HEALTHCARE REFORM
Employer Shared Responsibility
“Play or Pay”
December 6, 2013
These materials are intended to stimulate thought and discussion and to provide the reader with useful
ideas and guidance ...
PPACA – WHAT IS A HEALTHCARE
EXCHANGE?









“Marketplace”  supposed to look like Travelocity
Individuals and sma...
PPACA – WHY GET INSURANCE?







Individual Mandate
Employer Mandate
Medical Loss Ratios
Penalties
Lawsuits: Healthc...
2013 PPACA TIMELINE


Amend Cafeteria Plan for $2,500 FSA limit



PCORI fees due for some plans (July)



Exchange Not...
2014 PPACA TIMELINE


Annual limits prohibited



Cost-sharing limitations



90-day waiting period



Exchanges



P...
2015 PPACA TIMELINE


Reporting of health insurance coverage (Code
§§ 6055 & 6056)



Pay or Play

7
2014 PPACA TIMELINE – FOCUS ON COST
SHARING LIMITATIONS


Cost-sharing limitations. For all non-grandfathered group
healt...
2014 PPACA TIMELINE – FOCUS ON COST
SHARING LIMITATIONS




2014 only can have separate OOP max for pharmacy
benefit
For...
2015 PPACA – FOCUS ON “PLAY” OR “PAY”







Last month, the IRS unexpectedly delayed the Employer
Shared Responsibilit...
2015 PPACA – FOCUS ON “PLAY” OR “PAY”



NOTHING ELSE WAS DELAYED!
 No other changes to PPACA implementation timeline.

...
2015 PPACA – FOCUS ON “PLAY” OR “PAY”





Who is an ALE?
Controlled group rules
Employer must offer “minimum essential...
2015 PPACA – FOCUS ON EMPLOYER
PENALTIES


Penalties provided for in Code §§ 4980H(a) and (b)



Penalty is triggered, i...
2015 PPACA – FOCUS ON EMPLOYER
PENALTIES


Subsection (b) (or “inadequate coverage”) penalty
applies if employer


Offer...
2015 PPACA – OTHER “PLAY” OR “PAY”
ISSUES








95% of FT employees and dependents to avoid
sledgehammer
Minimum v...
OTHER LAWS YOU SHOULD PAY ATTENTION
TO IN 2013-2014






HIPAA – Compliance with new final omnibus regulations
require...
COVERAGE MANDATE: EXAMPLES FOR “NO
COVERAGE” PENALTY



Cox Co. has 1,000 FT employees and does not offer an
EESP to any ...
COVERAGE MANDATE: EXAMPLES FOR “NO
COVERAGE” PENALTY


Smith Co., with 20 FT and 60 half-time (0.5) FTEs, does
not offer ...
COVERAGE MANDATE: EXAMPLES FOR “NO
COVERAGE” PENALTY



Matthews Co. has 1,000 FT employees, offers affordable
plan with ...
COVERAGE MANDATE: EXAMPLES FOR “NO
COVERAGE” PENALTY


Same as previous slide except Matthews Co. offers
A/MV plan to sub...
COVERAGE MANDATE: EXAMPLES FOR
“INADEQUATE COVERAGE” PENALTY


Sutin Co. has 1,000 FT employees and offers EESP to
substa...
COVERAGE MANDATE: EXAMPLES FOR
“INADEQUATE COVERAGE” PENALTY



If 647 (or more) enroll in subsidized coverage for year

...
COVERAGE MANDATE: EXAMPLES FOR
“INADEQUATE COVERAGE” PENALTY


Smith Co., with 20 FT and 60 half-time (0.5) FTEs, offers
...
COVERAGE MANDATE: HOW TO COMPLETELY
AVOID A PENALTY



No penalty possible with offer of an affordable plan that
provides...
COX SMITH MATTHEWS INCORPORATED
EMPLOYEE BENEFITS ATTORNEYS:
Mary M. Potter
William M. Fisher
L. Katherine Noll
Jillian L....
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21st Annual Legal & Accounting Institute: Healthcare Reform

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21st Annual Legal & Accounting Institute: Healthcare Reform

  1. 1. HEALTHCARE REFORM Employer Shared Responsibility “Play or Pay” December 6, 2013
  2. 2. These materials are intended to stimulate thought and discussion and to provide the reader with useful ideas and guidance in the areas of healthcare reform. The materials do not constitute, and should not be treated as, legal advice. Although we have made every effort to ensure the accuracy of these materials, neither the authors nor Cox Smith Matthews Incorporated assumes any responsibility for any individual’s reliance on the written information presented during this presentation. Laws and regulations are subject to change at any time. This PowerPoint presentation is an educational tool that is general in nature and for purposes of illustration only. The materials in this presentation are not exhaustive, do not constitute legal advice and should not be considered a substitute for consulting with legal counsel. Cox Smith has no obligation to update the information contained in this presentation. CIRCULAR 230 DISCLOSURE: Pursuant to Department of Treasury Circular 230, this presentation is not intended or written to be used, and may not be used by the recipient, for the purposes of avoiding any federal tax penalty which may be asserted. 2
  3. 3. PPACA – WHAT IS A HEALTHCARE EXCHANGE?      “Marketplace”  supposed to look like Travelocity Individuals and small businesses (< 50 employees) can get health coverage Subsidies available for individuals under 4x FPL and some small businesses Exchanges offer Qualified Health Plans (“QHP”) Texas  Federally Facilitated Exchange (“FFE”) 3
  4. 4. PPACA – WHY GET INSURANCE?      Individual Mandate Employer Mandate Medical Loss Ratios Penalties Lawsuits: Healthcare Discrimination 4
  5. 5. 2013 PPACA TIMELINE  Amend Cafeteria Plan for $2,500 FSA limit  PCORI fees due for some plans (July)  Exchange Notice (October 1)  Exchange Open Enrollment (Fall)  Some plans to begin 12-month measurement period 5
  6. 6. 2014 PPACA TIMELINE  Annual limits prohibited  Cost-sharing limitations  90-day waiting period  Exchanges  PCE prohibition  Reinsurance fees  Individual mandate  Nondiscrimination for Healthcare Providers  HIPAA electronic operating rules. For 2014, the health care electronic funds transfers (EFT) and remittance advice operating rules are scheduled for employers to be in compliance by 1/1/14 6
  7. 7. 2015 PPACA TIMELINE  Reporting of health insurance coverage (Code §§ 6055 & 6056)  Pay or Play 7
  8. 8. 2014 PPACA TIMELINE – FOCUS ON COST SHARING LIMITATIONS  Cost-sharing limitations. For all non-grandfathered group health plans, out of pocket maximums for in-network benefits are limited to the out-of-pocket expense limits for self-only and family coverage for HSA-compatible highdeductible health plans (HDHPs) for taxable years beginning in 2014. For 2014, the HDHP maximum outof-pocket expense limit (that is, the sum of the plan’s annual deductible and other annual out-of-pocket expenses (other than premiums) that the insured is required to pay, such as co-payments and co- insurance for an HDHP) cannot exceed $6,350 for self-only coverage and $12,700 for family coverage. 8
  9. 9. 2014 PPACA TIMELINE – FOCUS ON COST SHARING LIMITATIONS   2014 only can have separate OOP max for pharmacy benefit For individual and small group market insured plans only, deductible is limited to $2,000 for self only and $4,000 for family 9
  10. 10. 2015 PPACA – FOCUS ON “PLAY” OR “PAY”    Last month, the IRS unexpectedly delayed the Employer Shared Responsibility penalties and reporting requirements until 2015. Prompted by concerns about the reporting requirements, but this necessarily also delayed the penalties, because reporting was critical to administration of penalties. Reprieve, not a Pardon!  Delay is only temporary  May need to track hours as early as October 2013 10
  11. 11. 2015 PPACA – FOCUS ON “PLAY” OR “PAY”  NOTHING ELSE WAS DELAYED!  No other changes to PPACA implementation timeline. 11
  12. 12. 2015 PPACA – FOCUS ON “PLAY” OR “PAY”    Who is an ALE? Controlled group rules Employer must offer “minimum essential coverage” through an “eligible employer-sponsored plan” 12
  13. 13. 2015 PPACA – FOCUS ON EMPLOYER PENALTIES  Penalties provided for in Code §§ 4980H(a) and (b)  Penalty is triggered, in general, if FT employee is certified as enrolled for Exchange subsidy for a month  Subsection (a) penalty (or “no coverage” penalty) applies if employer  Failed to offer substantially all FT employees (and dependents) opportunity to enroll in EESP for a month  Monthly Penalty = $2,000 X # of FT employees minus 30 ÷ 12 13
  14. 14. 2015 PPACA – FOCUS ON EMPLOYER PENALTIES  Subsection (b) (or “inadequate coverage”) penalty applies if employer  Offered substantially all FT employees (and dependents) opportunity to enroll in EESP for a month  But coverage is not affordable or fails to provide Minimum Value (“MV”)  Monthly Penalty = lesser of  $2,000 X # of FT employees minus 30 ÷ 12 OR  $3,000 X # of FT employees with subsidy ÷ 12 14
  15. 15. 2015 PPACA – OTHER “PLAY” OR “PAY” ISSUES       95% of FT employees and dependents to avoid sledgehammer Minimum value – 60% actuarial value Affordability – 9.5% of W-2 income Transition rule? Tracking FT employees Employer response to rule 15
  16. 16. OTHER LAWS YOU SHOULD PAY ATTENTION TO IN 2013-2014    HIPAA – Compliance with new final omnibus regulations required by September 23, 2013 DOMA – Big changes coming for same-sex benefits. Waiting for guidance Texas Medical Privacy - Relaxed training requirements for those who are subject to the law. 16
  17. 17. COVERAGE MANDATE: EXAMPLES FOR “NO COVERAGE” PENALTY  Cox Co. has 1,000 FT employees and does not offer an EESP to any FT employees  1 FT employee enrolls in subsidized coverage for year  Annual Penalty = $2,000 X (1,000 − 30) = $1,940,000  Note: Result would be same even if Cox Co. offered EESP to 94.99% of FT employees (and children up to age 26) 17
  18. 18. COVERAGE MANDATE: EXAMPLES FOR “NO COVERAGE” PENALTY  Smith Co., with 20 FT and 60 half-time (0.5) FTEs, does not offer an EESP to substantially all FT employees  Treated as having 50 FT employees and, thus, subject to rules  1 FT employee enrolls in subsidized coverage for year  Annual Penalty = $2,000 X (20 − 30) = 0  Smith Co. owes no penalty because only true FT employees are counted (FTEs only count for ALE status) 18
  19. 19. COVERAGE MANDATE: EXAMPLES FOR “NO COVERAGE” PENALTY  Matthews Co. has 1,000 FT employees, offers affordable plan with minimum value (“A/MV”) to ALL FT employees but NO dependent coverage  Question: Whether penalty could apply under either subsection (a) or (b) since it would appear that no FT employee would be eligible for Exchange subsidy (due to A/MV offer) 19
  20. 20. COVERAGE MANDATE: EXAMPLES FOR “NO COVERAGE” PENALTY  Same as previous slide except Matthews Co. offers A/MV plan to substantially all FT employees but NO dependent coverage  Annual Penalty = $2,000 X (1,000 − 30) = $1,940,000  Can be triggered by one of the 4.99% of FT employees who goes onto the Exchange and receives a subsidy  Matthews Co. can then be penalized because no offer of coverage to dependents 20
  21. 21. COVERAGE MANDATE: EXAMPLES FOR “INADEQUATE COVERAGE” PENALTY  Sutin Co. has 1,000 FT employees and offers EESP to substantially all (including children up to age 26)  If 200 FT employees enroll in subsidized coverage for year  Annual Penalty = $600,000  Lesser of $2,000 X (1,000 − 30) = $1,940,000 (Example #1) OR  $3,000 X 200 = $ 600,000 21
  22. 22. COVERAGE MANDATE: EXAMPLES FOR “INADEQUATE COVERAGE” PENALTY  If 647 (or more) enroll in subsidized coverage for year  Annual Penalty = $1,940,000 (same as Example #1)  Lesser of $2,000 X (1,000 − 30) = $1,940,000 (Example #1) OR  $3,000 X 647 = $1,941,000 22
  23. 23. COVERAGE MANDATE: EXAMPLES FOR “INADEQUATE COVERAGE” PENALTY  Smith Co., with 20 FT and 60 half-time (0.5) FTEs, offers EESP to substantially all FT employees  One FT employee goes onto Exchange and receives a subsidy  “Inadequate coverage” penalty = $3,000 X 1   But can never be more than “no coverage penalty,” which is $2,000 X (20 − 30) = 0 Penalty is still 0 under “lesser of” formula 23
  24. 24. COVERAGE MANDATE: HOW TO COMPLETELY AVOID A PENALTY  No penalty possible with offer of an affordable plan that provides MV to all FT employees (and children up to age 26)   FT employees offered this kind of plan are not eligible for subsidized Exchange coverage and, therefore, cannot trigger a penalty for the employer When a plan provides MV and when a plan is considered affordable discussed in next slides 24
  25. 25. COX SMITH MATTHEWS INCORPORATED EMPLOYEE BENEFITS ATTORNEYS: Mary M. Potter William M. Fisher L. Katherine Noll Jillian L. Gordon Erin H. Jansen Joshua A. Sutin 112 E. Pecan Street, Suite 1800 San Antonio, Texas 78205 (210) 554-5500 tel (210) 226-8395 fax www.coxsmith.com This PowerPoint presentation is an educational tool that is general in nature and for purposes of illustration only. The materials in this presentation are not exhaustive, do not constitute legal advice and should not be considered a substitute for consulting with legal counsel. Cox Smith Matthews Incorporated has no obligation to update the information contained in this presentation. © 2013 Cox Smith Matthews Incorporated 25

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