HEALTH CARE REFORM
GETTING READY FOR 2014
1
Minnesota Chamber of Commerce: Large Employer Panel
June 19, 2013
Maureen M. M...
The ACA
► Signed into law March 2010, is the law of the land today
► Applies to all businesses in the US, including govern...
Variables Affecting Costs for Employers
► State where business is operated & employee resides
► State vs. Federal Exchange...
2014: Individual Mandate
► Individual mandate to obtain health coverage: Beginning in 2014,
most individuals must obtain a...
2014: Government assistance to help some
individuals obtain coverage
► Medicaid expansion: Expands eligibility to
individu...
Cost Sharing Subsidies
► Federal government will pay insurers to reduce the cost sharing
for individuals:
► Enrolled in a ...
Pay or Play
7
Employer Shared Responsibility Rule
An applicable large employer must offer affordable health
coverage that offers minimum...
Must Employer Offer Coverage?
9
► No, employer may choose to pay or play
What Coverage Must Be Offered?
10
► Coverage must be affordable
► Coverage must offer minimum value
► Coverage must provid...
Who Is An Applicable Large Employer?
► Generally, must employ average of at least 50 full-time
employees on business days ...
Who Is An Applicable Large Employer? (cont’d)
► Determination of full-time employees includes certain
assumptions for part...
Applicable Large Employee –
Who Is An Employee?
► IRS common law standard applies
► Partners, non-employee Board members, ...
Applicable Large Employee –
Steps for Calculating Number of Employees
► Review actual hours of service for preceding calen...
Applicable Large Employee –
Seasonal Workers
► Seasonal workers generally taken into account in calculations
► Special exc...
Applicable Large Employee –
Leased Employees
► Leased employees do not count as employees of the recipient if
the leasing ...
Is Employer Better Off Paying Or Playing?
► This will be an individualized decision, that will vary from
employer to emplo...
To Whom Must Coverage Be Offered?
► At least 95% of full-time employees
► The pay or play mandate applies separately to ea...
Pay With Some And Play With Others?
► This is not likely to be a practical solution
► The employer must offer coverage to ...
May Groups be Excluded?
► Employer will need to analyze any groups that are currently
excluded from coverage to determine ...
May the Health Plan Exclude Part-Time
Employees?
► Yes, but the employer will need to evaluate how
part-time is defined to...
Penalty Strategy Components
► Defining FT employees
► Optional look-back measurement period
► Capping hours to reduce #s o...
What Is The Look Back Measurement Method?
► This is a method, prescribed by proposed regulations, of
determining the full-...
What Is The Look Back Measurement Method?
(cont’d)
► If the employee averaged 30 or more hours per week during the
measure...
What Is The Look Back Measurement Method?
(cont’d)
► This method can be used for ongoing employees, and for new
variable h...
Addressing Common Categories
► Seasonal
► Variable hour
► Teacher/faculty
► Rehires/resumption of service
► Direct hire te...
Can Employer Exclude A Class Of Employees?
► Technically possible, but must satisfy 95% rule
► 95% level chosen primarily ...
Coverage To Be Offered
► Minimum essential coverage
► Minimum value
► Affordable
28
Minimum Essential Coverage
► Substantial rules for demonstrating that insurance programs
meet minimum essential coverage
►...
Minimum Value
► Generally, plan must cover 60% of expected costs of “typical
plan”
► Regulatory agencies believe most empl...
Affordable Coverage
► Generally, employee’s premium/contribution for the lowest cost
self-only coverage may not exceed 9.5...
Affordability Safe Harbors
► Form W-2 Safe Harbor
► Rate of Pay Safe Harbor
► Federal Poverty Line Safe Harbor
32
Form W-2 Safe Harbor
► Employee’s required contribution for a calendar year for the
employer’s lowest cost self-only cover...
Rate Of Pay Safe Harbor
► Employee’s required contribution for the month for the
applicable large employer’s lowest cost s...
Federal Poverty Line Safe Harbor
► Employee’s required contribution for the calendar month for the
applicable large employ...
Employee Wage Levels Matter
36
Calculation of Assessable Penalty
► No insurance penalty =
► $2,000 for each full-time employee after the first 30
► Also ...
Case Studies: Health Reform in
Action
38
Case Studies
39
Case Study#1 Case Study #2 Case Study #3
Facility type Non-profit SNF For-profit CCRC SNF + AL
Size 85 bed...
Employer Health Insurance & Penalty (HIP) Costs
Impact of Employer Health Insurance Reforms HEALTH REFORM SUBSIDIES IMPACT...
2014 Coverage Breakdown
We estimate 69% of your full-time employees will be
eligible for Exchange subsidies, 20% for Medic...
Average Premium Cost Per Employee Perspective
42
Health Insurance and Penalty (HIP) Calculator
www.cliftonlarsonallen.com/HIP
43
Wellness Programs
► Substantially the same as prior regulations, but
► Awards may be up to 30%
► Additional 20% if related...
Other Changes
► Out-of-pocket limit for all plans (except grandfathered) – mirrors
HSA limits ($6,350 self/$12,700 family ...
Other Changes (cont’d)
► Auto-enrollment
► Applies to employers with more than 200 FT employees
► Notices
► Exchange notic...
Other Resources
► FaegreBD Beyond Health Care
Reform Blog (please subscribe!)
http://beyondhealthcarereform.com
► FaegreBD...
Questions?
4852274069
Maureen M. Maly Nicole O. Fallon
Partner Health Care Consultant Manager
FAEGRE BAKER DANIELS LLP CLI...
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Implementing Health Care in 2014: Guide For Employers Over 50

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HEALTH CARE REFORM - GETTING READY FOR 2014

On June 19, 2013, the Minnesota Chamber of Commerce hosted a workshop on the new health care reform law. This presentation outlines what small employers need to know about the law changes.

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Implementing Health Care in 2014: Guide For Employers Over 50

  1. 1. HEALTH CARE REFORM GETTING READY FOR 2014 1 Minnesota Chamber of Commerce: Large Employer Panel June 19, 2013 Maureen M. Maly, Partner Nicole O. Fallon Benefits & Executive Compensation Health Care Consultant Manager FAEGRE BAKER DANIELS LLP CLIFTONLARSONALLEN
  2. 2. The ACA ► Signed into law March 2010, is the law of the land today ► Applies to all businesses in the US, including governments ► Requires almost all individuals to obtain health insurance coverage or pay a penalty ► Establishes health insurance exchanges (state or federal) ► Employers with at least 50 full-time + FTE employees may have to pay a penalty, if they don’t offer full-time employees affordable, minimum level health insurance after 1/1/2014 ► Implementation details continue to be outlined through the issuance of new regulations, guidance, and FAQ documents from IRS, HHS, DOL 2
  3. 3. Variables Affecting Costs for Employers ► State where business is operated & employee resides ► State vs. Federal Exchange ► Medicaid Expansion ► Employer premium deductibility vs. non-deductible penalty ► Offer vs. don’t offer health insurance today ► Number of FT employees ► % of FT employees who enroll vs. don’t enroll in employer coverage ► Wages of workers ► Employer contribution, if any, toward employee premiums 3
  4. 4. 2014: Individual Mandate ► Individual mandate to obtain health coverage: Beginning in 2014, most individuals must obtain a minimum-level of health insurance coverage or pay a penalty ► Minimum essential coverage includes: ► Medicare, Medicaid, TRICARE ► Insurance purchased through an Exchange, or the individual market ► Any employer-sponsored coverage ► Grandfathered plans (group plan in effect on 3/23/2010) ► Penalties for failure to obtain coverage: ► In 2014: greater of $95 or 1.0% of income ► In 2015: greater of $325 or 2.0% of income ► In 2016: greater of $695 or 2.5% of income ► Penalty is capped at three times the per person amount for a family ► Assessed penalty for dependents is half the individual rate Hardship exemption Premium cost for lowest cost plan > 8% of Household Income 4
  5. 5. 2014: Government assistance to help some individuals obtain coverage ► Medicaid expansion: Expands eligibility to individuals and families up to 133% of the federal poverty level (FPL) or Modified Adjusted Gross Income (MAGI) of 138% of FPL ► If cost effective, states can opt to subsidize employer- sponsored premiums for this group ► Premium tax credit assistance: Individuals and families with household income of 100 - 400 % FPL may be eligible for sliding-scale assistance to help pay premiums ► Cost sharing assistance: Those earning between 100-250% FPL are also eligible for out-of-pocket reductions to help with cost sharing (e.g., maximum out-of-pocket, deductibles, co-payments) 138% FPL Individual = $15,856 Family of 4 = $32,499 400% FPL: Individual= $45,960 Family of 4= $94,200 5
  6. 6. Cost Sharing Subsidies ► Federal government will pay insurers to reduce the cost sharing for individuals: ► Enrolled in a silver-level plan through an Exchange and ► Whose household income is between 100-250% FPL ► Reductions don’t apply to benefits not included in the federal definition of “essential health benefits” 6 Household income as % of FPL Cost sharing reduction 100-200% FPL Two-thirds 200-250% FPL 50%
  7. 7. Pay or Play 7
  8. 8. Employer Shared Responsibility Rule An applicable large employer must offer affordable health coverage that offers minimum value to at least 95% of its full- time employees, or else be subject to an assessable penalty 8
  9. 9. Must Employer Offer Coverage? 9 ► No, employer may choose to pay or play
  10. 10. What Coverage Must Be Offered? 10 ► Coverage must be affordable ► Coverage must offer minimum value ► Coverage must provide minimum essential coverage
  11. 11. Who Is An Applicable Large Employer? ► Generally, must employ average of at least 50 full-time employees on business days in the preceding calendar year 11
  12. 12. Who Is An Applicable Large Employer? (cont’d) ► Determination of full-time employees includes certain assumptions for part-time employees ► Determination is made on controlled group basis ► Certain excludable workers (partners, non-employee Board of Directors) 12
  13. 13. Applicable Large Employee – Who Is An Employee? ► IRS common law standard applies ► Partners, non-employee Board members, other non-employees excluded ► Seasonal workers ► Leased employees ► PEO-employed workers 13
  14. 14. Applicable Large Employee – Steps for Calculating Number of Employees ► Review actual hours of service for preceding calendar year for each month (employee is considered full-time if had at least 130 hours of service for that month, the equivalent of 30 hours per week) ► Determine for each month the number of full-time employees ► Add the full-time employees to the number of full-time employees for that month ► Add totals together for all 12 months and divide by 12 (rounding down) 14
  15. 15. Applicable Large Employee – Seasonal Workers ► Seasonal workers generally taken into account in calculations ► Special exception if seasonal workers during limited portion of calendar year are what puts the employer over 50 15
  16. 16. Applicable Large Employee – Leased Employees ► Leased employees do not count as employees of the recipient if the leasing organization and not the recipient is the common law employer of the leased employees – this would, in many instances, not be the case for many types of temporary or leased employees ► For example, under PEO arrangements, the worksite employer is typically the common law employer of the employees 16
  17. 17. Is Employer Better Off Paying Or Playing? ► This will be an individualized decision, that will vary from employer to employer and industry to industry ► Financial issues ► Competitive issues ► Paternalistic issues ► Remember that assessable penalties are not deductible 17
  18. 18. To Whom Must Coverage Be Offered? ► At least 95% of full-time employees ► The pay or play mandate applies separately to each applicable large employer member of a control or affiliated service group ► An applicable large employer that provides coverage to employees is subject to different assessable penalty if coverage is not affordable or does not provide minimum value (and an employee qualifies for a Section 1411 certification) 18
  19. 19. Pay With Some And Play With Others? ► This is not likely to be a practical solution ► The employer must offer coverage to at least 95% of full-time employees to avoid an assessable penalty ► If the employer does not meet that standard, its assessable penalty is based on the total number of full-time employees, whether or not offered coverage 19
  20. 20. May Groups be Excluded? ► Employer will need to analyze any groups that are currently excluded from coverage to determine whether/how it might affect the 95% rule ► Part-time (and how that category is defined) ► Seasonal ► On-call ► Bargaining unit ► Limited or defined term employees 20
  21. 21. May the Health Plan Exclude Part-Time Employees? ► Yes, but the employer will need to evaluate how part-time is defined to make sure no “full-time” employees are unwittingly being excluded ► For example, a typical health plan provision might exclude employees who are not regularly scheduled to work 30+ hours per week ► The threshold for full-time status for these purposes, however, is working “on average” 30+ hours per week 21
  22. 22. Penalty Strategy Components ► Defining FT employees ► Optional look-back measurement period ► Capping hours to reduce #s of FT employees ► Impact of waived on bottom line ► Employee wage level ► Implications of over/under 400% FPL ► Minimum value & affordability ► Where is best place to spend benefit dollars (e.g., premiums, HRA/HSA contributions, etc.) ► Employer contribution level: Is it advantageous to make coverage less affordable? ► State decisions about Medicaid expansion & exchanges 22
  23. 23. What Is The Look Back Measurement Method? ► This is a method, prescribed by proposed regulations, of determining the full-time status of ongoing employees and new variable hour and seasonal employees ► Looks back at an employee’s average hours of service over a selected period of 3-12 months (the “measurement period”) to see if the employee averaged at least 30 hours per week 23
  24. 24. What Is The Look Back Measurement Method? (cont’d) ► If the employee averaged 30 or more hours per week during the measurement period, the employer must offer coverage to the employee for a subsequent period (the “stability period”) of 6-12 months (and no shorter than the measurement period) ► Option to have a brief “administrative period” (no longer than 90 days) between two periods to make determinations 24 Measurement Period Admini- strative Period Stability Period
  25. 25. What Is The Look Back Measurement Method? (cont’d) ► This method can be used for ongoing employees, and for new variable hour or seasonal employees ► An “ongoing” employee is someone employed for at least one standard measurement period ► Method cannot be used for new employees who are not variable hour or seasonal ► Proposed regs contain many special rules and requirements for using this method for ongoing employees (e.g., special rules for teachers, etc.) 25
  26. 26. Addressing Common Categories ► Seasonal ► Variable hour ► Teacher/faculty ► Rehires/resumption of service ► Direct hire temporary/defined term employees 26
  27. 27. Can Employer Exclude A Class Of Employees? ► Technically possible, but must satisfy 95% rule ► 95% level chosen primarily to give cushion for mistakes, not so much for excluding specific class, so there is not much margin for error 27
  28. 28. Coverage To Be Offered ► Minimum essential coverage ► Minimum value ► Affordable 28
  29. 29. Minimum Essential Coverage ► Substantial rules for demonstrating that insurance programs meet minimum essential coverage ► For employer group health plans, proposed regulations indicate that minimum essential coverage will be deemed to be met ► Self-funded need not offer minimum essential benefits...but, must meet minimum value to avoid all penalties 29
  30. 30. Minimum Value ► Generally, plan must cover 60% of expected costs of “typical plan” ► Regulatory agencies believe most employer plans meet this standard currently ► Online minimum value calculator ► Online minimum value calculators/tools ► HHS/CMS – http://cciio.cms.gov/resources/regulations/index.html ► IRS (coming soon) ► Features checklist ► Actuarial certification 30
  31. 31. Affordable Coverage ► Generally, employee’s premium/contribution for the lowest cost self-only coverage may not exceed 9.5% of household income ► Due to lack of information regarding employee household income levels, proposed regulations offer several Safe Harbors for affordability determination 31
  32. 32. Affordability Safe Harbors ► Form W-2 Safe Harbor ► Rate of Pay Safe Harbor ► Federal Poverty Line Safe Harbor 32
  33. 33. Form W-2 Safe Harbor ► Employee’s required contribution for a calendar year for the employer’s lowest cost self-only coverage that provides minimum value (for the entire calendar year) does not exceed 9.5% of the employee’s W-2 wages from the employer for the calendar year ► Additional regulatory details on how this calculation is made, including how to adjust for partial year offer of coverage 33
  34. 34. Rate Of Pay Safe Harbor ► Employee’s required contribution for the month for the applicable large employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.5% of an amount equal to 130 hours times the employee’s hourly rate of pay as of the first day of the coverage period ► For salaried employees, it is monthly salary instead of 130 hours per month 34
  35. 35. Federal Poverty Line Safe Harbor ► Employee’s required contribution for the calendar month for the applicable large employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.5% of a monthly amount determined as the Federal Poverty Line for a single individual for the applicable year, divided by 12 35 2013 FPL for single person = $11,490 9.5% of $11,490 = $1091.55/year or $90.96/month
  36. 36. Employee Wage Levels Matter 36
  37. 37. Calculation of Assessable Penalty ► No insurance penalty = ► $2,000 for each full-time employee after the first 30 ► Also applies if coverage offered to < 95% of full-time employees and their dependent children < 26 years old ► The “first 30” exclusion is apportioned among members of a controlled group ► Inadequate coverage offered penalty: If coverage offered but fails the applicable standards, $3,000 times the number of employees who receive a Section 1411 certification 37
  38. 38. Case Studies: Health Reform in Action 38
  39. 39. Case Studies 39 Case Study#1 Case Study #2 Case Study #3 Facility type Non-profit SNF For-profit CCRC SNF + AL Size 85 beds 180 Bed SNF 77 Bed SNF # of employees 79 FT employees 1922 FT employees 284 FT Employees Employer contribution to single coverage (% of total) $7,632/year (85%) $4,030/year (81%) $5,090/year (66%) Currently waived employees 34% (or 27 FT employees) 31.3% (or 603 FT employees) 57.7% (or 164 FT employees) # of Medicaid eligible O FT employees 10.7% (206 FT employees) 6% (17 FT employees) # of Exchange subsidy eligible 26% of FT employees (21 of 79 FT employees), many would pay less in the Exchange vs. ESI 3.1% of full-time employees (59 FT employees), many would pay less in the Exchange vs. ESI 74.3% of full-time employees (211 FT employees), most would pay less in the Exchange vs. ESI Impact of ACA Estimated to pay 11% less Estimated to pay 25% more Estimated to pay 12.7% more Cost drivers 1. Number of waived employees that will now enroll in ESI 2. Few subsidy eligible employees (many of whom currently waive ESI) because FT employee contribution is affordable for most so most employees would enroll in ESI The increased cost is the result of the fact that as a for-profit they benefit from the deductibility of health insurance premiums today but because of the high number of employees who would be eligible to receive subsidies in the Exchange, the company would incur $508K in penalties that are not deductible.
  40. 40. Employer Health Insurance & Penalty (HIP) Costs Impact of Employer Health Insurance Reforms HEALTH REFORM SUBSIDIES IMPACT ON HEALTH COSTS Full-Time Employees 115 (20 Insured / 95 Waived) One-Off Hospitality Today's 2014 Offer 2014 Drop/ Total Staffed 382 (6 PT Insured/261 PT No ESI) ($000s) Cost Coverage Don't Offer 2014 PPACA FTEs 252 Baseline Premium Cost 62$ 62$ 62$ HEALTH REFORM KEY DRIVERS 2012-2014 Premium Increase (9.0% / Yr) - 12 12 Today's Single Coverage Employer Premium Cost Pre-Reform Projected Premium Cost 62 74 74 Average Single Employer Cost 2,400$ TaxAdjusted Premium Costs 40 48 48 Employer Contribution % 39% PLUS: Additional Reform Impact Medicaid Eligible Employees Previously Waived FT Employees - 211 - Total FT Medicaid Enrollees 23 Penalty: Subsidy Eligibles & ESI - 170 - Employer Estimated Cost Savings 6$ ($000s) Health Reform Increased Cost - 381 - Employer Unaffordable Coverage Penalty Subsidy Eligible Full-Time Employees 79 LESS: Previous Premium Liabilities Subsidy ($3,000) 3$ Medicaid Employee ESI - (6) - Estimated Subsidy Penalty 237$ ($000s) Subsidy Eligible FT Employees ESI - (225) - % Total Full-Time Employees 68.7% Health Reform Decreased Cost - (231) - Employer No ESI Insurance Penalty No Minimal Essential Coverage Total Full-Time Employees 115 Less: 2014 Inflation Adjusted HC Cost - - (74) Less: 30 Employees (30) Plus: Subsidy Eligible Penalty - - 170 Adjusted Full-Time Employees 85 Health Reform No ESI Cost - - 96 No Insurance Penalty ($2,000) 2$ Post Reform HC Costs 62$ 224$ 170 Estimated Subsidy Penalty 170$ ($000s) HC Cost Change to 2014 Projected 150$ 96$ 2014 Pre Reform Projected HC Costs 48$ ($000s) % HC Cost Change to 2014 Projected 203% 130% Estimated Net Cost (122)$ ($000s) Tax Adjusted HC Costs 40$ 205$ 170 Sample Organization 40
  41. 41. 2014 Coverage Breakdown We estimate 69% of your full-time employees will be eligible for Exchange subsidies, 20% for Medicaid, and the remaining 11% enrolled in ESI. 23 , 20% 79 , 69% 13 , 11% Post Reform ESI FT Employee Mix Medicaid Eligible Subsidy Eligible ESI Coverage 41
  42. 42. Average Premium Cost Per Employee Perspective 42
  43. 43. Health Insurance and Penalty (HIP) Calculator www.cliftonlarsonallen.com/HIP 43
  44. 44. Wellness Programs ► Substantially the same as prior regulations, but ► Awards may be up to 30% ► Additional 20% if related to smoking 44
  45. 45. Other Changes ► Out-of-pocket limit for all plans (except grandfathered) – mirrors HSA limits ($6,350 self/$12,700 family for 2014) ► Removal of pre-existing limitation ► 90-day waiting period ► Coverage of clinical trials for routine cost (except for grandfathered) ► Reinsurance contributions ► Applies for 2014, 2015 and 2016 ► Approximately $60.00 per covered individual for 2014 45
  46. 46. Other Changes (cont’d) ► Auto-enrollment ► Applies to employers with more than 200 FT employees ► Notices ► Exchange notice – model just issued ► IRS reporting – begins in 2015; key to penalty assessment 46
  47. 47. Other Resources ► FaegreBD Beyond Health Care Reform Blog (please subscribe!) http://beyondhealthcarereform.com ► FaegreBD Health Care Reform Q/A (posted on www.FaegreBD.com) ► www.dol.gov/ebsa.healthreform ► www.irs.gov/uac/Affordable-Care-Act-Tax-Provision ► www.whitehouse.gov/healthreform ► www.healthcare.gov 47
  48. 48. Questions? 4852274069 Maureen M. Maly Nicole O. Fallon Partner Health Care Consultant Manager FAEGRE BAKER DANIELS LLP CLIFTONLARSONALLEN 612.766.7916 612.376.4843 maureen.maly@FaegreBD.com nicole.fallon@cliftonlarsonallen.com http://beyondhealthcarereform.com www.cliftonlarsonallen.com/HIP

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