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Understanding the Affordable Care Act: Should You Pay or Play?

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The Affordable Care Act (ObamaCare) is upon us and there’s a lot to do in order to be ready for the employer mandate coming in Jan 2015. It starts with determining if you should pay or play. Jennifer Kraft, gives us an update of where healthcare reform stands now and how to calculate your real cost. She’ll also cover: what steps should you be taking right now to determine whether you should pay or play; how can you ensure that you’re minimizing the financial impact of the ACA on your business?

Jennifer Kraft of Seyfarth Shaw LLP, will review this pay or play mandate and ways employers can mitigate the financial impact, including:
◾Are you even subject to the Affordable Care Act and if you are, what are your options? Which employees must you offer coverage to or pay a penalty? What are the state exchanges and how do they work with the employer mandate?
◾How is the employer penalty calculated?
◾How will the expansion of eligibility for Medicaid in your state affect the employer penalty? How do you discover whether your state’s ruling will impact your employees and who you will need to provide insurance to?
◾If your employee hours vary (i.e., part-time and fluctuating schedule workers in industries such as retail, hospitality, and health care), how do you calculate your ACA liabilities?
◾What steps should you be taking right now to determine whether you should pay or play? How can you ensure that you’re minimizing the financial impact of the ACA on your business?

In addition, EPAY will briefly discuss how a time and labor management system can help you monitor and track the data required to make these decisions and manage the ACA on an ongoing basis. Automated tools from your time-tracking system, such as reports and alerts, will be critical to managing who is eligible and mitigating the risk of non-compliance. For more than 60 years, Seyfarth Shaw has been recognized as one of the “go-to” labor and employment firms for business by providing extraordinary, cost-effective results. EPAY Systems, Inc. has joined forces with Seyfarth Shaw to educate employers of distributed labor environments on how compliance risk can be minimized
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Understanding the Affordable Care Act: Should You Pay or Play?

  1. 1. Understanding the Affordable Care Act: Should You Pay or Play? Featuring Seyfarth Shaw LLP ©2012 Seyfarth Shaw LLP
  2. 2. Welcome Today’s Host Michelle Lanter Smith Chief Marketing Officer EPAY Systems, Inc. mlsmith@EPAYsystems.com 773-499-7512 2
  3. 3. EPAY Systems -- designed to meet the needs of your complex, distributed workforce • Reduce your labor costs by 5% or more • Keep you in control and in compliance 3
  4. 4. Today’s Discussion The Affordable Care Act is upon us and there’s a lot to do in order to be ready for January 1, 2014. Does your company even need to be concerned? If so, who is eligible for health insurance at your company? How do you calculate whether it’s better to offer health insurance to your employees or just pay the penalty? 4
  5. 5. Our Speaker Jennifer A. Kraft Partner, Seyfarth Shaw LLP Employee Benefits jkraft@seyfarth.com (312) 460 -5000 ©2012 Seyfarth Shaw LLP 5
  6. 6. Ask Your Questions To ask a question, simply type your question in the “Question” box on the right side of your screen. ©2012 Seyfarth Shaw LLP 6
  7. 7. Legal Disclaimer The contents of this presentation should not be construed as legal advice or a legal opinion on any specific facts or circumstances. These materials are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have. 7| ©2012 Seyfarth Shaw LLP
  8. 8. Current Health Care Landscape Individual Policy Medicare Medicaid TRICARE Employer-provided coverage Population = 311 Million Uninsured 50 million people 16% of population 8| ©2012 Seyfarth Shaw LLP
  9. 9. Overview of 2014 Health Care System Medicaid Expansion Exchanges Guaranteed Issue/ Community Rating Individual Mandate Employer Mandate 9| ©2012 Seyfarth Shaw LLP
  10. 10. Projected Health Care Landscape Individual Policy Medicare Medicaid TRICARE Employer-provided coverage Population = 311 Million Uninsured 18 million people 5% of population 10 | ©2012 Seyfarth Shaw LLP
  11. 11. Medicaid Expansion • Following the Supreme Court decision on the ACA, states may choose whether to expand Medicaid coverage ► ► • Some Republican-led states have expanded Arkansas model of using funds to insure Medicaid-type offerings Employees with income below the thresholds shown below may not be eligible for Medicaid if their state of residence does not expand coverage Family Size Federal Poverty Level 133% of FPL 1 $15,281 2 15,510 20,628 3 19,530 25,975 4 23,550 31,321 5 27,570 36,668 6 • $11,490 31,630 42,068 These employees will be more likely to seek coverage: ► Through the exchanges, or ► From their employers 11 | ©2012 Seyfarth Shaw LLP
  12. 12. How Will Individuals Get Health Coverage? – Medicaid Expansion Participating in Medicaid Expansion? Yes Leaning Yes Leaning No No Undecided 12 | ©2012 Seyfarth Shaw LLP
  13. 13. Health Benefit Exchanges or ―Marketplaces‖ ©2012 Seyfarth Shaw LLP
  14. 14. Exchanges (Now Called Marketplaces) • • • State-based collection of health insurance offerings (―Qualified health plans‖) o Private and non-profit insurers o Essential health benefits o If state did not establish, Federal government stepped in  Illinois has a State-Federal partnership exchange 2014 o Individuals (with tax credits and cost-sharing subsidies) o Small businesses (100 or less employees) 2017 o Large employers (more than 100 employees) 14 | ©2012 Seyfarth Shaw LLP
  15. 15. State Decisions on Exchanges Establishing State Exchanges? State Exchange State/Federal Partnership Federal Exchange 15 | ©2012 Seyfarth Shaw LLP
  16. 16. Exchanges/Marketplaces • Each state will have one or two exchanges: o Individual Exchange + Small Business Health Operations Program Exchange (SHOP Exchange) OR o Combined exchange for individuals and small businesses • All individuals can purchase coverage through the exchange, regardless of:   Income level Employment status 16 | ©2012 Seyfarth Shaw LLP
  17. 17. Exchanges / Marketplaces Family Size 1 2 3 4 5 6 2013 Federal Poverty Level 133% of FPL 250% of FPL 400% of FPL $11,490 $15,281 $28,725 $45,960 15,510 20,123 $38,775 $62,040 19,530 25,975 $48,825 $78,120 23,550 31,321 $58,875 $94,200 27,570 36,668 $68,925 $110,280 31,590 42,068 $78,975 $126,360 17 | ©2012 Seyfarth Shaw LLP
  18. 18. Employer Mandate
  19. 19. Employer Mandate – Large Employers Only o Threshold for ―Large Employer‖ = 50 Full-time Equivalent Employees in prior year o Full-time employees = 30 hours per week, on average #FULL-TIME EMPLOYEES Aggregate # hours worked/ month by parttime employees ________ Divided by 120 #Full-time equivalent employees You must count all employees working for any company within the corporate family (as determined by IRS rules) 19 | ©2012 Seyfarth Shaw LLP
  20. 20. Employer Mandate • Employer ―Shared Responsibility‖ starting in 2014 o If:  Employer has 50 or more full-time equivalent employees  Add each month’s calculation up in the prior year and divide by 12 to get average monthly count, but note 2014 transition relief o Then:  The employer is required to provide affordable ―minimum essential coverage‖ to all full-time employees and their dependents  Dependents does not include spouses o Or else:  The employer will be assessed a penalty if an employee receives a tax credit or subsidy through an Exchange 20 | ©2012 Seyfarth Shaw LLP
  21. 21. Employer Mandate • Employer ―Shared Responsibility‖ — Penalties ► Failure to Provide Minimum Essential Coverage (―No Coverage Penalty‖) OR ► Failure to Provide Affordable Coverage (―Inadequate Coverage Penalty‖) 21 | ©2012 Seyfarth Shaw LLP
  22. 22. No Coverage Penalty • Employer Fails to Provide Minimum Essential Coverage o At least one employee receives a tax credit or subsidy through a state-based exchange  All full-time employees = 95% of full-time employees o Penalty = $2,000 X # of Full-time Employees  Subtract first 30 full-time employees when calculating the penalty o Assessed employer-by-employer within the controlled group  30 person deduction must be spread ratably among all employers 22 | ©2012 Seyfarth Shaw LLP
  23. 23. No Coverage Penalty • Minimum Essential Coverage o Group health plan o That is not excepted benefits  Dental only, vision only o Could be preventive care only 23 | ©2012 Seyfarth Shaw LLP
  24. 24. No Coverage Penalty • Example o Employer employs 55 full-time equivalent employees, 45 of which are full-time employees o The employer offers coverage to 35 of its full-time employees, 77%, but chooses not to offer health insurance coverage to 10 full-time employees o One of those employees who was not offered coverage purchases individual coverage through Exchange with a tax credit o The employer will be assessed a penalty of $30,000  (45-30) X $2,000 24 | ©2012 Seyfarth Shaw LLP
  25. 25. Inadequate Coverage Penalty • • Employer offers health insurance coverage, but not affordable coverage that provides minimum value ► Affordable – Cost of coverage no more than 9.5% of household income ► Minimum value – Covers at least 60% of actuarial value of health costs ► Note: No coverage to an employee (where part of the 5% leeway) would equate to coverage not offering minimum value Any employee receives a tax credit or subsidy through a statebased exchange 25 | ©2012 Seyfarth Shaw LLP
  26. 26. Inadequate Coverage Penalty ADEQUATE HEALTH COVERAGE AFFORDABLE MINIMUM VALUE • Employee-only premium cost (regardless of what coverage employee elects) cannot exceed 9.5% of household income. May use: • Plan must cover at least 60% of the actuarial value of health costs (medical, hospital, prescription drug, lab, etc.) • Calculated in one of three ways • W-2 wages • HHS Calculator • Rate of Pay (hourly rate for each hourly employee multiplied by 130 hours per month) • Safe Harbor Checklist • Federal Poverty Line * New guidance suggests may only use reduced premium under Wellness for tobacco cessation programs 26 | ©2012 Seyfarth Shaw LLP • Actuarial Certification
  27. 27. Inadequate Coverage Penalty PENALTY $2,000 x (Total No. of Full-Time Employees – 30) THE LESSER OF: $3,000 x No. of Full-Time Employees who receive a tax credit or subsidy and purchase coverage through an Exchange 27 | ©2012 Seyfarth Shaw LLP
  28. 28. Inadequate Coverage Penalty • Example o Employer employs 55 full-time equivalent employees, 45 of which are full-time employees. o Employer offers health insurance to all 45 full-time employees, but the insurance only covers 50% of costs. o Five employees receive a credit through the exchange. The employer will be assessed a penalty of $15,000 (5 X $3,000).  Note this is less than $2000 x (45 – 30) full-time employees 28 | ©2012 Seyfarth Shaw LLP
  29. 29. Inadequate Coverage Penalty • Strategies for Achieving Affordability o Set employee-only coverage premium at 9.5% but increase dependent level costs:    Assume an employee has $30,000 a year in household income Premium is $2,400 for employee-only coverage (8% of household income) and $6,000 for family coverage (20% of household income) The employer will be deemed to have offered the employee affordable coverage, even if the employee elects family coverage 29 | ©2012 Seyfarth Shaw LLP
  30. 30. Inadequate Coverage Penalty • Strategies for Achieving Minimum Value o Reduce participant cost-sharing   Co-insurance, co-pays, deductibles Wellness programs that reduce cost-sharing cannot be considered, except for tobacco-cessation programs o Add benefits  Cover additional services o Add HRA/HSA component  With employer contributions 30 | ©2012 Seyfarth Shaw LLP
  31. 31. Full-Time Employee • What is a Full-Time Employee? o Those who work, on average,   30 hours per week or 130 hours per month o Full-time status determined on a monthly basis o Measurement & Stability periods    Measurement period (look-back) could range between 3-12 months Stability period must be at least as long as the look-back period and can be no shorter than 6 months Administrative Period up to 90 days between the two  To determine who will be eligible, notify them and enroll them 31 | ©2012 Seyfarth Shaw LLP
  32. 32. Measurement and Stability Periods Measurement Period Admin Stability Period Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2014 2015 32 | ©2012 Seyfarth Shaw LLP
  33. 33. Safe Harbor for Current Employees • May use different Measurement and Stability Periods for:  Salaried and hourly employees  Employees of different entities  Employees located in different states  Collectively bargained with different collective bargaining agreements 33 | ©2012 Seyfarth Shaw LLP
  34. 34. Overlapping Periods Starting with 2014, every year will feature a simultaneous measurement and stability period Measurement Period #2 Stability Period #1 Admin Stability Period #2 Measurement Period #3 Admin Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2014 Stability period (following 2013 measurement period) 2015 New measurement period begins (for 2016 stability period) Optional administrative period. Overlaps with stability period 34 | ©2012 Seyfarth Shaw LLP 2016
  35. 35. When Must Coverage Be Offered? • Full-time position ► If know that the position is more than 30 hours/week, must offer coverage within 3 months of hire ► May be allowed to take 6 months, depending on facts and circumstances at time of hire ► Monitor hours going forward under Measurement Period approach 35 | ©2012 Seyfarth Shaw LLP
  36. 36. What is a ―Variable Hour‖ Employee? • • • Based on facts and circumstances at date of hire, Cannot determine that employee is reasonably expected to work, on average, at least 30 hours per week (or 130 hours per month) The IRS may disagree with determination and impose penalty if every crew member is labeled as ―variable hour‖ but many end up working full-time 36 | ©2012 Seyfarth Shaw LLP
  37. 37. What is a ―Variable Hour‖ Employee? • Examples* ► Part-time employees ► Hourly employees with fluctuating schedules ► Seasonal employees *These are merely examples of individuals that might be considered variable hour new hires. Facts and circumstances may limit an employer’s ability to treat these employees as variable hour new hires. • NOTE: Expected (short) length of employment can be taken into consideration, but only for 2014 37 | ©2012 Seyfarth Shaw LLP
  38. 38. What is a ―Seasonal Employee‖? • Seasonal Employee ► No definition for purposes of the Employer Mandate ► Through 2014, employers may make a good-faith interpretation of the term ► Example • Employees hired for summer season • Employees hired over holiday break 38 | ©2012 Seyfarth Shaw LLP
  39. 39. When Must Coverage Be Offered? • ―Variable hour‖ o New hires must be offered coverage within 13 months of hire date (or start of next calendar month thereafter), o if they work at least 130 hours per month on average during that time 39 | ©2012 Seyfarth Shaw LLP
  40. 40. When Must Variable Hour New Hires be Offered Coverage? Employee switches to ongoing employee measurement period effective October 1, 2014 Measurement Period #2 Measurement Period #1 Stability Period #2 Stability Period #1 Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2014 Variable Hour New Hire – Hire Date February 15, 2014 2015 Measurement Period ends February 14, 2015 Administrative Period From February 15 – March 31 40 | ©2012 Seyfarth Shaw LLP 2016 Stability Period coverage begins April 1, 2015 (and continues through March 31, 2016)
  41. 41. Transition Relief for 2014 • Shorter 6-Month Determination Period for 2013 (for purposes of determining ―large employer‖ status) o Any 6 consecutive months o Normally would look back to prior 12 month year • • • Shorter Measurement Period for 2013 (even if using a 12Month Measurement Period going forward) Off-Calendar Year Plans can wait until first day of Plan Year after Jan. 1, 2014 Dependent Coverage Not Required in 2014 o Never required for spouses 41 | ©2012 Seyfarth Shaw LLP
  42. 42. Special Rule: Breaks in Service Length of Break Length of Employment Result Upon Rehire More than 26 weeks N/A Treat employee as new hire (i.e., start new measurement period and disregard prior service) Less than 26 weeks but more than 4 weeks Shorter than break Treat employee as new hire (i.e., start new measurement period and disregard prior service) Less than 26 weeks but more than 4 weeks Longer than break Continue existing measurement period (0 hours counted during break*) OR Continue coverage for remainder of stability period Less than 4 weeks N/A Same as above 42 | ©2012 Seyfarth Shaw LLP
  43. 43. Special Rule: Breaks in Service • For ―special leaves‖ employees must not be penalized for breaks in service o Two methods:   Apply average hours worked before and after leave to determine ―hours‖ equivalent during leave, Exclude leave period when calculating average hours o Special leaves include:    FMLA USERRA Jury Duty 43 | ©2012 Seyfarth Shaw LLP
  44. 44. Special Rule: Breaks in Service • Employees on paid leave must be credited with hours of service during leave, regardless of length!!!!! ©2013 Seyfarth Shaw LLP 44 |
  45. 45. Special Rule: Other Terminations of Coverage • No penalty if: o Employee is offered but fails to elect coverage during open enrollment o Employee fails to pay premiums so coverage terminates • Grace period runs through conclusion of plan year to which employee’s failure relates 45 | ©2012 Seyfarth Shaw LLP
  46. 46. Nondiscrimination Requirements • Nondiscrimination Rules Extended to Insured Plans ► Insured plans may not discriminate in favor of highlycompensated employees ► Prior to PPACA, Code Section 105(h) applied to self-funded plans • No discrimination in (1) eligibility or (2) benefits ► Post-PPACA, similar rules apply to fully insured plans, BUT ► Penalty is different • • • $100 per day per non-highly compensated employee Civil action to enjoin noncompliance (or to seek appropriate equitable relief) No imputed income penalty for highly compensated employee Doesn’t apply to grandfathered plans ©2013 Seyfarth Shaw LLP ©2012 Seyfarth Shaw LLP 46 |
  47. 47. Key Considerations
  48. 48. Key Considerations • Employers are not required to pay 100% of the cost of coverage o Employees can be required to contribute to the cost of coverage, in increasing amounts based on increasing income o Employees can be required to pay the full cost of dependent coverage • Large employers are only required to offer coverage o There is no penalty if an employee declines coverage o Not all employees will elect the coverage that is offered 48 | ©2012 Seyfarth Shaw LLP
  49. 49. Next Steps • Start to project cost of options o Determine maximum number of employees who could elect coverage o Determine number of employees likely to elect coverage • • Select Measurement Period and Stability Period o Document Consider design options for 2014 o Wellness rewards 49 | ©2012 Seyfarth Shaw LLP
  50. 50. Homepage 50 | ©2012 Seyfarth Shaw LLP
  51. 51. Quick Access to Resources 51 | ©2013 Seyfarth Shaw LLP ©2012 Seyfarth Shaw LLP
  52. 52. Sortable FAQ ©2013 52 | Seyfarth Shaw LLP ©2012 Seyfarth Shaw LLP
  53. 53. ACA Resource Center aca-seyfarth.com 53 | ©2013 Seyfarth Shaw LLP
  54. 54. Questions? jkraft@seyfarth.com To sign up for Seyfarth Alerts, email healthreform@seyfarth.com @SeyfarthEBLaw ©2012 Seyfarth Shaw LLP
  55. 55. EPAY Systems Michelle Lanter Smith Chief Marketing Officer EPAY Systems, Inc. 55
  56. 56. Real Time Data Collection Data Collection 1 3 2 Secure web management Payroll Processo r 56 Data Export Payroll
  57. 57. EPAY’s Mobile Expertise Today’s Expert John Gaudiuso Sales Engineer EPAY Systems, Inc. Contact John at: jgaudiuso@EPAYsystems.com 312-291-2032 57
  58. 58. Determining FTE’s in Blueforce • • • • • Compare all employees average hours to AHA guidelines to determine total FTE’s Will give total Full Time Employees (> 30 hours) Will give total Part Time Employees (< 30 hours) Total the two to determine total FTE’s Could also use alerting to ensure employees not going over 30 hours per week 58
  59. 59. Determining Average Hours in Blueforce • • Calculate employees’ average hours per week from hire date Report to show the employee, the hire date and the average hours worked per week 59
  60. 60. Track Covered Employees in Blueforce • • • Report to give information on average hours worked per week Includes whether employee has insurance Easily identify employees that do not have coverage 60
  61. 61. Upcoming Education • New Time & Attendance Technologies for Tracking the Mobile Workforce Webinars. May 30: 10:00 cst • California Wage & Hour Labor Law--Avoiding Common Pitfalls with a Distributed Workforce. June 26: 12:00 cst • How to Avoid Costly Wage & Hour Pitfalls for Healthcare Employers with a Distributed Workforce. Sept 25: 12:00 cst • How to Avoid Costly Wage & Hour Pitfalls for Employers in the Hospitality Industry. Nov 6: 12:00 cst Register at www.EPAYsystems.com 61
  62. 62. Thank You! Jennifer A. Kraft Partner, Seyfarth Shaw LLP Employee Benefits jkraft@seyfarth.com (312) 460-5983 62
  63. 63. Connect With Us Connect with EPAY: o LinkedIn – follow our company page at EPAY Systems o Twitter -- @EPAYsystems o Sign up for our e- newsletter at www.EPAYsystems.com Connect with Seyfarth Shaw LLP: o Wage & Hour Litigation Blog http://www.wagehourlitigation.com/ o Twitter - @SeyfarthShawLLP o Twitter - @SeyfarthEBLaw 63
  64. 64. Thank You! 64

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