april 29 2.45pm roger abramson

Surviving Reform Roger Abramson, General Counsel

AmeriFlex Business Solutions

April 29, 2013

HCR: One Stubborn Three-Year Old

2011: When HCR Could Barely Walk

• Happy Birthday, Health Care Reform” (BSE, Opryland Hotel, April 2011)

• The Two-Factor Theory: – Does the provision expand coverage?

– Has the provision gone into effect?

2011: When HCR Could Barely Walk

2012: The Terrible Twos

• January - May: Republican Presidential Primaries – Mitt Romney wins

• June: Supreme Court Ruling – “Individual Mandate” upheld

– Only Medicaid mandates affected

• November: President Obama re-elected

• 11/6/12 at 11:17 EST: Skynet becomes self-aware; starts developing and issuing regulations

2013: Where We Are Now

• ACA now as much a part of the benefits legal landscape as ERISA, COBRA, HIPAA, etc.

• Congress out of the picture until at least 2015

• Playing field has shifted to the agencies

• The Five Stages of Grief = Completed! – Right?

2013: Where We Are Now

Understanding Administrative Law

• Executive Branch: Where the action is now

• Not just “enforcement,” but “administration”

• President holds all of the cards

• Health care reform law gives agencies wide latitude


• Administrative Procedure Act (1946) – Codified the Washington we know and love today

– Borne out of the Great Depression/WWII/FDR Era

– Essentially put into place an entirely new lawmaking process

– Understanding this is key to understanding the next phase of health care reform implementation


• The Rulemaking Process – Proposed Rule

– Public Comment

– Final Rule

– Judicial Review?

• Was Congress’ intent clear?

• If not, is agency’s statutory construction permissible?

• Courts tend to grant wide latitude

Administrative Law & the ACA

• The ACA’s Three-Agency Circus – Internal Revenue Service

– Department of Labor

– Department of Health and Human Resources

• Internet HQ: http://www.dol.gov/ebsa/healthreform/

http://www.dol.gov/ebsa/healthreform/


• Sometimes It’s Pretty Straightforward – Insurance Market Reforms

– Essential Benefits

– Affordability

– Actuarial Value

– Exchanges & “Play-or-Pay” (more to come)


• Sometimes…It’s Not: HRAs Anyone? – HRAs: The HCR Wedding Crasher

– Not “HCR,” but “HIR” Who Invited HRAs?

– HRAs = “Group Health Plans”

– But they are not insurance

– Legislative afterthought

– Agencies have struggled to deal with them

The HRA/HCR Conundrum

• Annual limits – Annual limits prohibited for group health plans

– The great “waiver” controversy of 2010

– 2011 – “Pre-existing” HRAs grandfathered in

– 2014 – Window closing

– Stand-alone HRAs now at risk

• Retiree plans OK

• Vision/dental plans OK


• HRAs & the Summary of Benefits and Coverage (SBC) – Applies to “group health plans”

– So applies to HRAs

– Started doing those for clients in fall 2012


• HRAs & PCOR Fees – Patient-Centered Outcomes Institute

– Usually a “per-participant” fee paid by insurers

– HRA application

• Stand-alones: Pay

• Integrated with insurance plan: Pay on top of insurance PCOR fee

• Integrated with self-insured plan: One combined fee


• HRAs & “Valuable” Coverage – Yes, if “integrated”

• Calculations to come

– Stand-alones may be left out in cold

– What about “cost-sharing”?

• Small groups cannot use HRAs to lower deductible to required $2,000/$4,000 threshold

• “Administrative concerns”


• HRAs & the “Cadillac Tax” – Down the road

– Likely determined by the answers to above questions

• Or whatever direction the wind is blowing then

Exchanges, Playing, Paying & All That Stuff

• The “Play-or-Pay” Penalty – Intended Purpose: Shared responsibility

– Two ways to lose

• Not offering minimum essential health care coverage for all FT EEs

• Insufficient benefits

– Not offering “affordable” coverage (premium exceeds 9.5% of EE’s household income)

– Not offering “minimum value” (at least 60%)

– Penalty is due if any FT EE purchases health insurance through an Exchange using a premium tax credit or cost-sharing reduction


• The “Play-or-Pay” Penalty – Applies to “applicable large employers”

– Average 50 FT EEs during previous calendar year

• Generally, FT= at least 30 hours a week

• Count FTEs for part-time EEs

– BUT: PT EEs do not count for purpose of the penalty

– Watch out for controlled groups

– Complicated calculations for ERs on “the line”


• The “Play-or-Pay” Penalty – Offering employer-sponsored health coverage to FT EEs is the trigger

– BUT: Assessing “FT EE” a little different here

• Part-timers do not count

• Real-time, not retrospective

– The “fortunetelling” problem

– IRS has developed safe harbors for both new and regular EEs

» Summary: “Standard periods” and “measurement periods”


• The “Play-or-Pay” Penalty – The “No-Plan” Penalty

• No plan with “minimum essential coverage” offered to FT EEs + subsidized FT EE enrollment in a QHP = Penalty

– NOTE: Both factors must apply

• Penalty = Applicable payment amount ($166.67 in 2014) x # of FT EEs (minus a 30-EE allowance)


• The “Play-or-Pay” Penalty – The “Inadequate-Plan” Penalty

• Plan failing minimum value or affordability requirement with “minimum essential coverage” offered to FT EEs + subsidized FT EE enrollment in a QHP = Penalty

– NOTE: Both factors must apply

• “Minimum Value” – three options

– Calculator

– Safe harbor checklist

– Actuarial certification


• The “Play-or-Pay” Penalty – The “Inadequate-Plan” Penalty

• “Affordability”

– Statute = “household income”

– IRS safe harbor = EE’s W-2 alone OK to use

» EE portion of the self-only premium for the ER’s lowest-cost “minimum value” coverage cannot exceed 9.5% of the EE’s wages

• Penalty = $250 (1/12 of $3,000) X # of FT EEs getting subsidized QHP

– No “30 EE” reduction

– Capped Cannot be higher than “no-plan” penalty


• The “Play-or-Pay” Penalty – How Would the Employer Know?

• Exchange sends notice to employer

• IDs EE and explains ERs penalty

• ER can appeal

• Details still being worked out

• Expect changes as we go along

• Privacy?

Congratulations: You are the New HR Director at Holiday Corp

• Holiday Fun & Family Resort (“HFFR”) – Principal business: Family resort in NE US

– Main operating season: May 1 – August 31

• Seasonal EEs work during this time

• Mostly college students

– Off-season: September 1 – April 30

Congratulations: You are the New HR Director at Holiday Corp

• Stats – 250 total employees

– 60 year-round employees

• 20 corporate employees – 10 “FT” working at least 35 hours/wk

– 10 “PT” working at least 25 hours/wk

• 40 resort employees – 25 “FT” working at least 35 hours/wk

– 15 “PT” working at least 20 hours/wk

– 175 seasonal employees

• 90 “FT” working at least 35 hours/wk

• 85 variable but no more than 25 hours/wk

The Rubber Meets the Road (Issues)

• “Applicable large employer” – Predecessor/successor employers

– “Business day”

– Full-time & Full-time Equivalents

– Seasonal employees

– New employers


• “Full-Time Employee” – Exclude PT EEs this time

– Not retrospective this time

• Except that it is

– What is an “hour of service”?

• Up to agencies to define

• Hourlies v. Salaried – Actual? Days? Weeks?

– “Anti-abuse” rule

• “Oddballs” (e.g., airline pilots, adjunct profs)


• “Full-Time Employee” – The IRS Safe Harbor (aka “Lets Just Ignore What the Statute Says”)

• The Measurement Period, etc.

• New v. Ongoing EEs

• Transition Rule for 2013

• “Variable-Hour” EEs

• Seasonal EEs


• The “No-Plan” Penalty – The 5/5 “Margin-of-Error” allowance

– “Offer of coverage”

– Employees and “Dependents”

• Who’s missing?

– “Minimum essential coverage”


• The “Inadequate-Plan” Penalty – Minimum Value Test (at least 60%)

• Calculator

• Safe Harbor

• Actuarial

– Affordability Test (9.5% of HH income)

• “Form W-2”

• “Rate of Pay”

• Poverty Line

– Role of HRA/HSA contributions?


• Penalty Assessment – Exchange sends notice to employer

– IDs EE and explains ER’s penalty

– ER can appeal/detailed process

– Expect changes as we go along

– Privacy?


• Transition Rules – Fiscal Year Plan Years/Cafeteria Plan Years

– Initial Measurement Period for 2013/4

– Coverage for Dependents

– Variable-Hour Employee Definition

Keeping It Real

• Good Advice = Providing a Reality Check

• Better to “play” or “pay”? – False choice?

• The Taxation Factor – Bonus-up?

• The HR Factor

• The PR Factor

Keeping It Real

• “Wait-and-see” approach most likely – “Diehards” excepted

– Let the pioneers go ahead

• “29 hours” may be the new “39 hours” – Legislative movement to lower?

• Agencies & exchanges adjusting on the fly – Remember: Expanding or preserving coverage is the key

Questions?

april 29 2.45pm roger abramson

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