Affordable Care Act: What Does It Mean For Large Employers
Affordable CareAct: What Does ItMean For LargeEmployers
Before We BeginIt is easy to get caught up in the frenzy of Health CareReform and PPACAAsk yourself the following questions:• What key questions do you have that you would like toget answered?• What feedback or questions are you getting from youremployees?• Is your company going to continue offering healthbenefits to its employees?
Before We Begin• What coverage do I want to offer?• How much do I want to contribute?• Do I have to offer coverage at all?
Before We BeginHowever, there are potential penalties.These include:• Failure to offer coverage to everyone• Failure to meet minimum standards• Failure to offer affordable coverage
Agenda• Background and Looking Forward• Large Employer Status• Employer Penalty Calculation• Impact on Employers• 2014 Compliance Deadlines• Key Steps to Take Now
2012December 28, 2012: The Administration released comprehensive proposed ruleson the major employer coverage requirements under the ACA. Employers canrely on these rules until final rules are released.The Administration has provided transition relief in certain circumstances, such as:Liability for penalties for non-calendar year plans in 2014The process for smaller employers to determine large employer status in 2013Measurement periods for stability periods starting in 2014Coverage for dependents in 2014Some issues remain outstanding and will be addressed in forthcoming regulations.
2013• October 1, 2013 – Exchanges begin open enrollment period• Mandatory W-2 reporting for tax year 2012− For employers who issue 250 or more W-2 forms• Deduction for expenses allocable to employer Part D retiree drug subsidyeliminated• Medicare payroll tax increased• New tax on unearned income• Cap on salary-reduction contributions to FSA’s• Employee Exchange Notification
2014• January 1, 2014 - Employers must generally be in compliance with coveragerequirements• Individual Health Mandate• Premium tax credits for Individuals• Individual market subsidies for low and middle income individuals• Annual dollar limits on essential benefits removed• Optional medicaid eligibility expansions (under 65)
2015 and Beyond• Automatic enrollment for large employers• Temporary reinsurance fee ends in 2016• 40% excise tax on high-cost group health plans
Who is a Large Employer?• Any employer with 50+ full time equivalents is considered alarge employer.• IRC 4980H applies to all common law employers, includinggovernmental entities, churches, tax-exempt organizations withat least 50 full-time equivalent employees.• Foreign companies with at least 50 full-time equivalentemployees performing work in the US with US-sourcecompensation also are subject to the law.
Basic Large Employer Coverage Rules• Large employers may be subject to an excise tax if at least onefull-time employee whose household income is between 100%and 400% of the federal poverty level receives a premium taxcredit for Exchange coverage and an employer either:Fails to offer coverageto full-time employeesand their dependentsOROffers coverage to full-timeemployees that does notmeet the law’s affordabilityor minimum value standards
What is a Premium Tax Credit?In 2014, people applying for private insurance coverage through exchanges mayapply for an advance premium tax credit to help offset the monthly cost of insurancepremiums. The premium tax credits work as follows:− The tax credit is paid in advance, meaning that people do not have to wait until their taxes arefiled to receive the subsidy, nor do they have to pay any upfront costs for premiums.− The tax credit is paid by the federal government directly to plans on a monthly basis, starting atthe point of enrollment. No payments are made directly to consumers.− The credit is available to people with income between 100 and 400 percent federal povertylevel (FPL) who are not eligible for Medicaid and who do not have access to affordableemployer-sponsored health coverage.− Income eligibility for the premium tax credits will be based on the previous year’s income taxreturns. Income can also be verified through pay stubs or other documentation.
Full-Time & Part-Time EmployeesCalculation forhourly & non-hourlyemployees:• Hourly employees: Countactual hours served• Non-hourly employees:Select one of threemethods:• Count actual hoursDays workedequivalence• Count 8 hours foreach day creditedwith at least one hourof service Weeksworked equivalence• Count 40 hours ofservice for eachweek credited withat least one hour ofservice
Full Time Equivalent EmployeeOnly a large employer may be subject to penalties regardingemployer-sponsored health insurance.• A “large employer” is an employer with more than 50 full-timeequivalent employees during the preceding calendar year.• In order to determine whether an employer is a “largeemployer”, both full-time and part-time employees areincluded in the calculation.
Full Time Equivalent Employee -ExampleA firm has 35 full-time employees (30+ hours). In addition, the firm has 20part-time employees who all work 24 hours per week (96 hours per month).These part-time employees’ hours would be treated as equivalent to 16 full-time employees, based on the following calculation:20 employees x 96 hours / 120= 1920/120=16 FTE’sThus, in this example, the firm would be considered a “large employer”,based on a total full time equivalent count of 51 (35 FT + 16 FTE’s)
Impact on Employers• Employers may elect to not offer coverage• Applicable large employers that do not offer benefits may paya penalty/tax• The penalty that must be paid depends on whether theemployer offers coverage and whether any employees receivesubsidies on the individual market exchange• Penalty/tax applies to “applicable large employers”. Anapplicable large employer is an employer with an average of50 or more full-time equivalent employees in the precedingcalendar year.
• Employers must notify new employees regarding healthcare coverage− At time of hiring• Notice must include information about 2014 changes:− Existence of health benefit exchange− Potential eligibility for subsidy under exchange if employer’sshare of benefit cost is less than 60 percent− Risk of losing employer contribution if employee buys coveragethrough an exchange• More guidance and model notice expected• Penalties apply for non compliance of $50/missedstatement; max $100kNew Notice Requirement –Exchangesand Minimum Essential Coverage
Employer Reporting• Employers will have to report certain information tothe government− Whether employer offers health coverage to full-timeemployees and dependents− Whether the plan imposes a waiting period− Lowest-cost option in each enrollment category− Employer’s share of cost of benefits− Names and number of employees receiving health coverage
More 2014 Changes• No pre-existing condition exclusions or limitations− Applies to everyone and all plans• Wellness program changes• Limits on out-of-pocket expenses and cost-sharing• No waiting periods over 90 days• Coverage of clinical trial participation• Guaranteed issue and renewal in all markets• Individual and fully insured group policies under 100 lives must abide bystrict modified community rating standards:− Premium variations only allowed for age, tobacco use, family composition andgeography.− Experience rating would be prohibited.
Fidelity Quickpay Will Help You:• Determine the implications of whether or not to offer a healthplan.− Health benefits are only one part of the total rewards strategy− How will offering, or not offering, health benefits impact other talentmanagement and recruitment strategies− Costs• Perform analysis to determine if plan offered should stayGrandfathered, if currently is• If employee is over 50 years, perform a qualitative analysis todetermine if existing plans meet the eligibility and affordabilitystandards to avoid penalties. Calculators available!• Consider cost and benefits of each option• Analyze potential Cadillac Tax implications each year(preparation for 2018)
Fidelity Quickpay Will Help You:• Consider a communication strategy for employeesand candidates− Implementation timeline on amending employee manuals,when communication documents should be delivered andhow, employee engagement• Consider staffing needs in light of reform and haveopen discussions with CEO and CFO about directionof company in terms of staffing and the role it playswith rewards package• Create a check-list of the various requirements andtheir due dates