The Patient Protection andThe Patient Protection andAffordable Care Act’s ImpactAffordable Care Act’s Impact

“The Next Steps for Employers”“The Next Steps for Employers”

E. Kent Evans, CBC

Managing Representative

Medical Society of Delaware Insurance Services, Inc.

This material and any accompanying remarks are provided for informational purposes only and nothing contained in either should be taken as a legal opinion or as legal advice.

Confused?You Are Not Alone....

“Four in ten Americans (42 percent) are unaware that the ACA is still the law of the land, including 12 percent who believe the law has been repealed by Congress, 7 percent who believe it has been overturned by the Supreme Court and 23 percent who don’t know whether or not the ACA remains law. And about half the public says they do not have enough information about the health reform law to understand how it will impact their own family….”

Source: Henry J. Kaiser Family Foundation Health Tracking Poll: April 2013

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Agenda

Impact of Exchanges Pay or Play Tax (High Level) Employee Impact Cadillac Tax

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The Election is Over! Full Steam Ahead for PPACA

– Since the November Elections, HHS has issued over 500 pages of additional guidance for the States on PPACA.

– Exchanges must be operational by October 1, 2013, to accept new business for the January 1, 2014 open enrollment season.

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March 1, 2013 Health Insurance Exchange Notice

Employers to Provide Notice of Health Insurance Exchanges:

- Beginning on March 1, 2013, employers must provide employees

written notice:

(1) of the existence of the Health Insurance Exchange which will become operative as of January 1, 2014;

(2) of the employee’s potential eligibility for federal assistance if the employer’s health plan doesn’t meet affordability and minimum value criteria under PPACA and if employee household income is below certain thresholds; and

(3) that employees may lose the employer’s contribution to health coverage if they purchase health insurance through the Health Insurance Exchange.

DELAYED

What is an Exchange?A technology based platform that provides greater consumer choice, reduces employer engagement and enhances decision support. A broad spectrum of Exchange definitions in use today General Attributes:

‒ “Shop and Compare” quoting tool‒ Technology based ‘backbone’‒ Robust decision support tools ‒ Customer Service support‒ Greater employee ownership / responsibility‒ Reduced employer engagement

Spectrum varies ‒ Personalized member experience‒ “Point and click’ purchasing platform‒ Increased employer cost predictability and budget ability (DB to DC)

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Will State Exchanges Bea Viable Option?

December 14th Deadline– No further extensions – Federal exchange for 32 states – Initial open enrollment to start 10/1/2013 – 19 states and DC establish state– 7 partnership exchanges– 25 states default to federal exchange

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Emerging Exchange Models- Employer Involvement +

State / Federal Public

Exchanges

Multi carrier Exchanges -

Individual Plans

Multi carrier Exchanges- Group Plans

Single carrier Exchanges- Group Plans

Traditional ER sponsored Group Plans

• Operational in 2014

• Governmental Subsidies included

• Various attributes / types which differ by state model

• ER has no control• Insured individual

products• Ex: MA & UT

• Operational today• Employer subsidies

possible• Various attributes /

types which differ by third party host capabilities

• Insured individual products

• Ex: EHealth, Extend

• Operations limited today

• Employer subsidies possible (DC)

• Insured or self insured

• ER determined plan offerings

• Insurers compete for individuals

• Post enrollment risk adjustment may be required

• Ex: Aon Hewitt (proposed), Liazon (select markets)

• Operational today• 3rd party or insurer

host• Insured or self

insured• Employer subsidizes

through DB or DC• ER determined plan

offering• Single carrier per

LOC per employer group

• EX: Liazon, Connected, Bloom (BCBS)

• Operational today• High ER

engagement• Less EE choice• Group based model• Single or limited

multi-carrier models

Private Exchanges

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The Exchanges in 2014 Requires each state to have created an Exchange to

facilitate the sale of qualified benefit plans to individuals, including new federally administered multi-state plans and non-profit co-operative plans– Establish a Navigator program to assist consumers.– Coverage must be offered on a guaranteed issue basis.– Determine eligibility for the Exchange, tax credits, and cost-sharing

reductions.– The state can either create their own Exchange or the Federal

Government will facilitate the Exchange.– Essential health benefits must be offered.– States may select a benchmark plan that reflects the scope of

services typically offered by an employer plan within guideline limits.– States may choose to allow large groups (over 100) to purchase

coverage through the Exchanges in 2017

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Employee Impact in 2014 In 2014, U.S. citizens and residents are required

(with limited exceptions) to have qualifying health coverage or “minimum essential health coverage” for themselves and their dependents.

Exceptions to Individual Mandate:– Religious objectors– Individuals not lawfully present – Incarcerated individuals– Taxpayers with income under 100% of poverty and those who have a

hardship waiver– Members of Indian tribes – Those who were not covered for a period of less than three months during

the year– People with no income tax liability

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Employee Impact in 2014 Individuals who do not have qualifying health coverage will be

subject to a tax penalty. This penalty is also called a “shared responsibility payment”. The penalty will be the greater of:– A specified flat dollar amount per taxpayer, up to a maximum of

three times the specified amount per family; or

– A percentage of household income over the threshold amount of income required for income tax return filing

Year Flat Dollar Penalty

Family Maximum

Percentage of Income

2014 $95 $285 1.0%

2015 $325 $675 2.0%

2016 $695 $2,085 2.5%

Following 2016, the penalty will be indexed for inflation.

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Employers – Pay or Play Tax in 2014

Applies to employers with 50 or more employees who DOES NOT offer health coverage.

Employer requirement to offer health coverage to full-time employees or pay a penalty.– When determining whether an employer has 50 employees, it is

those working 30 or more hours/week and full time equivalent employees (total monthly part time hours/120).

– This does not mean that part-time employees must be covered Fine for noncompliance is $2,000 per full-time employee

annually, but first 30 employees not counted (i.e., if the employer has 51 employees and doesn’t provide coverage, the employer pays the fine for 21 full-time employees. Part-time employees are counted in determining employer size but do not count them in calculating the penalty amount.)

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Employers – Pay or Play Tax in 2014

An employer with 50 or more employees that DOES OFFER coverage but has at least one full-time employee receiving a tax credit in the Exchange will pay the lesser of $3,000 for each of those employees receiving a tax credit or $2,000 for each of their full-time employees (FTE).

An individual with family income up to 400% of FPL is eligible for a tax credit instead of employer coverage if:– The actuarial value of the employer’s coverage is less than the

minimum standard (does not cover at least 60% or costs); or– The employer requires the employee to contribute more than 9.5%

of the employee’s household AGI income toward the cost of coverage but penalty would be assessed on a FTE basis.

Waiting periods in excess of 90 days are prohibited.

Federal Poverty Level Summary (400%) – Tax Credit Eligible

Household Size Household Income

1 $44,680

2 $60,520

3 $76,360

4 $92,200

5 $108,040

6 $123,880

7 $139,720

8 $155,560

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Upcoming IRS Play or Pay Guidance

Proposed Regulations due March, 18 and public hearings for draft on April, 23.

Proposals:– Exclude hours worked overseas, not common law employees (leased workers,

partners, sole proprietors, and true independent contractors.)– Employers near 50 employee threshold can choose any 6 consecutive month period

in 2013 to get employee count vs. entire 2013 period.– If controlled group, apply mandate to each company in the group separately for

penalty but not the calculation.– Minimum Essential Coverage for all full time and dependents to mean 95% or the

employees and dependents. A 5% margin for error.– Dependent Coverage to exclude “Spouses”.

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Excise Tax on High‐Cost “Cadillac” Coverage

Starting in 2018, a 40% excise/penalty tax will apply to certain high‐cost health coverage, but only to the extent that the coverage exceeds certain thresholds, which are at least $10,200 (single) and $27,500 (family).

If an individual has single coverage with a value of $12,200 and the applicable threshold is $10,200, the 40% excise/penalty tax will apply only to the $2,000 excess, resulting in an excise/penalty tax payment of $800.

As noted, the minimum thresholds that will be in effect in 2018 are: For single coverage, $10,200 For family coverage, $27,500 After 2018 the thresholds will be indexed

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Strategic Planning for Employers

Pay or Play Tax Consequences? What is my Competition doing to retain/attract quality

employees? Will employees leave if health insurance is not offered

as a benefit? What type of workforce do I have and the impact on

my cost? What do my employees want? Will the Exchanges work as planned?

Thank You!

E. Kent Evans CBC, Vice President, Human Capital Practice302-397-0171

kent.evans@willis.com

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