4. Employer Mandate
Three important questions:
1) Are we subject to the mandate and have to offer
insurance?
– Do we have more than 50 FT + FTEs?
2) To whom do we have to offer coverage?
– Full-time employees
– Part-time employees
– Variable/seasonal employees
– Leased/temporary staffing employees
3) What kind of coverage do we have to offer?
– Minimum value
– “Affordable”
“Pay or Play”
5. FT + FTE = Total employees for that calendar month
Total PT hours = # of Full-Time Equivalents (FTEs) for
120 that calendar month (no rounding)
Add 12 month totals = Average # of FT employees for that year
12 (round down)
Question #1 – Are we a large employer?
6. “Hour of Paid Service”
“For employees paid on an hourly basis, employers must calculate actual hours of
service from records of hours worked and hours for which payment is made or due for
vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or
leave of absence.”
“For employees not paid on an hourly basis, calculate under any of the following three
methods:
(1) counting actual hours of service [same as above];
(2) using a days-worked equivalency method whereby the employee is credited with
eight hours of service for each day for which the employee would be required to be
credited with at least one hour of service under these service crediting rules; or
(3) using a weeks-worked equivalency of 40 hours of service per week for each week
for which the employee would be required to be credited with at least one hour of service
under these service crediting rules.” - 29 CFR 2530.200b-2(a)
We are still awaiting guidance on issues with varying pay structures
(i.e. – piece rate, commission, per-mile)
Question #1 – Are we a large employer?
7. Company A has 75 employees; 25 full-time employees and
50 part-time employees. The part-time employees each
work three six-hour shifts a week (18 hours/week), for a
total of 3,600 hours in January (18 X 50 X 4).
3,600 / 120 = 30 FTEs
25 FT + 30 FTE = 55 total full-time employees (for PPACA)
Question #1 – Are we a large employer?
8. Part-time employees are cut back to two six-hours shifts in
February (12 hours/week), for a total of 2,400 hours worked
(12 X 50 X 4).
2400 / 120 = 20 FTEs
25 FT + 20 FTE = 45 total full-time employees (for PPACA)
Question #1 – Are we a large employer?
12. Remember!
Question #1 – Are we a large employer?
Seasonal Employee Exception
26 USCA § 4980H(c)(2)(B)
(i) In general.--An employer shall not be considered to employ more than 50
full-time employees if--
(I) the employer's workforce exceeds 50 full-time employees for
120 days or fewer during the calendar year, and
(II) the employees in excess of 50 employed during such 120-
day period were seasonal workers.
Definition of seasonal workers - labor is performed on a seasonal basis
where, ordinarily, the employment pertains to or is of the kind exclusively
performed at certain seasons or periods of the year and which, from its
nature, may not be continuous or carried on throughout the year – employers
may used “reasonable good-faith interpretation” of seasonal until further
guidance is issued
13. Question #1 – Are we a large employer?
Controlled Group Rules
(1) Parent-subsidiary controlled group - One or more chains of
corporations connected through stock ownership with a common parent
corporation if--
(B) the common parent corporation owns stock possessing at
least 80 percent of the total combined voting power.
(2) Brother-sister controlled group - Two or more corporations if 5 or
fewer persons possessing more than 50 percent of the total combined
voting power of all classes of stock entitled to vote
(3) Combined group of parent-subsidiary and brother-sister
14. Remember!
Question #1 – Are we a large employer?
Seasonal Employee Exception
Controlled Group Rules
Transitional Relief – 6 Month Look Back for 2015
Temporary/Leased Employees
Union Employees
1099 Contractors
When do we have to comply?
15. 2015 “Mid-Size” Employer Exemption
• Applicable large employers that have fewer than 100 full-time employees will have an
additional year, until 2016, to comply with the pay or play rules. Provided that:
1) The employer must employ a limited workforce of at least 50 full-time employees
(including full-time equivalent employees, or FTEs) but fewer than 100 full-time
employees (including FTEs) on business days during 2014;
2) During the period beginning on Feb. 9, 2014, and ending on Dec. 31, 2014, the
employer may not reduce the size of its workforce or the overall hours of service
of its employees in order to satisfy the workforce size condition; and
3) During the coverage maintenance period (that is, the period ending Dec. 31,
2015, or the last day of the plan year that begins in 2015), the employer may not
eliminate or materially reduce the health coverage, if any, it offered as of Feb. 9,
2014.
In addition, the employer must provide an appropriate certification
stating that it meets all of the eligibility requirements.
Question #1 – Are we a large employer?
16. Employer Mandate
Three important questions:
1) Are we subject to the mandate and have to offer
insurance?
– Do we have more than 50 FT + FTEs?
2) To whom do we have to offer coverage?
– Full-time employees
– Part-time employees
– Variable/seasonal employees
– Leased/temporary staffing employees
3) What kind of coverage do we have to offer?
– Minimum value
– “Affordable”
“Pay or Play”
17. Question #2 – Who gets offered coverage?
To fall within the PPACA safe harbor, you are required to set a
specific schedule of when you will
(1) measure employee hours,
(2) review measurements, and
(3) offer insurance regardless of hours worked during that period.
18. Employees expected to work more than 30 hours/week must be
offered coverage and cannot have more than a 90-day waiting
period before coverage takes effect
- Standard Measurement Period (look-back)
- Administrative Period
- Stability Period
Question #2 – Who gets offered coverage?
Full-time Employees
19. Your Insurance Cycle
Standard Measurement Period
(SMP) – 3-12 months
Determines which employees have FT status
(30+hr/wk or 130+hr/month)
Here, the SMP is from November 1, 2013 to
October 31, 2014
Ongoing Employees
20. Your Insurance Cycle
Administrative Period (Optional)
– up to 90 days
Gives employers time to
evaluate EE hours and determine eligibility,
notify EEs of eligibility and coverage options,
collect materials, and
enroll EEs
Coverage must begin on the 91st day
Coverage of already-enrolled EEs must continue during
this time
Ongoing Employees
21. Your Insurance Cycle
Stability Period – Same length as SMP, but no
shorter than 6 months
Determination made during SMP sticks with employee
(unless promoted to FT status)
Here, the Stability Period follows the Administrative
Period and lasts for 1 year
Ongoing Employees
22. All periods must be uniform for employees within the same category
You may distinguish EE categories based on
1) Collectively bargained EEs and non-collectively bargained;
2) Salaried EEs and hourly EEs;
3) EEs of different entities (parent/subsidiary);
4) EEs located in different states.
Your Insurance Cycle
Combined
The periods overlap so that employee FT status is continually being
monitored for the following Stability Period
Renewal stays at the same date from year to year
Ongoing Employees
23. Variable Hour/Seasonal Employees
What if we don’t know how many hours the employee will work?
- Initial Measurement Period
- Administrative Period
- Stability Period (same as ongoing employees)
- Standard Measurement Period Crossover
Question #2 – Who gets offered coverage?
Full-time Employees
24. Variable Hour Employees
If you cannot determine FT status on start date = VHEE
Typically restaurants, hospitality industry, retail, tourist related,
seasonal (high fluctuations in employees)
Hourly or salary employees
Contract employees
Seasonal employees
NOT ongoing employees
25. Your Insurance Cycle
• Initial Measurement Period (IMP) – 3-12 months
• Administrative Period – up to 90 days
– must not extend past the remainder of the VHEE’s 13th month
• Stability Period – Over 6 months and as long as IMP
• In the scenario above, the VHEE will become an “Ongoing Employee”
at the end of Measurement Period 2
Variable Hour Employees
26. New Hire
Average hours during IMP > 30/wk or 130/month?
- Yes? The coverage must be offered and begin before the first calendar
month beginning on or after the 1st anniversary of the EE’s start date.
Unsure if new hire will be FT or PT?
- No? Then no coverage offered and hours will be reevaluated at the end
of SMP 2
↑ New Hire Becomes Ongoing EE
Coverage must last through ASP regardless
of EE status at the end of SMP 2
28. Special VHEE Considerations
There are two rehire rules to determine if you should treat a
returning employee as a new hire
1) 26 Week Rule (flat) – Employee is a new hire if…
No hours of service credited for 26 consecutive weeks
2) Rule of Parity (<26 weeks) – Employee is a new hire if…
No hours of service credited for 4 consecutive weeks, and
The period without service is longer than the employee’s original
period of employment that immediately proceeded this period
without service
Variable Hour Employees
29. Special VHEE Considerations
Payroll periods that are one week, two weeks, or semi-monthly:
[Period that ends on the last day of the payroll period] preceding [the
payroll period that includes the date that would otherwise be the first
day of the measurement period] – may be treated as the measurement
period
[Period that begins on the first day of the payroll period] that follows
[the payroll period that includes the date that would otherwise be the
first day of the payroll period], provided that [the measurement period
ends on the last day of the payroll period that includes the date that
would otherwise be the last day of the measurement period] – may be
treated as the measurement period
Example – Employer using calendar year as a measurement period:
May exclude entire payroll period that included January 1st if
it included the entire payroll period that included December
31st (of the same year), or
May exclude entire payroll period that included December
31st if it included the entire payroll period that included
January 1st of that year
Variable Hour Employees
30. Question #3 – What kind of coverage do we have to offer?
Minimum Value
60% or “Bronze” plan – tested actuarially
Various Safe Harbors
HHS MV Calculator
“Safe Harbor” Plan Design
Independent Actuarial Certification
Certified “Metal Tier” Plan if Sold in Small Group Market
31. Question #3 – What kind of coverage do we have to offer?
Minimum Value
60% or “Bronze” plan – tested actuarially
Coverage must be “affordable”
No more than 9.5% of household income for self-only coverage*
Safe Harbors
*Employers must offer dependent coverage, but there is no
“ “affordability” test attached & no requirement to offer spouse/family
coverage
- W-2 – Do premiums exceed 9.5% of W-2 Box 1 income?
- Rate of Pay – Do premiums exceed 9.5% of EEs rate of pay
multiplied by 130 hours (as of the first day of coverage)?
- Federal Poverty Level – Do premiums exceed 9.5% of the
FPL divided by 12?
32. Penalties (non-tax deductible)*
$2,000 per full time employee (minus first 30)
Employer does not offer coverage to all, or substantially all (>95%),
of full time employees and their dependents
AND at least one full time employee receives federal insurance
subsidies
$3,000 per subsidized full time employee
Employer offers coverage but it is “unaffordable” or does not meet
the 60% minimum value test
AND at least one full time employee receives federal insurance
subsidies
Lesser of:
$3,000 per FTE receiving subsidy
or
$2,000 per FTE (minus first 30)
*(annual penalties calculated monthly and pro-rated across controlled groups)
33. Penalties (non-tax deductible)
Transitional Relief for 2015
$2,000 per full time employee (minus first 80)
Employer does not offer coverage to all, or substantially all (>70%),
of full time employees and their dependents
AND at least one full time employee receives federal insurance
subsidies
Employer could still be subject to $3000 penalty for employees in the
30%
35. “Pay or Play”
• Case study:
– Employer with 100 + employees
– Currently offers insurance to FTEs
Financial Model
36. Total Costs $1,133,000 $1,361,000 $878,000
“Pay or Play”
Financial Model
• Case study:
– Employer with 100 + employee
– Currently offers insurance to FTEs
37. “Pay or Play”
Truven Health Analytics Study
“MODELING THE IMPACT OF ‘PAY OR PLAY’ STRATEGIES
ON EMPLOYER HEALTH COSTS”
Our analysis revealed three key findings:
• There is no immediate or long-term cost advantage for employers to
eliminate group health benefits.
• It will cost employers more to “make employees whole” when shifting
their benefits to an Exchange than to continue existing group health
plans.
• Should employers choose to eliminate group health, employees will
suffer a significant reduction in overall compensation when they
assume the incremental costs of benefits.
39. Past Plan Design Changes
• FSA limit of $2,500 ($500 rollover now allowed)
• Preventive care with no cost sharing (including
women’s health – special rules apply to religious
groups)
– USPSTF list continues to grow
• Dependent coverage to age 26
• Summary of Benefits and Coverage
• Grandfathered status?
What You Should Have Done
40. 2014 Plan Design Changes
• $6,350/$12,700 maximum out of pocket
– Now includes ALL mechanisms of cost-sharing
• Clinical trials (only have to pay for “routine services”)
– The term “approved clinical trial” is defined in the statute as a
clinical trial that is conducted in relation to the prevention,
detection, or treatment of cancer or other life-threatening
disease or condition and is one of the following:
1. A federally funded or approved trial
2. A clinical trial conducted under an FDA investigational new drug application
3. A drug trial that is exempt from the requirement of an FDA investigational
new drug application
• No pre-existing condition exclusions
• No lifetime or annual limits on Essential Health
Benefits
• Maximum 90 Day waiting period
• Automatic Enrollment (Only if 200+ EEs – delayed
indefinitely)
All Plans*
41. Plan Design Changes
• Composite rating (can only ask age, location, tobacco use)
3:1 Age bands
• Plan must cover essential health benefits (EHB) – includes
pediatric dental and vision
• $2,000/$4,000 maximum deductible (REPEALED – 4/1/14!)
*Applies on renewal date in 2014
Small Groups*
42. Plan Design Changes
PPACA
In connection with a group health plan, the term “small employer” means an employer
who employed on average at least 1 but not more than 100 employees on business
days during the preceding calendar year and who employs at least 1 employee on the
first day of the plan year. (The term “large employer” means, in connection with a
group health plan, an employer who employed an average of at least 101 employees
on business days during the preceding calendar year and who employs at least 1
employee on the first day of the plan year.)
- For plan years beginning before January 1, 2016, a state has the option of
defining a small employer as an employer who employed on average at least
1 but not more than 50 (instead of 100) employees and defining a large
employer as an employer who employed on average at least 1 but not more
than 51 (instead of 101) employees.
Texas
Senate Bill 1332 amended Texas law to allow the inclusion of part-time employees to
classify businesses as large or small employers. It allowed the definitions to be based
on total number of employees instead of the previous “eligible” employees, which
were those who worked at least 30 hours per week. This brought the state in line with
federal definitions regarding how businesses are sized for the Affordable Care Act &
HIPAA. The change in law applies only to health benefit plans delivered, issued for
delivery, or renewed on or after January 1, 2014.
Small Groups
43. SHOPs
Insurance may be purchased through the Federally Facilitated
Small Business Health Options Program (FF-SHOP)
– Available to employers with up to 100 employees until 2017, then
open to all size employers (States may limit this to 50 employees
or less until 2016
Online FF-SHOP enrollment delayed until November 2014
Employee Choice Model delayed until 2015
Employers must enroll in SHOP coverage through “direct
enrollment” with an agent, broker, or insurer
To qualify for the small business health care tax credit, and ER
must purchase coverage through the SHOP to be eligible for the
tax credit.
44. Nondiscrimination
Testing for Fully-Insured Plans
• PPACA has a new requirement for fully-insured
plans to comply with nondiscrimination benefit
rules
– Grandfathered plans are exempt from nondiscrimination
testing
• Why is this important?
– Under PPACA fully insured plans that do not comply with
the new requirements will be subject to a fine of
$100/day per employee subject to discrimination
• Compliance has been delayed until final guidance
is issued
45. Disclosure Requirements
By October 1, 2013, all employers subject to the FLSA should have provided
Exchange notices to their employees, and, moving forward, must do so to all
new employees within 14 days of hire.
In general, the Exchange notices must:
• Inform employees about the existence of the Exchange and describe the
services provided by the Exchange and the manner in which the employee
may contact the Marketplace to request assistance;
• Explain how employees may be eligible for a premium tax credit or a cost-
sharing reduction if the employer's plan does not meet certain
requirements;
• Inform employees that if they purchase coverage through the Exchange,
they may lose any employer contribution toward the cost of employer-
provided coverage, and that all or a portion of this employer contribution
may be excludable for federal income tax purposes; and
• Include contact information for the Exchange and an explanation of appeal
rights.
» Employers may distribute the notice electronically, provided
that they use the DOL’s Electronic Distribution Safe Harbor
provisions.
» Model Notices are available on the EBSA website
46. Disclosure Requirements
New Notices Issued 05/2014:
- New Model COBRA General Notice
- New Model COBRA Election Notice
- New Model CHIP Notice
47. W-2: “Applicable Employer-
Sponsored Coverage”
• Section 9002(a) of the ACA provides that employers must disclose the
aggregate cost of applicable employers sponsored coverage provided to
employees on the Form W-2.
• Include coverage under any group health plan made available to the EE by
the ER which is excludable from the EE’s gross income under Code § 106
• Currently optional for “small” employers
– An employer is considered a small employer if it had to file fewer than 250 Forms
W-2 for the prior calendar year. If an employer filed fewer than 250 Forms W-2
for 2012 in 2013, the employer would not be subject to the reporting requirement
for 2013.
– IRS Controlled group rules are NOT used to aggregate employers
48. Reporting Requirements
According to Section 6056 (6055 for issuers or self-funded plans), large
employers will have to report certain information to the IRS including:
• The employer’s name, address and EIN, the name and telephone number of the
employer’s contact person and the calendar year for which the information is reported;
• A certification as to whether the employer offered its full-time employees (and their
dependents) the opportunity to enroll in minimum essential coverage under an eligible
employer-sponsored plan by calendar month;
• The number of full-time employees for each month during the calendar year;
• For each full-time employee, the months during the calendar year for which coverage
under the plan was available;
• Each full-time employee’s share of the lowest-cost monthly premium (self-only) for
coverage providing minimum value offered to that full-time employee, by calendar month;
and
• The name, address and TIN of each full-time employee during the calendar year and the
months the employee was covered under an eligible employer-sponsored plan.
49. Reporting Requirements
Employers required to file section 6055/6056 information returns must
also furnish to each full-time employee identified on the return a written
statement including:
The employer’s name, address and EIN; and
The information required to be shown on the section 6056 return with
respect to the employee.
Employee statements for each calendar year must be furnished to full-
time employees by Jan. 31 of the next calendar year. Extensions may
be available in certain circumstances.
The employer’s name, address and EIN; and
The information required to be shown on the section 6056 return with
respect to the employee.
IRS is considering
simplified/combined Reporting methods,
such as using codes on Form W-2.
50. The Future
Assessing your risks/liabilities
• Are you currently offering insurance?
– Will you be required to in 2015?
– Will there be transitional relief for fiscal year plans?
– How many employees will be eligible?
• Does it pass the affordability and minimum value tests?
• What is the income level of your employee base?
– Between 100% and 400% of FPL?
• Would you pass nondiscrimination testing if it were in
effect today?
• Will you be subject to the “Cadillac” tax?
Employer Strategies
51. The Future
Plan for the future
• Pay?
– Penalties (non-deductible)
– Cost shift to employees
– Increased compensation
– Employee recruitment/retention
• Play?
– Budget for new costs
– Change in plan structure (Bronze or MEC Plan)
– Penalties
– Limit potential liabilities
– Reduce claims/costs
• Spectate?
– <50 full-time employees (early renewal up until 10/1/14?)
Employer Strategies
54. Reducing Cost
CDHP with Patient Advocacy Program
Employer Strategies
Source: Compass Case Study of 6000 Life Group
55. Reducing Cost
Employer Strategies
Source: Pan American Life
Minimum Essential Coverage (MEC) or “Skinny” Plans
Self-funded to avoid state/federal mandates
Usually only cover preventative care with some doctor’s visits
May offer RX co-pays
Often sold alongside voluntary hospital indemnity plans
May or may not be offered alongside full medical plans
57. Reducing Cost
• Two kinds of wellness programs:
– Participatory wellness programs
– Health-contingent wellness programs (outcomes-based)
• Regulations have increased the maximum reward
under a health-contingent wellness program from 20%
to 30% of the cost of coverage and further increased
the maximum reward to 50% for wellness programs
designed to prevent or reduce tobacco use
Employer Strategies
58. Reducing Cost
Employer Strategies
What about HRAs?
Type of HRA Status in 2014
Integrated HRA Permitted if the HRA satisfies one
of the integration methods
Stand-alone HRA Not allowed. Stand-alone HRAs
must be converted to integrated
HRAs or terminated.
HRA used to reimburse individual
market coverage
Not allowed
Stand-alone, retiree-only HRA Permitted (exempt from the ACA’s
reforms)
59. Individual Mandate
Summary
Starting January 2014
Individuals must maintain minimum essential coverage (MEC)
or otherwise pay a penalty
Some exemptions available
Penalties
Greater of flat dollar amount OR percentage of individual’s
taxable income over the income filing threshold
60. Financial Assistance
Federal Subsidies
Premium Tax Credits (amount varies)
– Household income between 100-400% FPL
– Not a dependent
– Filed jointly if married
– Enroll in QHP through an Exchange
– Not eligible for minimum essential coverage
Cost-Sharing Reductions
– Household income up to 250% of FPL
http://kff.org/interactive/subsidy-calculator/
62. Exemptions
Cannot afford coverage (cost >8% of your household income)
Income below the federal income tax filing threshold
Non-citizens
Gap in coverage less than 3 months
Religious conscience objector
Health care sharing ministry*
Certain Indian tribes
Hardship exemption (HHS)*
Incarcerated*
Certifications of Exemptions
IRS tax-filing process
*Require yearly applications
- There is also transition relief in 2014 for employees eligible to
enroll in a non-calendar year employer sponsored plans
63. Individual Mandate Penalty
“Income” for this purpose is your household income minus your exemption (or exemptions
for a married couple) and standard deductions. Families will pay half the penalty amount
for children.
64. Flat Dollar Amount
The lesser of…
The sum of the applicable dollar ($95 - $325 - $695) for all nonexempt
individuals without MEC for whom the taxpayer is liable, or
300% of the applicable dollar amount
– If under 18 as of the beginning of the month, the applicable dollar
amount is ½ of the regular dollar amount
65. Percentage of Income
The excess of the taxpayer’s household income over the
taxpayer’s federal income tax return filing threshold, multiplied
by a percentage figure (1% - 2% - 2.5%)
(Household Income – Threshold) X Percentage
66. Penalty Cap
Penalty may not exceed the national average premium for
bronze-level QHPs offered through exchanges for the
applicable family size involved.
National average determined for each month
67. Example
In 2014, Taxpayer A is an unmarried individual with no
dependents. A does not have MEC for any month in 2014,
and A’s household income is $120,000. A’s applicable filing
threshold is $12,000. The annual national average bronze
plan premium for A is $3,000.
68. 2014
Flat Dollar Amount = $95
($95x1) $95 < $285 ($95x3)
Monthly Flat Dollar Amount = $95/12 = $7.92
Percentage of Income = $1,080
($120,000 - $12,000) x 1%
Monthly Percentage of Income = $1,080/12 = $90
Sum of Monthly National Average = $3,000
Monthly National Average = $3,000/12 = $250
Taxpayer A would pay the greater of $7.92 or $90 a
month. $90 X12 = $1,080, which is less than the national
average for a bronze plan. $1,080 would be his penalty for
2014.
69. 2016
Flat Dollar Amount = $695
($695x1) $695 < $2,085 ($695x3)
Monthly Flat Dollar Amount = $695/12 = $58
Percentage of Income = $2,700
($120,000 - $12,000) x 2.5%
Monthly Percentage of Income = $2,700/12 = $225
Sum of Monthly National Average = $3,000
Monthly National Average = $3,000/12 = $250
Taxpayer A would pay the greater of $58 or $225 a
month. $225 X12 = $2,700, which is less than the national
average for a bronze plan. $2,700 would be his penalty for
2016
70. Example - B
In 2014, Taxpayers B and C are married and file a joint
return. They have three children: D (21); L (15); and M (10).
No member of the family has MEC for any month in 2014. B
and C’s household income is $120,000. B and C’s applicable
filing threshold is $24,000. The annual national average
bronze plan premium for a family of five is $12,000.
71. 2014
Flat Dollar Amount = $285
($95 x 3 adults + $95/2 x 2 children) $380 > $285 (95x3)
Monthly Flat Dollar Amount = $285/12 = $23.75
Percentage of Income = $960
($120,000 - $24,000) x 1%
Monthly Percentage of Income = $960/12 = $80
Sum of Monthly National Average = $12,000
Monthly National Average = $12,000/12 =$1,000
Family B would pay the greater of $23.75 or $80 a
month. $80 X12 = $960, which is less than the national
average for a bronze plan. $960 would be their penalty
for 2014
