What You Need to Know About the Patient Protection & Affordable Health Care Act

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JacksonWhite HR compliance attorney, Otto Shill, goes over the basics of Obamacare/The Patient Protection & Affordable Care Act. Shill discusses how US businesses can prepare to comply under the upcoming changes in healthcare policies and regulations.

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What You Need to Know About the Patient Protection & Affordable Health Care Act

  1. 1. What You Need to Know About theWhat You Need to Know About the Patient Protection and Affordable CarePatient Protection and Affordable Care ActAct By: Otto S. Shill, Attorney at LawBy: Otto S. Shill, Attorney at Law
  2. 2. ABOUT JACKSONWHITEABOUT JACKSONWHITE We offer a full range of legalWe offer a full range of legal services to assist individuals,services to assist individuals, families, and businesses.families, and businesses. Founded in 1983.Founded in 1983. The firm has grown steadilyThe firm has grown steadily to include 24 highlyto include 24 highly experienced attorneys.experienced attorneys. We are proud to be one ofWe are proud to be one of the largest law firms in thethe largest law firms in the East Valley.East Valley.
  3. 3. Current Enforcement EnvironmentCurrent Enforcement Environment • COBRA: 20 or more employeesCOBRA: 20 or more employees • FMLA: 12 weeks job-protected, unpaid leave for birth & care of a child, care ofFMLA: 12 weeks job-protected, unpaid leave for birth & care of a child, care of immediate family member, or employeeimmediate family member, or employee’s serious health condition.’s serious health condition. • TITLE 7: Prohibits employers from considering race, religion, color, nationality, or sexTITLE 7: Prohibits employers from considering race, religion, color, nationality, or sex when making decisions regarding hiring, firing, pay, benefits, etc.when making decisions regarding hiring, firing, pay, benefits, etc. • RETIREMENT PLANS: Employee Retirement Income Security Act; DOL audits areRETIREMENT PLANS: Employee Retirement Income Security Act; DOL audits are on the riseon the rise • FAIR LABOR STANDARDS ACT: Overtime (1.5 x base rate) payable to employeesFAIR LABOR STANDARDS ACT: Overtime (1.5 x base rate) payable to employees working more than 40 hours per weekworking more than 40 hours per week • NATIONAL LABOR RELATIONS ACT: Prevents employers from interfering withNATIONAL LABOR RELATIONS ACT: Prevents employers from interfering with employees’ concerted activities to improve their employment situation.employees’ concerted activities to improve their employment situation. • OSHA / ADOSH: Regulates workplace safety standardsOSHA / ADOSH: Regulates workplace safety standards
  4. 4. Government Audit PrioritiesGovernment Audit Priorities  Internal Revenue Service will focus onInternal Revenue Service will focus on small business starting in 2014small business starting in 2014  Department of Labor – overtime auditsDepartment of Labor – overtime audits  National Labor Relations BoardNational Labor Relations Board  Department of Health and HumanDepartment of Health and Human ServicesServices
  5. 5.  Extended Coverage StandardsExtended Coverage Standards  Non-discrimination StandardsNon-discrimination Standards  Shared Responsibility StandardsShared Responsibility Standards
  6. 6. Extended Coverage StandardsExtended Coverage Standards  Dependents remain insured until age 26Dependents remain insured until age 26  Pre-existing conditions eliminated by 2014Pre-existing conditions eliminated by 2014  Lifetime coverage limitations eliminated by 2014Lifetime coverage limitations eliminated by 2014  deductibles of small group plans will be limited todeductibles of small group plans will be limited to $2,000 for individuals and $4,000 for families.$2,000 for individuals and $4,000 for families.
  7. 7. NondiscriminationNondiscrimination RequirementsRequirementsUnder the PPACA, all non-grandfathered plans will beUnder the PPACA, all non-grandfathered plans will be required to satisfy the nondiscriminatory requirementsrequired to satisfy the nondiscriminatory requirements under Internal Revenue Code Section 105(h)(2).under Internal Revenue Code Section 105(h)(2). A plan must not:A plan must not: • Discriminate in favor of highly compensated individuals (HCI) inDiscriminate in favor of highly compensated individuals (HCI) in regards to eligibilityregards to eligibility • Favor HCI participants in regards to benefits offeredFavor HCI participants in regards to benefits offered • Impose waiting periods that favor HCIsImpose waiting periods that favor HCIs • Provide more favorable employer contributions to HCIsProvide more favorable employer contributions to HCIs A plan must:A plan must: • Provide identical employee/employer contributions at eachProvide identical employee/employer contributions at each benefit levelbenefit level • Provide the same types of benefits to HCIs and non-HCIsProvide the same types of benefits to HCIs and non-HCIs • Establish the same maximum benefit level and type of benefitsEstablish the same maximum benefit level and type of benefits for all ages, years of service, and compensationfor all ages, years of service, and compensation
  8. 8. DISCRIMINATION TESTINGDISCRIMINATION TESTING There are two sets of tests that must be satisfied to determine whetherThere are two sets of tests that must be satisfied to determine whether or not a plan is nondiscriminatory.or not a plan is nondiscriminatory. Eligibility TestEligibility Test An employer must pass one of the following:An employer must pass one of the following: •70% Test: plan must benefit at least 70% of all non-excludable employees.70% Test: plan must benefit at least 70% of all non-excludable employees. •70%/80% Test: plan must benefit at least 80% of non-excludable employees if70%/80% Test: plan must benefit at least 80% of non-excludable employees if 70% of all non-excludable employees are eligible to participate in the plan.70% of all non-excludable employees are eligible to participate in the plan. •Reasonable Classification Test:Reasonable Classification Test: • Non-discriminatory classification: the percentage of HCIs who benefit under the plan is notNon-discriminatory classification: the percentage of HCIs who benefit under the plan is not significantly higher than the percentage of non-HCIs.significantly higher than the percentage of non-HCIs. • Reasonable Classification: the eligibility requirements for employees must be reasonableReasonable Classification: the eligibility requirements for employees must be reasonable and based on objective business criteria—compensation, geographic location, type of job.and based on objective business criteria—compensation, geographic location, type of job. Benefits TestBenefits Test Once a plan satisfied the eligibility test, it must be determined whether orOnce a plan satisfied the eligibility test, it must be determined whether or not the benefits offered favor HCIs. To satisfy this test, all benefits tonot the benefits offered favor HCIs. To satisfy this test, all benefits to must be provided to all participants and all benefits provided tomust be provided to all participants and all benefits provided to dependents must be the same for all participants.dependents must be the same for all participants.
  9. 9. What are the Penalties forWhat are the Penalties for Discriminatory Plans?Discriminatory Plans? The employer may be subjected to an excise tax of $100The employer may be subjected to an excise tax of $100 per day with respect to each related individual.per day with respect to each related individual. Effective Date delayed until regulations are published.Effective Date delayed until regulations are published.
  10. 10. GlossaryGlossary HCI:HCI: • One of the 5 highest paid officersOne of the 5 highest paid officers • A shareholder who owns more than 10%A shareholder who owns more than 10% • Among the highest paid 25% of all employeesAmong the highest paid 25% of all employees Excludable Employee:Excludable Employee: • Employees under the age of 25Employees under the age of 25 • Part-time or seasonal employeesPart-time or seasonal employees • Employees covered by a collectiveEmployees covered by a collective bargaining agreementbargaining agreement • Employees who have not completedEmployees who have not completed 3 years of service3 years of service • Employees who are nonresident aliens andEmployees who are nonresident aliens and receive no earned income from the employerreceive no earned income from the employer that constitutes income from sources within the United Statesthat constitutes income from sources within the United States
  11. 11. SHAREDSHARED RESPONSIBILITYRESPONSIBILITY Employers Employers with more than 200 employees will be required to automatically enroll all employees in their health insurance plans, allowing individual workers to opt-out. Employers with 50 or more full-time workers that do not offer health insurance coverage will pay an assessment of $2,000 per full-time worker (not including the first 30 workers) if any of their employees obtains premium tax credits through the Exchange. Employers that offer unaffordable coverage or coverage that does not cover at least 60 percent of allowable costs will pay $3,000 for any employee that receives a tax credit in the Exchange up to a cap of $2,000 for every full-time employee. Employers will be required to provide notice to their employees of their health insurance options, including coverage through the Exchange. Effective Dated delayed until calendar year 2015.Effective Dated delayed until calendar year 2015.
  12. 12. Individuals Individuals who can afford to purchase health insurance coverage and do not do so will face a penalty of the greater of $95 or one percent of income in 2014, $325 or two percent of income in 2015 and $695 or 2.5 percent of income in 2016, up to a cap of the national average bronze plan premium. Families will pay half the amount for children up to a cap of $2,250 for the entire family. After 2016, dollar amounts will increase by the annual cost of living adjustment. This requirement is essential to keep the cost of health insurance premiums affordable. Without a coverage requirement, the market reforms that insurance companies will implement such as eliminating pre-existing condition requirements and requiring guaranteed issue would make the price of health insurance unaffordable for most Americans. SHAREDSHARED RESPONSIBILITYRESPONSIBILITY
  13. 13. INSURANCE COMPANIESINSURANCE COMPANIES Must pay a premium excise tax annually on healthMust pay a premium excise tax annually on health insurance premium income in excess of $25,000,000.insurance premium income in excess of $25,000,000. Designed to Raise $102 Billion over the next 10 years.Designed to Raise $102 Billion over the next 10 years. Does not apply to self-insured plans.Does not apply to self-insured plans. SHAREDSHARED RESPONSIBILITYRESPONSIBILITY
  14. 14. Complying with EmployerComplying with Employer Shared ResponsibilityShared Responsibility
  15. 15. What DoesWhat Does “Affordable” Mean?“Affordable” Mean? In order for a plan to beIn order for a plan to be “affordable,” the self-only“affordable,” the self-only premiums must not exceed 9.5 percent of the employeespremiums must not exceed 9.5 percent of the employees income (regardless of whether or not there are other wageincome (regardless of whether or not there are other wage earners in the employee’s household).earners in the employee’s household).
  16. 16. What is Minimum Essential CoverageWhat is Minimum Essential Coverage • Emergency servicesEmergency services • Prescription drugs• Prescription drugs • HospitalizationHospitalization • Laboratory services• Laboratory services • Maternity and newborn careMaternity and newborn care • Pediatric services (oral &• Pediatric services (oral & vision)vision) • Ambulatory patient servicesAmbulatory patient services • Rehabilitative services and• Rehabilitative services and devicesdevices • Mental health & substance abuse servicesMental health & substance abuse services • Behavioral health treatmentBehavioral health treatment • Chronic disease management• Chronic disease management • Preventative and wellness servicesPreventative and wellness services
  17. 17. Do you have at least 50 FTE employees? NODo you have at least 50 FTE employees? NO Penalties do not applyPenalties do not apply YESYES Do you offer coverage for your workers? NODo you offer coverage for your workers? NO Did at least oneDid at least one YESYES employee receive aemployee receive a premium tax credit orpremium tax credit or subsidy in an Exchange?subsidy in an Exchange? Does your plan cover at least 60% ofDoes your plan cover at least 60% of YESYES typically covered expenses? NOtypically covered expenses? NO YESYES Do any of your employees pay more thanDo any of your employees pay more than 9.5% of their family income for employer9.5% of their family income for employer Coverage? YESCoverage? YES Employees can choose to buy coverage inEmployees can choose to buy coverage in NONO an Exchange.an Exchange. No penalty—the employer offers affordable coverage!No penalty—the employer offers affordable coverage! A penaltyA penalty of $2,000of $2,000 per FTEper FTE employeeemployee (except the(except the first 30).first 30). A penalty of $3,000 per FTEA penalty of $3,000 per FTE employee that goes to theemployee that goes to the state-run exchange orstate-run exchange or qualifies for subsidizedqualifies for subsidized insurance.insurance.
  18. 18. What is a Full-Time Employee?What is a Full-Time Employee? A full-time employee is employed an average of at least 30A full-time employee is employed an average of at least 30 hours per week.hours per week. This can be calculated by looking back at least 3 but noThis can be calculated by looking back at least 3 but no more than 12 consecutive months to determine whether ormore than 12 consecutive months to determine whether or not an employee has averaged at least 30 hours per week.not an employee has averaged at least 30 hours per week.
  19. 19. Other Types of EmployeesOther Types of Employees • Part-Time EmployeesPart-Time Employees Part-time employees work less than 30 hours per week. LargePart-time employees work less than 30 hours per week. Large employers are not required to offer minimum essential coverage toemployers are not required to offer minimum essential coverage to these employees.these employees. However, the hours of part-time employees will be converted intoHowever, the hours of part-time employees will be converted into full-time equivalent (FTE) employees. This is done by adding up allfull-time equivalent (FTE) employees. This is done by adding up all of the hours worked by non-full-time employees per week andof the hours worked by non-full-time employees per week and dividing the total by 30.dividing the total by 30. (If 6 employees work 5 hours per week, that will equal one FTE(If 6 employees work 5 hours per week, that will equal one FTE employee).employee). • Seasonal EmployeesSeasonal Employees An employer is not consideredAn employer is not considered “large” if they have 50 FTE“large” if they have 50 FTE employees for 120 days or less during one calendar year.employees for 120 days or less during one calendar year.
  20. 20. Shared Responsibility ReportingShared Responsibility Reporting The employer mandate of the PPACA will affect businesses differentlyThe employer mandate of the PPACA will affect businesses differently depending on the following factors:depending on the following factors: •Number of full-time employeesNumber of full-time employees •Whether or not your employees qualify for government subsidiesWhether or not your employees qualify for government subsidies •Starting in 2014, businesses with more than 200 employees will be requiredStarting in 2014, businesses with more than 200 employees will be required to auto-enroll employees into their coverage.to auto-enroll employees into their coverage. •Starting in 2013, businesses with more than 250 employees will beStarting in 2013, businesses with more than 250 employees will be requiredrequired to report the aggregate costto report the aggregate cost of coverage under their employer-sponsoredof coverage under their employer-sponsored group plan to the IRS.group plan to the IRS. •Whether or not you were already offering minimal essential coverageWhether or not you were already offering minimal essential coverage •Does your business have aDoes your business have a waiting periodwaiting period before full-time employees are eligible forbefore full-time employees are eligible for coverage?coverage?
  21. 21. 1. More than 50 employees, not offering health care to FTE employees,1. More than 50 employees, not offering health care to FTE employees, one or more of them are receiving subsidies.one or more of them are receiving subsidies. $2,000 fine per FTE employee (minus the first 30).$2,000 fine per FTE employee (minus the first 30). 2. Less than 50 FTE employees, not offering health care.2. Less than 50 FTE employees, not offering health care. No penaltyNo penalty.. 3. More than 50 employees, offering health care, one or more3. More than 50 employees, offering health care, one or more employees are receiving subsidies because offered care is aboveemployees are receiving subsidies because offered care is above 9.5%.9.5%. $3,000 penalty per employee receiving subsidies, or $2,000 per FTE$3,000 penalty per employee receiving subsidies, or $2,000 per FTE employee (minus the first 30).employee (minus the first 30). 4. More than 50 employees, offering4. More than 50 employees, offering affordableaffordable health care, no FTEhealth care, no FTE employees receiving subsidies.employees receiving subsidies. Shared Responsibility - What Penalties Apply?
  22. 22. Key Planning OpportunitiesKey Planning Opportunities  Effective Dates and Grandfathered PlansEffective Dates and Grandfathered Plans  Review Company Ownership – Who is the employer?Review Company Ownership – Who is the employer? – Controlled and Affiliated Service Group AggregationControlled and Affiliated Service Group Aggregation – Ownership Attribution rules (particularly affect families)Ownership Attribution rules (particularly affect families)  Determine total number of full-time employeesDetermine total number of full-time employees – Measuring 30 hours per weekMeasuring 30 hours per week – Impact of DOL audit – waiting timeImpact of DOL audit – waiting time – Employees vs. Independent ContractorsEmployees vs. Independent Contractors  Determine total number of full-time equivalent employeesDetermine total number of full-time equivalent employees  Determine plan affordability and minimum essential coverage complianceDetermine plan affordability and minimum essential coverage compliance  Review non-discrimination complianceReview non-discrimination compliance – Employee vs. Independent ContractorEmployee vs. Independent Contractor  Review compliance calendarReview compliance calendar – Reporting deadlines – The next one is July 31, 2013 for insurers, self-insuring employers and employers with cafeteria plansReporting deadlines – The next one is July 31, 2013 for insurers, self-insuring employers and employers with cafeteria plans – Compliance deadlines – shared responsibility postponed until 2015; non-discrimination postponed until regulations are publishedCompliance deadlines – shared responsibility postponed until 2015; non-discrimination postponed until regulations are published – Start now to avoid compliance problemsStart now to avoid compliance problems  Review company audit profileReview company audit profile  Self-insured vs. insured plansSelf-insured vs. insured plans  Methods of shifting costs to employeesMethods of shifting costs to employees – Premiums, deductibles, co-paysPremiums, deductibles, co-pays – Who will sign up?Who will sign up? – Who will use the exchange and claim a credit – employee demographicsWho will use the exchange and claim a credit – employee demographics  Union PlansUnion Plans
  23. 23. How do I Use My Advisors?How do I Use My Advisors?  Legal CounselLegal Counsel – Compliance IssuesCompliance Issues  Employee ClassificationEmployee Classification  Overtime ComplianceOvertime Compliance  Company Ownership StructureCompany Ownership Structure  Plan components, eligibility and participationPlan components, eligibility and participation  Number of employees / FTE employeesNumber of employees / FTE employees – Strategic PlanningStrategic Planning  Corporate ReorganizationCorporate Reorganization  Changes in Employee WorkforceChanges in Employee Workforce  Costs and Risks of non-complianceCosts and Risks of non-compliance  Plan design IssuesPlan design Issues  AccountantAccountant – Costs of compliance / Penalties of non-complianceCosts of compliance / Penalties of non-compliance – Corporation ReorganizationCorporation Reorganization – Reporting issuesReporting issues – Number of employees / FTE employeesNumber of employees / FTE employees – Available credits for individuals and small businessAvailable credits for individuals and small business  Insurance AdvisorInsurance Advisor – Plan Design IssuesPlan Design Issues – Timing of RenewalsTiming of Renewals – Plan Coverage CompliancePlan Coverage Compliance – Rate StructureRate Structure – Self-Insurance OptionsSelf-Insurance Options

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