers minimum essential coverage, andEmployer offers minimum essential coverage, and

Is not affordable; orIs not affordable; or Does not offer minimum value; Does not offer minimum value;

ANDAND

– Any full-time employee receives a subsidy to purchase Any full-time employee receives a subsidy to purchase insurance through a Health Care Marketplaceinsurance through a Health Care Marketplace

– No coverage at all then the penalty is $2,000 x the No coverage at all then the penalty is $2,000 x the number of full-time employees over 30number of full-time employees over 30

– Not affordable or no minimum value then the lesser of Not affordable or no minimum value then the lesser of $2,000 x the number of full-time employees over 30; or$2,000 x the number of full-time employees over 30; or $3,000 x the number of full-time employees that receive a subsidy$3,000 x the number of full-time employees that receive a subsidy

The Employer Mandate The Employer Mandate PenaltiesPenalties

Cornerstone of the ACACornerstone of the ACA

Health Care Market Places (both state run Health Care Market Places (both state run and federally run)and federally run)

Premium Tax Credits (subsidies)Premium Tax Credits (subsidies) Individual Mandate (tax on individuals who Individual Mandate (tax on individuals who

do not obtain insurance)do not obtain insurance)

– Implementation and effective dates have not Implementation and effective dates have not been extended been extended

– And, all are closely tied to the Employer And, all are closely tied to the Employer MandateMandate

Individual Aspects Individual Aspects of the Employer Mandate?of the Employer Mandate?

Individuals with household incomes Individuals with household incomes between 100% and 400% of the federal between 100% and 400% of the federal poverty level will be eligible for a federal poverty level will be eligible for a federal subsidysubsidy

Access to employer-sponsored coverage Access to employer-sponsored coverage that is both "affordable" and provides that is both "affordable" and provides "minimum value" disqualifies an individual "minimum value" disqualifies an individual from receiving the subsidyfrom receiving the subsidy

The Department of Health and Human The Department of Health and Human Services (HHS) has been tasked with Services (HHS) has been tasked with verifying whether an individual has access verifying whether an individual has access to employer sponsored coverageto employer sponsored coverage

Individual Aspects Individual Aspects of the Employer Mandate? of the Employer Mandate? (cont.)(cont.)

So, since individuals may apply for a So, since individuals may apply for a subsidy, an employer cannot ignore subsidy, an employer cannot ignore “affordability” and “minimum value” “affordability” and “minimum value” determination until 2015determination until 2015

Employers will receive inquiries from Employers will receive inquiries from federally run exchanges federally run exchanges

Employees will also make inquiries to Employees will also make inquiries to determine whether they can apply for a determine whether they can apply for a subsidysubsidy

Individual Aspects Individual Aspects of the Employer Mandate? of the Employer Mandate? (cont.)(cont.)

““Affordability” and “minimum value” of Affordability” and “minimum value” of minimum essential coverage is also minimum essential coverage is also important for the notice requirements important for the notice requirements related to health care marketplacesrelated to health care marketplaces

Employers must to send a notice to Employers must to send a notice to current employees by current employees by October 1, 2013 October 1, 2013 advising them about the availability of advising them about the availability of coverage through a health care coverage through a health care marketplacemarketplace

New employees must receive the notice New employees must receive the notice within 14 days of hirewithin 14 days of hire

http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf

Other Provisions of the ACA in Effect or Other Provisions of the ACA in Effect or Which Have not Been ExtendedWhich Have not Been Extended

90-Day Waiting Periods Limit: Effective January 1, 90-Day Waiting Periods Limit: Effective January 1, 2014, no waiting period more than 90 days2014, no waiting period more than 90 days

Maximum Out-of-Pocket Limitation: Effective Maximum Out-of-Pocket Limitation: Effective January 1, 2014, $6,350 for employee-only January 1, 2014, $6,350 for employee-only coverage and $12,700 for family coveragecoverage and $12,700 for family coverage

Patient-Centered Outcomes Research Institute Patient-Centered Outcomes Research Institute (PCORI) Fee: Health insurance issuers and (PCORI) Fee: Health insurance issuers and sponsors of self-funded plans must pay a fee to sponsors of self-funded plans must pay a fee to fund the PCORI based upon the average number fund the PCORI based upon the average number of lives coveredof lives covered– Generally the PCORI fee is $2 per life covered Generally the PCORI fee is $2 per life covered

($1 for plan years ending before October 1, ($1 for plan years ending before October 1, 2013)2013)

– The fee expires in 2019The fee expires in 2019

Other Provisions of the ACA in Effect or Other Provisions of the ACA in Effect or Which Have not Been Extended (cont.)Which Have not Been Extended (cont.)

Transitional Reinsurance Fee: Transitional Reinsurance Fee: – Insured and self-funded plans must pay a per enrollee Insured and self-funded plans must pay a per enrollee

fee of $63 fee of $63 – The number of enrollees must be reported by November The number of enrollees must be reported by November

15, 201415, 2014– The first fee must be paid in early 2015.The first fee must be paid in early 2015.

Preexisting Condition Exclusions: Effective Preexisting Condition Exclusions: Effective January 1, 2014, the prohibition on preexisting January 1, 2014, the prohibition on preexisting condition exclusions is extended to individuals of condition exclusions is extended to individuals of all agesall ages

Elimination of Annual Limits: Effective January 1, Elimination of Annual Limits: Effective January 1, 2014, annual limits on the dollar amount of 2014, annual limits on the dollar amount of essential health benefits are prohibitedessential health benefits are prohibited

Other ConsiderationsOther Considerations

Defunding the Patient Protection and Affordable Defunding the Patient Protection and Affordable Care ActCare Act

Passed in the House on September 20Passed in the House on September 20thth – Somewhat surprising since, to date, there have been Somewhat surprising since, to date, there have been

over 40 futile votes to repeal the lawover 40 futile votes to repeal the law Probably will not get passed the SenateProbably will not get passed the Senate

– A vote could come as early as SundayA vote could come as early as Sunday Even if the Senate passed the bill, President Even if the Senate passed the bill, President

Obama would never signObama would never sign So – Defunding is DOA, and the Affordable Care So – Defunding is DOA, and the Affordable Care

Act is here to stay!Act is here to stay!

Patient Protection Patient Protection & Affordable Care Act& Affordable Care Act

Questions?Questions?