Affordable Care Act: What Does It Mean For Small Employers
Affordable CareAct: What Does ItMean For SmallEmployers
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?
Agenda• Background and Looking Forward• Small Employer Status• Compliance Regulations and Tax Credit• Impact on Employers• 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 – not small employers• Temporary reinsurance fee ends in 2016• 40% excise tax on high-cost group health plans
Who is a Small Employer?• From now until 2016, states can define the size of small groups:− Small employer can be either 50 and under or 100 and under• Beginning in 2016, the definitions in the federal reform law willapply:− Small employers are those who had, on average, 1-100 employees in thepreceding calendar year and at least 1 employee on the first day of the plan− Definitions are not applied consistently throughout the law, as notedthroughout this presentation
Grandfathered Plans• Existing Plans = Grandfathered Plans− A group health plan or health insurance coverage in which an individual was enrolled on the date ofenactment of the health care reform legislation (March 23, 2010)• Regulations provide guidance on changes that could take aplan out of “grandfathered” status
Grandfathered Plans – Which RulesApply?• Health Insurance Changes – Prohibitions on:◦ Lifetime and annual limits◦ Pre-existing condition exclusions ◦ Rescissions◦ Excessive waiting periods• Required coverage of adult children up to age 26• Summary of benefits and coverage• Reporting medical loss ratio
Compliance RegulationsChanges Effective Right Away
The BasicsNo requirement to provide coverage and no penalties for failing to do so.If providing coverage:§ No lifetime or annual limits§ If you offer dependent coverage then must cover children up to age26 – you don’t have to cover the cost§ Medical loss ratio rebates§ Summary of benefits and coverage§ 90 day maximum waiting period§ Transitional reinsurance fee
Small Employer Tax Credit• Qualifying small employers that provide health care coverage toemployees are eligible for tax credit◦ Have fewer than 25 full-time equivalent (FTE) employees◦ Pay wages averaging less than $50,000 per employee per year◦ Has a “qualifying arrangement” (pays premiums for each employee in a uniformpercentage that is at least 50 percent of the cost of coverage)◦ Tax-exempt 501(c) organization also eligible• Credit based on premiums paid by employer• Claimed on employer’s annual income tax return
Small Employer Tax CreditAmount of Credit• Up to 35 percent of health (includes dental & vision) premiumcosts paid in 2010 (25 percent for tax-exempt employers)• On Jan. 1, 2014, increases to 50 percent (35 percent for tax- exemptemployers)Depends on employees and wages• The credit phases out gradually for:• Employers with average wages between $25,000 and $50,000and• Employers with the equivalent of between 10 and 25 full-timeworkers
Small Employer Tax CreditEmployers not eligible◦Government employers• Federal• State• Local• Indian tribal• Unless the employer is a tax-exempt 501(c) organization
Coverage for Adult Children UntilAge 26• Plans that cover dependent children must make coverageavailable until child turns 26− Includes grandfathered plans, unless child has own employer coverage (before2014)− Covers married and unmarried children− Children of covered adult children do not have to be covered• State mandates above this level continue to apply• Insurers complying early to avoid coverage gaps
Restrictions on Lifetime and AnnualLimits• Apply to new and grandfathered plans• No lifetime limits on essential benefits• Restricted annual limits on essential benefits− Allowed for plan years beginning before Jan. 1, 2014• Essential benefits generally include:− Ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental healthand substance abuse services, prescription drugs, rehab services, lab services, wellness and diseasemanagement, pediatric care• Some regulations issued, waiting on others
Access to Coverage• No rescission of coverage− Applies to group and individual coverage− Applies to new and grandfathered plans− Exception for fraud or intentional material misrepresentation− ◦ Individual must be given prior notice of cancellation for permitted reasons (including nonpayment ofpremium or plan termination)• No pre-existing condition exclusions or limitations for children underage 19− This prohibition will apply to everyone in 2014− Applies to new and grandfathered group plans
• 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 expectedNew 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 offera health plan.− Health benefits are only one part of the total rewards strategy− How will offering, or not offering, health benefits impact othertalent management and recruitment strategies− Costs• Perform analysis to determine if plan offered shouldstay Grandfathered, if currently is• Consider cost and benefits of each option
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
Fidelity Quickpay Will Help You:Compliance reporting, benefits administration, andmanaging employee data are just a few of the back-office tasks that will become more difficult for smallbusinesses to handle manually once furtherrequirements of the Affordable Care Act take effect.The first open enrollment in the health plan exchangesare expected in October and for penny-wise smallbusiness owners, throwing additional manpower atthese challenges isn’t the answer.• If you haven’t already, now’s the time to enter theage of HR outsourcing. Allow us to help you!