Tribal Employer Opportunities & Requirements under the

Affordable Care Act (ACA)

Disclaimer

This training material is for informational purposes only and is not intended as tax or legal advice. Please talk with your attorney or tax professional for specific questions related to your Tribe or Tribal entity as an employer.

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Tribal Employer Opportunities & Requirements under the Affordable Care Act

• The Affordable Care Act & Your Employees• ACA Employer Provisions

• Small Tribal Employer Opportunity• Small Tribal Non-Profit Employer Opportunity• Large Tribal Employer Requirements

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The Affordable Care Act & Your Employees

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The Affordable Care Act• On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (ACA).

• The ACA protects the right of all Americans, including American Indians and Alaska Natives, to access affordable health care.

• More than 32 million in this country who would otherwise not have health insurance now have access to health coverage.

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The Affordable Care Act• There are several strategies under the ACA to ensure that everyone has access to the affordable health care.• Medicaid Expansion • Health care tax credits for individuals and small

businesses• Insurance Marketplaces in each state

• Major insurance reform• No annual or lifetime limits allowed• A person cannot be denied coverage for a pre-existing

condition

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What it Means for Your Employees• All Americans must have or enroll in minimum essential

coverage by March 31, 2014.• Minimum essential coverage includes:

• Medicaid/Children’s Health Insurance Program (CHIP)• Medicare• Veteran’s Administration Program• Tricare• Employer Sponsored Coverage• Other Private Health Insurance

• No coverage by this date could result in an employee’s liability for an individual shared responsibility payment or fine UNLESS an employee qualifies for an exemption.

Some Employees May Sign Up for Health Insurance through the Marketplace• Employees at or below certain federal poverty level thresholds may qualify for Medicaid or financial assistance to purchase insurance.

• Employees who are not offered affordable coverage by an employer with minimum value, may be eligible for tax credits or cost sharing reductions through the Marketplace.

• Affordable = not more than 9.5% of employee’s household income.

Medicaid & Financial Assistance Eligibility• A state’s decision to expand or not expand Medicaid determines income eligibility for tax credits.

• Tax credits eligibility for Marketplace plans:• States expanding Medicaid: 138%-400% FPL• States not expanding: 100%-400% FPL• Sliding scale (lower FPL, more tax credits)

• Cost sharing reductions eligibility:• All states: <250% FPL

Did Your State Expand Medicaid?

Federal Poverty Levels48 Contiguous States (2013)

# household >100% FPLTax Credits in State Not Expanding Medicaid

<138% FPLMedicaid Expansion> 138% FPL Tax Credits in State Expanding Medicaid

<250% FPLCost Sharing Reductions

<400% FPLTax Credits

1 $11,490 $15,856 $28,725 $45,9602 15,510 21,404 38,775 62,0403 19,530 26,951 48,825 78,1204 23,550 32,499 58,875 94,2005 27,570 38,047 68,925 110,280

What the ACA Means for Your American Indian/Alaska Native Employees• The mandate also applies to American Indians/Alaska

Natives. • However, AI/AN may apply for an exemption from the shared

responsibility payment if:• Member of a federally recognized tribe or Alaska Native Claims

Settlement Act (ANCSA) Corporation (“Tribal Member”)• Eligible for services from an Indian health care provider.

• Special cost sharing protections for Tribal Members if enrolled in coverage through the Marketplace • Zero Cost Sharing Plan Variation < 300% FPL• Limited Cost Sharing Plan Variation > 300% FPL

• Special monthly enrollment for Tribal members• May change status in a health plan once per month.

• Individuals who can afford health insurance but choose not to buy it, must pay a fine known as an individual “shared responsibility payment.”

• In 2014, the fine is $95 per person ($47.50 per child under 18) with maximum of up to $285 per family using this method OR up to 1% of yearly household income, whichever is higher. For 2014, the payment is made through 2014 tax return filing in April 2015.

• In 2015, it is $325 per person or 2% of income; and in 2016, it is $695 per person or 2.5% of income.

How Much is the Fine for Not Having Insurance?

Who Qualifies for an Exemption from the Fine?

Members of federally recognized tribes or ANCSA Corporations; or individuals eligible for services from an Indian health care provider.

Individuals/families where the lowest-priced coverage available would cost more than 8% of the household income.

Individuals uninsured for less than 3 months of the year.

Individuals who do not have to file a tax return because their income is too low.

Individuals who fall under other hardship exemptions. See healthcare.gov/exemptions/ for other exemptions.

Key Points to Remember

• Only employees within certain income limits are eligible for the tax credits and cost sharing reductions.

• For large employers, receipt of a tax credit or cost sharing reduction by a full-time employee triggers the shared responsibility payment.

• Employees eligible for exemptions are still counted by the employer in their employee counts related to ACA provisions.

Tribal Employer ACA Opportunities & Requirements

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Tribal Employer ACA Opportunities & Requirements

ACA Employer Provisions At-A-Glance

ACA Provisions Number of employees

1 to 24 25 to 49 50 to 99 100-200 > 200

Small Business Health Care Tax Credit X

Small Business Health Options Program (SHOP) X X

(up to 50)

IRS Assessable Payments & Reporting

FLSA Automatic Enrollment

X(transition relief

in 2015)

X X

X

Why is this Important for Tribes?• If a Tribe is considered a “large employer,” it may incur an assessable payment for not offering health insurance.

• Tribes may be eligible to purchase health insurance through the Small Business Health Options Program (SHOP).

• Tribes can strategize to meet ACA employer requirements in a cost effective manner.

Small Tribal Employer Opportunity

What is SHOP?• SHOP = Small Business Health Options Program • A Marketplace for small businesses

• Designed to help small businesses purchase health insurance for employees.

• Allows an employer to compare plans based on price, coverage and quality.

• Employers eligible if ≤ 50 employees (see next slide).• In 2016, will increase to ≤ 100 employees.

• Tribes and Tribal entities are eligible to participate.• To find our more about the Marketplace in your State, visit:

https://www.healthcare.gov/marketplace/shop/.

Employer Eligibility CriteriaGenerally, an employer is eligible to participate in SHOP if the employer:(1) Is a small employer on business days during the prior calendar year and who employs at least one employee on first day of the plan year; (2)Elects to offer all full-time employees coverage in a plan through a SHOP; and(3)Has its principal place of business address in the Exchange and offers coverage to all full-time employees through that SHOP; OR offers coverage to each eligible employee through the SHOP serving that employee’s primary worksite (in this case, the employer participates in multiple SHOPs).

Application Process• An employer may apply through the SHOP website, a

Navigator, an insurance broker, or a call center• Single SHOP application (on line & paper)

• Separate applications for employer & employee• The SHOP will:

• Verify information in applications• Determine employer’s eligibility to participate• Notify employer as to denial or approval of application

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SHOP Plans• Different actuarial values

(AV) in plans are described using “metallic” descriptors.

• All plans in the SHOP will have the same EHB.

• Plans may have different:• Network of providers • Premiums & cost sharing

Metallic Plan Actuarial Value

Bronze (lowest premium, least beneficial)

60%

Silver (Benchmark) 70%

Gold 80%

Platinum (highest premium, most beneficial)

90%

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Essential Health BenefitsThe plans in SHOP will include Essential Health Benefits (EHB):

1. Ambulatory patient service2. Emergency services3. Hospitalization4. Maternity and newborn care5. Mental health and substance use disorder services, including

behavioral health treatment6. Prescription drugs7. Rehabilitative and habilitative services and devices8. Laboratory services9. Preventive and wellness services and chronic disease management10. Pediatric services, including oral and vision care

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Employer & Employee ChoicesYear State-based SHOP FF-SHOP

2014Transition Period

Employer selects one plan (or more, depending on State) which will be made available to employees.

Employer selects one plan which will be made available to employees.

2015 Employer may select:(1) a level of coverage and employee may select any plan in that metallic level; or(2) other options to offer employees.

Employer may select:(1) a level of coverage and employee may select any plan in that metallic level; or(2) one plan to offer employees.

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Small Tribal Non-Profit Employer Opportunity

Small Business Health Care Tax Credit

• Qualify if 1 to 24 full-time equivalent employees.

• Per IRS Guidance, an agency or instrumentality of an Indian tribal government is not eligible for the tax credit unless it is a 501(c)(3).

• Other Tribally owned entities may be eligible for the tax credit (e.g., an entity organized under State law).

Eligibility for the Tax CreditA small employer may qualify for a tax credit if the small employer meets all of these requirements:

1. Fewer than 25 full-time equivalent employees (FTEs);

2. Pays an average annual wage of less than $50,000 per year per FTE; and

3. Pays for at least 50% of the cost of health insurance coverage for each of its employees.

About the Tax Credit• The tax credit is a percentage of premiums paid by employer.• Percent is sliding scale based on employer size and average

wage.• Beginning January 1, 2014, maximum credit is:

• 50% for small business employers • 35% for small tax-exempt employers

• The maximum credit is available to employers with ≤ 10 FTE employees and average annual wages of $25,000.

• In 2014, the credit will only be available for employers that purchase insurance coverage through a SHOP.

• The employer can only receive the credit for 2 consecutive years (beginning in 2014).

For more information on SHOP and Small Business Health Care Tax Credit• Visit http://business.usa.gov/healthcare for options related to

your business or non-profit. • IRS Small Business Health Care Tax Credit for Small Employers

http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers

• Determine your eligibility at: http://tribalhealthcare.org/tribal-employers/determine-your-responsibility/.

Large Tribal Employer Requirements

Employer Shared Responsibility Mandate• Employer Shared Responsibility Mandate provisions

(i.e., assessable payments): • Applicable to employers with > 50 full-time

employees, including full-time equivalent employees. • In 2015, transition relief for employers with 50 to 99 full-

time employees (certification required).• Final regulations issued on February 12, 2014.• Delayed to 2015 (IRS Notice 2013-45).

What is the Mandate?• The Employer Shared Responsibility mandate means that an employer will be subject to an “Assessable Payment” or “Shared Responsibility Payment” for not offering health insurance coverage that is affordable or that does not provide minimum value to its full-time employees and their dependents.

How the Mandate Applies to Tribes• Tribal governments and subdivisions of Tribal

governments are not exempt.• The rules specific to governmental entities (which includes

Tribal governments and subdivisions of Tribal governments) have not been issued by the IRS.

• All Tribal entities will have to comply with these provisions to avoid Assessable Payments.• Tribal businesses, organizations and all other entities such as

casinos, retail businesses, health centers, nursing homes and non-profit organizations.

• See 26 U.S.C. § 4980H, 78 Fed. Reg. 218, and 79 Fed Reg. 8544.

Determining Large Employer Status• Many employers will know they are a large employer

without having to count their full-time employees. • Number of full-time employees (average of 30 hours of

service per week) and full-time equivalent employees (FTEs) are counted. • A specific method must be used to count hours of service for hourly and

non-hourly employees.

• Large employer status determined in current year for following calendar year. • Transition Relief in 2015: Employers close to threshold may use a one-

time period of six consecutive months to determine large employer status.

Steps to Determine Large Employer Status

1. Calculate the number of full-time employees (including seasonal workers) for each calendar month in the prior year.

2. Calculate the number of full-time equivalent employees (including seasonal workers) for each calendar month in the prior year.• Full-time equivalent employees = Add the total number of hours of service of

part-time employees in a calendar month and divide by 120.

3. Add the number of full-time employees and full-time equivalent employees for each month of the calendar year.

4. Add up the 12 monthly numbers and divide by 12.

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Steps to Determine Large Employer Status (continued)•The Result

• If the result is less than 50, the employer is not a large employer.

• If the result is 50 or more, the employer is a large employer. • Employer may not be considered a large employer if the Seasonal Worker

Exception applies.

Seasonal Worker Exception

An employer may not be considered a large employer if:

• The employer’s work force only exceeds 50 full-time employees for 120 days or less during the calendar year; and

• The employees in excess of 50 who were employed during that 120 day period or less were seasonal workers.

Definition of Seasonal Worker• Seasonal worker = “…a worker who performs labor or services

on a seasonal basis as defined by the Secretary of Labor, including (but not limited to) workers covered by 29 CFR 500.20(s)(1), and retail workers employed exclusively during holiday seasons.” 79 Fed. Reg. 8581.

• Employers may use a good faith interpretation of seasonal worker under DOL Regulations 29 CFR 500.20(s)(1).

• Per IRS guidance:• The 120-period may be applied using four calendar months (whether or

not consecutive) or a period of 120 days (whether or not consecutive).• Not limited to agricultural or retail workers.

Transition Relief for Employers with Fewer than 100 Full-Time Employees in 2015An employer must satisfy these conditions:(1) Employs 50 to 99 full-time employees (including FTEs) on business days during 2014.(2) Does not reduce its workforce or overall hours of service of its employees between 2/9/14 to 12/31/14 in order to satisfy the workforce size condition (except if for a bona fide business reason). (3) During “coverage maintenance period,” does not eliminate or materially reduce the health coverage it offered as of 2/9/14 . (4) Certifies that it meets conditions (1) to (3) on a prescribed form.

Two Ways to Identify Full-Time Employees

• Two ways to identify full-time employees:(1) Monthly Measurement Method; or(2) Optional Look Back Measurement Method.

• Employers identify full-time employees in 2014 and offer coverage in 2015.

• Large Tribal Employers need to start planning now to determine what method they will use.

Companies with a Common Owner• Parent corporations and subsidiaries• To determine large employer status, total the number

of all full-time employees (including full-time equivalent employees) working at all companies.

• If the total number of employees is at least 50 full-time employees, then each separate company is considered a large employer.• Even if each separate company employs less than 50 full-time

employees.

To Avoid Assessable Payments• A large employer must offer to its full-time employees

and their dependents the opportunity to enroll in health insurance coverage:• That provides Minimum Essential Coverage under an Eligible

Employer-Sponsored Plan; • That is Affordable; and • That provides Minimum Value.

• If offered, a full-time employee would not be eligible for a premium tax credit or cost sharing reduction.

• The assessable payment is triggered by the employee’s receipt of a tax credit or cost sharing reduction.

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Plan, Affordability & Minimum ValueRequirement Explanation

Eligible Employer Sponsored Plan

(1) Group health insurance coverage offered by, or on behalf of, an employer to the employee that is either:

-- a governmental plan within the meaning of section 2791(d)(8) of the Public Health Service Act (PHS Act) (42 U.S.C. 300gg–91(d)(8)) (e.g., FEHB Program), -- any other plan or coverage offered in the small or large group market within a State, or -- a grandfathered health plan, as defined in section 5000A(f)(1)(D), offered in a group market;

(2) Self-insured group health plan under which coverage is offered by, or on behalf of, an employer to the employee.

Affordable “Employee only” contribution towards the premium is < 9.5% of the employee’s household income. Note: Safe Harbors available.

Minimum Value (MV)

Plan has to cover at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan. MV calculator at: http://www.cciio.cms.gov/resources/regulations/index.html#pm. See 78 Fed. Reg. 25909 for other ways to determine MV.

Affordability Safe Harbors• Since an employer may be unable to ascertain an employee’s

household income, an employer may rely on an affordability safe harbor to avoid the second type of assessable payment: • W-2 Safe Harbor (next slide)• Rate of Pay Safe Harbor• Federal Poverty Line Safe Harbor

• An employer may only use a safe harbor if it offers its full-time employees and their dependents the opportunity to enroll in • minimum essential coverage under an eligible employer-sponsored

plan that provides minimum value as to the “employee only” coverage offered to the employee

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W-2 Safe Harbor• The “employee only” portion of the premium is deemed

affordable if the employer’s lowest cost plan does not exceed 9.5% of the employee’s W-2 wages.

• Application of this safe harbor is determined at the end of the calendar year.

• Per Guidance: An employer could deduct 9.5%, or lower percentage, from an employee’s W-2 wages each pay period.

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Offer of Coverage• A large employer must:

• In 2015, make an offer of coverage to at least 70% (in 2016, 95%) of its full-time employees and their dependents.

• Provide the “effective” opportunity to enroll or decline to enroll no less than once during the plan year.

• Make the offer within three months of hire.• A group health plan may not apply any waiting period that

exceeds 90 days.

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Dependents

• Offer of coverage to dependents of full-time employees: • Dependents includes children under 26 years of age,

but does not include spouses, step children or foster children.

• Employer does not have to pay for dependent coverage.

• Transition relief to offer coverage to dependents is extended to plan years in 2015 under certain conditions.

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How Assessable Payments Can Be IncurredIf a large employer:

(1) Does not offer coverage to at least 70% (in 2016, 95%) of its full-time employees (and their dependents*), OR

(2) Offers coverage to at least 70% (in 2016, 95%) of its full-time employees (and their dependents*) but the coverage is not affordable or does not provide minimum value;

AND at least one full-time employee receives a premium tax credit or cost sharing reduction in the Marketplace.

*If dependent coverage transition relief does not apply.

Assessable Payments in 2015Types: (1) Employer Does Not Offer Coverage

or Offers Coverage to Less Than 70% (in 2016, 95%) of Full-Time Employees*

(2) Employer Offers Coverage to at least 70% (in 2016, 95%) of Full-Time Employees* but Coverage is Not Affordable or Does Not Provide Minimum Value.

Calculation

(1/12=assessed monthly)

1/12 of $2,000 per full-time employee, not including the first 80 employees (in 2016, 30 employees)

1/12 of $3,000 per employee

Dollar Amount Approximately $166.67 per employee, per month X number of employees > 80.

$250.00 per employee, per month.

*Assessable payment triggered by a full-time employee receiving a premium tax credit or cost sharing reduction in the Marketplace.

Assessable Payments in 2016 and ForwardTypes: (1) Employer Does Not Offer Coverage

or Offers Coverage to Less Than 95% of Full-Time Employees*

(2) Employer Offers Coverage to at least 95% of Full-Time Employees* but Coverage is Not Affordable or Does Not Provide Minimum Value.

Calculation

(1/12=assessed monthly)

1/12 of $2,000 per full-time employee, not including the first 30 employees

1/12 of $3,000 per employee

Dollar Amount Approximately $166.67 per employee, per month X number of employees > 30

$250.00 per employee, per month

*Assessable payment triggered by a full-time employee receiving a premium tax credit or cost sharing reduction in the Marketplace.

Employees with Access to Coverage•Employees with access to an eligible-employer sponsored plan that is affordable and that provides minimum value cannot obtain a premium tax credit or cost sharing reduction in a Marketplace.

IRS Reporting and Other Requirements

• IRS Requirements• Section 6055 Reporting• Section 6056 Reporting• W-2 Form Reporting

• Other• Fair Labor Standards Act, Section 18B Notice to Employees

Requirement• ERISA, Summary of Benefits and Coverage Requirement

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• Tribal employers need to determine now whether they are are a small or large employer.

• Employers with between 50-99 full-time employees (including full-time equivalent employees) may be eligible for transition relief in 2015.

• Large tribal employers need to determine now which method they will use to identify their full-time employees.

• Planning now will ensure that large tribal employers reduce the potential for employer shared responsibility payments.

Key Points to Remember