Affordable Care Act (ACA) Updates and Strategies What Employers Need to Know for 2015 and Beyond
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DESCRIPTIONAffordable Care Act (ACA) Updates and Strategies What Employers Need to Know for 2015 and Beyond. June 3, 2014. Agenda. Introduction Employer Penalties Pay or Play Employer Responsibilities Affordability Minimum Value Future Considerations ACA Fees and Assessments Other Considerations - PowerPoint PPT Presentation
<p>Slide 1</p> <p>Affordable Care Act (ACA) Updates and Strategies</p> <p>What Employers Need to Know for 2015 and Beyond</p> <p>June 3, 2014#AgendaIntroductionEmployer Penalties Pay or PlayEmployer ResponsibilitiesAffordabilityMinimum ValueFuture ConsiderationsACA Fees and AssessmentsOther ConsiderationsQuestions and Answers</p> <p>#IntroductionThe pay or play provisions of the ACA will impact most Applicable Large Employers (ALEs) in 2015, generally on their health plan renewal date in 2015ALEs are employers whose total full time employees and full time equivalent employees (FTEs) are greater than 50 [100 for 2015 only]There are two Assessable Payments (Penalties) for employers to consider the pay ($2,000) or play ($3,000); neither are tax deductible</p> <p>#Employer Responsibility Pay or PlayIf an employer does not offer Minimum Essential Coverage (MEC) to 95% of its full time employees (30+ hours per week) [after a maximum 90 day waiting period], the employer is subject to an Assessable PaymentUpdate The standard for applicable large employers is to offer minimum essential coverage to 70% of full-time employees and their dependents during their 2015 plan year, and this will increase to 95% for 2016 plan years and beyond</p> <p>#Employer Responsibility Pay or PlayAssessable Payments of $2,000 annually [$166.67/month] per each full time employeeCalculation excludes first 30 full time employeesUpdate For the 2015 plan year, the exclusion is 80 for applicable large employers with 100 or more full-time employeesIn order for an Assessable Payment to be assessed, one full time employee must receive a premium credit or cost sharing reduction in the Marketplace</p> <p>#Employer Responsibility Pay or Play Example: If an employer does not offer Minimum Essential Coverage (MEC) to 70% of its full time employees and one full time employee receives a premium credit or cost sharing reduction in the Marketplace [exchange]Assuming 100 full time employees for the entire year100 full time employees less the 80 employee exemption equals20 full time Assessable employees x $2,000 = $40,000Penalty is not tax deductible</p> <p>#Employer Responsibility Pay or PlayMinimum Essential Coverage (MEC)An eligible employer-sponsored plan is any group health plan other than a plan that provides only excepted benefits (e.g., stand alone vision or dental, hospital or fixed indemnity)MEC plans need to cover preventive services at 100%Minimum Essential Coverage is not the same as Minimum Creditable Coverage (MCC) or Essential Health Benefits (EHB) or Minimum Value (MV)</p> <p>#Employer Responsibility Pay or PlayKey Clarifications and ConsiderationsIf Minimum Essential Coverage (MEC) is offered, must be offered to employees and dependents [children/adult children to age 26] but no requirement to offer to spouse Transition rules require compliance beginning with the first plan year that begins on or after January 1, 2015Generally if a health insurance plan was in place on February 9, 2014 [the date the regulations were issued], compliance begins first plan year that begins on or after January 1, 2015No plan changes can be made to further delay compliance</p> <p>#8Employer Responsibilities [Play]:Affordability & Minimum Value#Affordability (IRS Notice 2011-73)If an employer offers a health insurance plan to 95% or more of its full time employees (70% in 2015), it may also be subject to an Assessable Payment if:The health insurance plan is unaffordable, orThe health insurance plan does not meet minimum value; andOne full time employee receives a premium credit or cost sharing reduction in the Marketplace [exchange]Assessable payment of $3,000 [$250/month] per full time employee that is receiving premium tax credits or a cost sharing reduction</p> <p>#Affordability (IRS Notice 2011-73)Only those employees receiving reductions/credits are assessable [Key difference from Pay penalty]Total penalty amount limited to the not offering penalty Example: An employer [100 ees] offers health insurance that is either unaffordable or does not meet minimum value and 5 full time employees receive premium credits or cost sharing reductions for the entire year5 employees x $3,000 = $15,000 Penalty not tax deductible</p> <p>#Affordability (IRS Notice 2011-73)Full time employees must be offered a health insurance plan that is affordable, or the employer could be subject to a $3,000 per employee penalty for each employee that receives a premium credit or cost sharing reduction in a public marketplaceAffordable employee cost for a self-only health insurance plan is not greater than 9.5% of employees W-2 income on Box 1 (Total)Gross income less pre-tax deductions#Affordability (IRS Notice 2011-73)Lowest cost for self-only coverage is usedCan use a lower contribution if available for participation in a wellness plan but only those related to tobacco useNo affordability requirement for non self-only coverage tiers (e.g., two person, family)Affordability only an issue for employees who have a household income at 400% of the Federal Poverty Limit (FPL) or lowerEmployer can not be penalized if it offers (or does not offer) an unaffordable or non minimum value plan to an employee with household income >400% of the FPL</p> <p>#Affordability (IRS Notice 2011-73)Three safe harbors for affordabilityFederal Poverty Limit (FPL) for an individualApproximately $92 monthly for 2014 (cost for self-only coverage for lowest cost plan employee is eligible for)Rate of PayCost of Coverage can not exceed 9.5% of rate of pay x 130 hours for the monthW-2 Income (Box 1)Annual income less pre tax deductions (e.g., 401k, medical, dental)</p> <p>#Minimum Value (IRS Notice 2012-31)Full time employees must be offered a health insurance plan that has a minimum actuarial value of 60% or the employer could be subject to a $3,000 per employee penalty for each employee that receives a premium credit or cost sharing subsidy in a public marketplace [penalty works the same as Affordability]Minimum Value - the plans share of the total allowed costs of benefits provided under the plan is 60 percent or greater of such costs #Minimum Value (IRS Notice 2012-31)Methods for Determining Minimum ValueHealth and Human Services (HHS) online Minimum Value (MV) or Actuarial Value (AV) calculatorsCompletion of a plan design checklistCertification by an outside ActuaryOnline calculator available at HHS websiteEssential Health Benefits (EHB) or Minimum Essential Coverage (MEC) are not the same as Minimum Value (MV) requirements#Waiting Periods (IRS Notice 2012-59)Public Health Service (PHS) Act section 2708, as added by the Affordable Care Act, provides that, in plan years beginning on or after January 1, 2014, a group health plan or group health insurance issuer shall not apply any waiting period that exceeds 90 days (90 days is NOT three months)Waiting Period - the period that must pass before the individual is eligible to be covered for benefits under the terms of the plan#Waiting Periods (IRS Notice 2012-59)Waiting period will also be integrated into the determination of part time/full time employee status for variable hour employeesWaiting periods may also have to comply with non-discrimination provisionsWaiting periods are different than eligibility criteria For example, attainment of a license, part time employees working a certain number of hours in a period of time before becoming eligible#Notices Updates On May 2, 2014 HHS updated COBRA and CHIPRA notices based on Marketplaces now being operationalNew versions should be used going forwardCOBRA: www.gol.gov/ebsa/cobra.htmlCHIPRA: www.dol.gov/ebsa/compliance_assistance.html</p> <p>#19Future Considerations#Future ProvisionsEmployer Reporting in 2016 for coverage offered on or after January 1, 2015. Due February 28th [March 1 in 2016] or March 31st if filed electronically Waiting periodLowest cost employee premium for self only coverageWhether the plan met Minimum Value (MV)Employee information (name, address, ss#)Months covered by the planSimilar to 1099-HC for MA health care reformEmployer summary reporting required as well</p> <p>#21Future ProvisionsEmployer Reporting DetailsFully insured checklistSelf-insured checklist</p> <p>#22Future Provisions (Delayed Indefinitely)Automatic enrollment of employees in health plansFor employers with 200+ full time employeesNon-discrimination rules for fully-insured plansSimilar to existing Section 105(h) rules for self insured plansThis could eliminate different plans for different classes of employeesAlready prohibited in Massachusetts under insurance regulations from its 2006 health care reform law#Cadillac TaxScheduled to be effective 201840% excise tax on the excess total premium over$10,200 for self only coverage$27,500 for family coverageNo guidance issued yet for other coverage tiers or payment methods and timingMany plans at current rates and an 8% annual trend rate will exceed these limitsExample: 2014 rates of $625 self only and $1,690 family would reach the limit in 2018 at an 8% annual trend#Fees and Assessments#PCORI FeesACA requires the payment of a Patient Centered Outcomes Research Institute (PCORI) fee for plan years that end after October 1, 2012 through 2019 [health plans]$1.00 per average covered life (member) 10/13$2.00 per average covered life (member) 10/14Indexed in subsequent yearsPaid by July 31st of following year (on IRS Form 720)First payment was due July 31, 2013#26PCORI FeesFor fully insured plans, fee paid by insurer (included in premiums)For self insured plans, including Health Reimbursement Arrangements (HRAs) fee paid by plan sponsor (employer)Health Reimbursement Arrangements (HRAs)If coupled with fully insured plan two feesOne paid by insurer, one paid by plan sponsorIf integrated with self-insured plan one fee#27PCORI FeesIn order for the one fee to apply for the self insured health plan and HRAHRA and Health Plan must have the same plan yearHRA and Health Plan must be established by the same plan sponsorHRAs set up by an employer who participates in a consortium or other joint purchase arrangement would need to pay a separate fee [consortium pays the other fee and includes in premiums}For employers with fully insured plans and an HRACovered Lives can be employee or participant count, not member count#28PCORI FeesIRS Form 720http://www.irs.gov/pub/irs-pdf/f720.pdfPCORI is on Line 133 under Part IIEnter # of covered lives and calculate the total due (fee is pre printed, although form needs to be updated)</p> <p>#29Transitional Reinsurance Program FeesACA created a Transitional Reinsurance Program to stabilize premium rates during the period 2014-2016Payment for this program will come from insurers and Third Party Administrators (TPAs) [employers]The 2014 fee will be $63 per member [covered life] per yearThe 2015 fee will be $44 per member [covered life] per yearThe 2016 fee has not yet been announced#30Transitional Reinsurance Program FeesFor fully insured plans, fee paid by insurer (included in premiums)For self insured plans, fee paid by plan sponsor (employer)Health Reimbursement Arrangements (HRAs) that are integrated with a medical plan (fully or self insured) are exempt from this feeIntegrated covers only those enrolled in the plan that meets ACA annual limit requirements</p> <p>#31Transitional Reinsurance Program FeesSelf insured employers need to register with HHSHealth Insurance Oversight System (HIOS) and obtain a HIOS ID numberhttp://www.hhs.gov/cciio/gatheringinfo/index.htmlEnrollment counts sent to HHS by November 15thHHS sends invoice within 30 days or by December 15th, payment due 30 days from invoicePayment made in two installments:$52.50 in January 2015 [$33 in 2016]$10.50 in late fourth quarter (Oct -Dec) 2015 [$11 in 2016]</p> <p>#32Health Insurance Industry AssessmentsAssessments on health insurers and certain dental insurers to pay for ACA implementation$8 Billion total in 2014$14.3 Billion total in 2018Increases annuallyAmount of carrier assessment is related to the individual carriers share of total premiumsApplies to fully insured plans onlyAssessment is added to the premium ratesAssessments have ranged from 1.5% - 6% of premiums#33Other Considerations#Individual Responsibility 2014 Individuals are covered by Minimum Essential Coverage (MEC) health plan or pay a penalty Annual individual penalty is the greater of $95 [flat dollar penalty capped at 3x for a family] or 1% of household taxable income for 2014Capped at the national average Bronze level premiumPenalty is assessed on federal tax return and either added to tax or subtracted from refund (similar to MA)Employer/carrier reporting provides the backup#352014 Credit and Subsidy Eligibility Table</p> <p>#36Determining Full Time EmployeesDetermination of Full Time employeeNew Employees: at hire date, it can be reasonably determined the employee is expected to work an average of 30 hrs/week over the initial Measurement PeriodVariable Hour Employee: at hire date, it can not be reasonably determined the employee is expected to work an average of 30 hrs/week over the initial Measurement PeriodPart Time Employee: An employee that is neither a Full Time or Variable Hour EmployeeSpecial rules for measuring Variable Hour Employees</p> <p>#Determining Full Time EmployeesVariable Hour EmployeesEmployers can utilize a Measurement Period for new and ongoing Variable Hour Employees to determine Full Time status of the employeeMeasurement Period can be between 3 and 12 consecutive monthsUsed to determine if employee averaged 30 hours per week and therefore considered Full Time for Assessable Payments or health insurance eligibilityStability period must be equal to or greater than Measurement period</p> <p>#Questions and AnswersContact:Pat HaradenLongfellow Benefitspat_haraden@ajg.comwww.lf-ben.com617-351-6054 #20132013 Federal Poverty GuidelinesAnnual Amounts48 States except Alaska and Hawaii</p> <p>Household Size2014 HHS Poverty Guidelines133% of FPL138% of FPL200% of FPL300% of FPL400% of FPL1$11,670$15,521$16,105$23,340$35,010$46,6802$15,730$20,921$21,707$31,460$47,190$62,9203$19,790$26,321$27,310$39,580$59,370$79,1604$23,850$31,721$32,913$47,700$71,550$95,4005$27,910$37,120$38,516$55,820$83,730$111,6406$31,970$42,520$44,119$63,940$95,910$127,8807$36,030$47,920$49,721$72,060$108,090$144,1208$40,090$53,320$55,324$80,180$120,270$160,360add for each additional person$4,060$5,400$5,603$8,120$12,180$16,240</p> <p>MonthlyAnnualFPL Safe Harbor for Affordability$92.39$1,108.65</p>
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