Checklist and Decisions for Employers Facing Healthcare Law
Action Items and DecisionsFacing Employers with thePatient Affordable Care Act Chris Hodge, District Manager Oasis Outsourcing February 21, 2013
Timeline of Key Provisions 2011 2012 2013 2014• Adult children to • W-2 reporting $2,500 health care FSA Exchanges age 26 (early requirements for salary reduction limits operational adopter) health care coverage Increase in Medicare (for January 2013 Free rider penalty• No lifetime or payroll tax on individuals W-2s) making more than (employer mandate) annual maximums $200k/$250K• 100% preventive • Summary of Benefits Individual mandate Investment income care coverage and Coverage and subject to Medicare tax Auto-enrollment• FSAs cannot Uniform Glossary for individuals making reimburse over- rules more than $200k/$250k No preexisting the-counter (OTC) Expanded women’s condition exclusions • Nondiscrimination expenses without testing rules in all preventive care Wellness program Rx plans, including Comparative discount expansion• No preexisting insured plans Effectiveness Fee per member participant on Eligibility waiting condition • Medical Loss Ratios all health plans period no longer exclusions under Rebates Notify all employees than 90 days age 19 about exchanges,• Prohibition on • Tax credit for Employer reporting services and contact rescissions employers with < 25 info. of health insurance employees info to govt &• New claims and participants appeals rules
2013 Employer Checklist$2,500 Flexible Spending Account LimitComparative Effectiveness Fee for all health plan participantsEmployer must provide written notice regarding the existence of insurance exchanges and that employee may qualify for subsidies2014 Employer Mandate will be based on 2013 FTEs and hours worked.
2013 Employer Checklist# 1 $2,500 Flexible Spending Account Limit – Child Care spending limit is not affected – Employee Contributions to Medical Flexible Spending Accounts are limited to $2,500/year
2013 Employer Checklist# 2 Comparative Effectiveness Fee • New fee to fund independent comparative clinical research programs • Fee became effective for plan years as of October 1, 2012 and later • Initial fee is $1 per member per year, increasing to $2 per member in second year. • Fee is due no later than July 31, 2013 • Assessed by the carrier
2013 Employer Checklist# 3 Employer must provide written notice regarding the existence of insurance exchanges and that employee may qualify for subsidies • Originally due March 1, 2013 • Postponed to early Autumn 2013. No exact date yet.
2013 Employer Checklist# 4. Employers that do not currently provide health insurance, evaluate headcount to determine whether your company will be subject to the employer mandate in 2014.
2013 Employer Checklist# 5. Employers that do provide health insurance, evaluate plans to ensure that by 2014 insurance meets requirements: • Affordability • Adequate coverage
2014 Employer ChecklistShared Responsibility Provision takes effect (for companies with 50+ employees)Automatic Enrollment of New EmployeesLimits to waiting periods for coverageReporting of health insurance information to government
2014 Employer Checklist# 1 Shared Responsibility Provision takes effect • Applies only to employers with 50+ Full Time EQUIVALENTS • $3,000 penalty per employee • If premium contribution is greater than 9.5% of income – Example: For employee earning $35,000/year, 9.5% equals $3,325 annually or $277 per month • If plan covers less than 60% of allowable costs. • The alternative penalty is $2,000 per employee for not offering coverage.
How Eligibility is Calculated• Do you have 50 Full Time Equivalents? – Any employee averaging 30 or more hours a week is considered a Full Time Employee. – Add to that number, the total number of hours worked by all PTEs every month divided by 120. – Seasonal workers (<120 days/year) are excluded.• Example: A firm has 35 FTEs & 20 PTEs working 24 hours/week (or 96 hours/month). – 20 PTEs X 96 (hours/month) / 120 = 16 – 35 FTEs + 16 Calculated FTEs = 51 FT Equivalents
How Eligibility is Calculated• Companies under common control are considered one company. – You can’t subdivide businesses to avoid eligibility. – Separate businesses with common ownership must be evaluated as a whole.
How the Penalties are Assessed• Assessed differently than eligibility is assessed.• Tax penalty is assessed if at least one FULL- TIME employee obtains coverage from through an exchange AND receives a premium credit. – No penalties for part-time workers.• Premium credits are for workers who are 138% to 400% of the Federal poverty level. – Employee premium must be greater than 9.5% of income. – Plan pays less than 60% of essential health benefits
Penalty for >50FTE Employer not offering Health Insurance• Penalty applied to FT Employees (working over 30 hours a week) greater than 30.• $166.67 per month penalty for every FTE greater than 30 who do not have company-sponsored health insurance. – 35 FTEs and 20 PTEs. Penalty would be: 35 - 30 = 5 X $166.67 = $833.35/mo. – 29 FTEs and 50 PTEs. Penalty would be: 29 - 30 = -1 or 0 X $166.67 = $0/mo.
Potential Penalties for Employers >50 FTE who do offer health insurance• Penalty is applied if any of the employer’s FT Employees (PTEs are excluded) receives a premium credit to purchase from an exchange.• To get premium credit: – Employee must be 138-400% of FPL AND – Employee’s share of premium > 9.5% of income OR – Policy does not provide minimal essential coverage.• Penalty is the lesser of: – FTEs – 30 X $2,000 – FTEs receiving premium credits X $3,000
Potential Penalties SummarizedLess Large Employer: 50 or more FTEsthan 50 Does not offer coverage Offers coverageFTEs No FTEs 1 or more FTEs No FTEs 1 or more FTEs receive credit receives credit receive credit receives credit for for exchange for exchange for exchange exchange coverage coverage coverage coverageNo penalty No penalty Number of FTEs No penalty Lesser of: minus 30 - Number of FTEs multiplied by minus 30 multiplied $2,000. by $2,000. - Number of FTEs who receive premium credit multiplied by $3,000
Online Tools to Determine Eligibility and Penalties• Online calculator atwww.franchise.org/healthcare/calculator.aspx• Government’s Outline of Ruleshttp://www.healthcare.gov/using-insurance/emp• DHHS to be releasing a calculator for minimum essential coverage
How does this apply to 2013?• The determination of the number of full- time vs part-time employees in 2014 will be based on a “Lookback Period” that includes 2013. – Each employee is classified FT or PT based on the hours they worked in that period. – Period can be 3 to 12 months – Employer can determine the length of the period
2014 Employer Checklist# 2 Automatic Enrollment of New Employees – Applies only to employers with 200+ Employees – Employers must automatically enroll new full- time employees in health plan – Employees may opt out
2014 Employer Checklist# 3 Limits to waiting periods for coverage • No health plan may impose a waiting period for benefits of greater than 90 days • Employers with 50+ employees will be fined for waiting periods over 90 days ($600 per FTE in waiting period).
Decisions facing Employers• If you do provide • If you don’t provide health insurance: health insurance: – Should you continue to – Should you start? provide coverage? – Can you stay below – What changes should the 50 employee you make to your threshold? plans? – What are the best – What changes should vehicles to provide be made to insurance? contributions?
Considerations in Deciding to Maintain or Buy Group Coverage• Insurance premiums are tax-deductible but penalties are not.• Cost of providing insurance is a function of the number of participants, not the number of employees.• The Individual Mandate will make insurance important to employees who did not care before.• Any additional compensation to cover Exchange costs will increase payroll (FICA/FUTA) taxes for the employer, and income and payroll (FICA) taxes for the employee.• If you already provide coverage, why? Has that changed?
Considerations for the Providing Coverage• Does the plan cover 60% of expenses? – DHHS Calculator – Common sense guide• Does your contribution keep employees from paying more than 9.5% of their income for their plan? – Increase contribution? – Create classes that reverse discriminate?
Whatever you do (or don’t do)• Do the math! Summary of Results: Pay or Play Analysis Potential PenaltiesFull-time Employees 73Penalty (Cost) for not offering coverage to all full-time employees 0Employees paying more than 9.5% of income for single coverage 29Does plan pay for at least 60% of covered expenses for a typical population? YESPenalty for employees paying more than 9.5% $87,000Total Potential Penalties Accrued $87,000 Cost of Providing CoverageAnnual cost of current plan $198,756Employee Contributions, including increased employer contribution for low income employees (89,556)Value of Federal Tax Deduction (37,128)Employer net cost of plan $72,072
Whatever you do (or don’t do)• Do the math!• Make sure your assumptions are accurate.• Spreadsheet your options• Base calculations on what is known and minimize speculation. – We do know more than we don’t know – Many remaining questions will not be significant enough to require a change in course. – If information changes, then change the spreadsheet.• Re-assess after the exchanges have been around for a year.