April 3 10 45am - alson martin


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April 3 10 45am - alson martin

  1. 1. HEALTH REFORM IN A NUTSHELL What Employers Need to Know Alson R. Martin Lathrop & Gage LLP 10851 Mastin Boulevard Suite 1000 Overland Park, KS 66210-1669
  2. 2. Health Reform in a Nutshell What Employers Need to Know  With the passage of the most significant reform of America's modern-day health care system, employers must assess what the Patient Protection and Affordable Care Act (PPACA) means for them. This presentation seeks to provide you with an overview of the most important things an employer needs to know about health reform. This material is informational only and does not constitute legal advice regarding any specific situation.  HHS, IRS and DOL have already issued many PPACA healthcare reform regulations. Many more regulations will be issued.
  3. 3. What’s Covered and What’s Not  Healthcare reform covers insured and self-funded comprehensive medical health plans.  Health reform does not regulate “Excepted Benefits,” which include stand-alone vision, stand-alone dental, cancer, long-term care insurance, Medigap insurance, as well as accident and disability insurance that make payments directly to the individual.  Healthcare reform also does not affect retiree only plans.
  4. 4. US Supreme Court Decision  The US Supreme Court in NFIB v. Sebelius (June 28, 2012) ruled that (1) Congress had the power to adopt the individual mandate as a tax under its taxing authority (but not under the Commerce Clause, an important limitation on the Commerce clause); (2) for purposes of the Anti-Injunction Act that prevents judicial decisions on taxes until they are assessed by the IRS, the individual mandate is a penalty and not a tax for this purpose; and (3) that while the 2014 Medicaid expansion is constitutional but the law's remedy is unconstitutional. The remedy was that a state that did not agree to the Medicaid expansion lost its federal funding for the expansion and its current funding.  The Court held that a state not implementing the expansion would only lose funds for the expansion, but not its existing federal funding, in effect making the expansion optional for each state. Many states are not increasing Medicaid eligibility to those making less that 133% of Federal Poverty Level.
  5. 5. Small Business Tax Credit - 2010 and Thereafter  SMALL BUSINESS TAX CREDIT: Tax credits for employers with 24 or fewer employees (excluding owners, certain relatives, and seasonal employees) with average wages of less than $50,000, covering up to 35% of employer-paid premiums (25% for tax-exempt entities). The employer must contribute 50% or more toward your employees’ self-only health insurance premiums.  In 2014 and thereafter, that credit increases to 50% for for-profit employers (35% for tax-exempt employers) and will be available for an additional two consecutive years. A small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
  6. 6. Plan Years Beginning On/After September 23, 2010 Grandfathered Health Plans are subject to certain HCR rules, as follows: • Prohibition of annual and lifetime benefit limits (except that provisions annual limit prohibitions not applicable for individual health insurance coverage). • No rescission except for fraud or intentional misrepresentation. • For plan years beginning before January 1, 2014, children, who are not eligible for employer- sponsored coverage, covered up to age 26 on family policy. • Pre-existing condition exclusions for covered individuals younger than 19 are prohibited. • Pre-existing condition exclusions prohibited for all persons in 2014 except individual grandfathered policies.. • Prohibition on waiting period of more than 90 days in 2014 and thereafter. • Summary of Benefits and Coverage (SBC). • Medical Loss Ratio provisions.
  7. 7. Plan Years Beginning On/After September 23, 2010 New and Non-Grandfathered Health Plans – prior slide requirement plus: • No cost-sharing for preventive services • Discrimination in favor of highly compensated is prohibited. However, IRS has Indefinitely delayed effective date and has yet to issue regulations. • Children covered up to age 26 on family policy • Internal appeal and external review processes • Emergency services at in-network cost-sharing level with no prior authorization • Minimum value and essential health benefits
  8. 8. Plan Years Beginning On/After September 23, 2010 New and Non-Grandfathered Health Plans  Parents must be allowed to select a pediatrician as a primary care physician for their children and women must be allowed to select an OB-GYN for their primary care physician  Coverage for clinical trial participants  Any insurance policy sold to new entities or individuals after March 23, 2010 will not be grandfathered, even if the product was offered in the group or individual market before March 23, 2010.
  9. 9. Collectively Bargained Plans  The regulations provide that fully insured (but not self-insured) collectively bargained plans retain their grandfather status until the current agreement (i.e., the agreement in effect on March 23, 2010) expires. Self-insured collectively bargained plans are subject to the rules in the same way as other covered health plans.  A change in carriers under a fully insured collectively bargained plan does not result in loss of grandfather status if the change is made before the current agreement (i.e., the agreement in effect on March 23, 2010) expires.  Changes to benefits that apply while the current collective bargaining agreement is in effect, such as increasing co-payments, do not result in loss of the grandfather.  However, whether the grandfather applies after the expiration of the collective bargaining agreement is measured by comparing the benefits in effect at that time to the benefits in effect on March 23, 2010. If the changes are not within the permitted parameters then the plan will cease to be grandfathered when the relevant agreement expires.
  10. 10. Grandfathered Plans  THE POSTPONED INSURED HEALTH PLAN NONDISCRIMINATION RULES do not apply to “grandfathered” plans continuously in existence March 23, 2010.  As discussed hereafter, grandfathered plans cannot reduce benefits or increase employee costs except in minor respects or grandfathering is lost.
  11. 11. Grandfathered Plans  Grandfathered plans DON'T have to: • Cover preventive care for free • Guarantee your right to appeal • Protect your choice of doctors and access to emergency care • Be held accountable through Rate Review for excessive premium increases • Grandfathered individual health insurance plans (the kind you buy yourself, not the kind you get from an employer) don't have to: • End yearly limits on coverage • Cover you if you have a pre-existing health condition
  12. 12. Grandfathered Plans Notice Requirement  Unfortunately, while the law does not require this, the current regulations require that a grandfathered plan notify participants each year that the plan is a grandfathered plan beginning September 23, 2010.  This requirement, if incorporated in final regulations, would cause plans qualified as grandfathered plans not to be grandfathered because many employers have not given this annual notice.
  13. 13. Permitted Grandfathered Plan Changes  The following changes do not cause a plan to lose its grandfathered status: • Voluntary changes to increase benefits, to conform to required legal changes (including health care reform mandates), and to voluntarily adopt health care reform requirements do not cause a plan to lose its grandfathered status. • Increasing a fixed-amount copayment, deductible and/or out of pocket limit if less than $5 increased by medical inflation as measured from the grandfather date, or a total percentage measured from the grandfather date that is more than the sum of medical inflation plus 15 percentage points. • In addition, recognizing that group health plans and health insurance issuers may have made design changes since the grandfather date, the preamble to the Interim Final Rules states that changes made in good faith compliance with the health care reform grandfathering requirements prior to June 14, 2010 may be disregarded by regulators for enforcement purposes if the changes only modestly exceed the permitted changes described above.
  14. 14. 2011 – Simple Cafeteria Plan  NEW SIMPLE CAFETERIA PLAN available for businesses with 100 or fewer employees. This is modeled after the Simple 401(k) plan – the employer gets a pass on all nondiscrimination requirements if 1. eligibility and benefits meet stated requirements; and 2. a minimum contribution is made to the plan each year.  However while it appears to be Congress’ intent to exempt Simple cafeteria plans from the new PPACA health insurance nondiscrimination rules, that is not provided in the statute. Nevertheless, this problem is easy to design around.  Probably the only owners who can be covered are shareholders of C corporations who are “employees,” as in regular cafeteria plans.
  15. 15. 2011 – Nonprescription OTC Drugs  NONPRESCRIPTION OVER-THE-COUNTER DRUGS (except insulin and OTC equipment and supplies, like crutches, bandages, contact lens solution, blood sugar tests) are no longer an eligible medical expense under a health care flexible spending account (FSA), a health reimbursement arrangement (HRA), a health care savings account (HSA).  Solution – Get a Dr’s order for these OTC items at your annual checkup.
  16. 16. 2013 W-2 Information Reporting For 2012  An employer was required show the value of health insurance for employees’ on their Form W-2 for 2011 and thereafter. However, this deadline was extended a year by the IRS, so the first time most W-2s will include this information will be in 2013 for calendar year 2012.  Smaller Employer Exemption: Until the issuance of further guidance, an employer is not subject to the W-2 reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.
  17. 17. 2012 – Federal LTC Benefit Eliminated  Community Living Assistance Services and Supports (CLASS) Act - the employee, not the employer, was pay for it through payroll deductions if employee elects.  HHS determined this benefit could not be adequately funded on a sustainable basis, and it has now been eliminated from the healthcare reform law.
  18. 18. 2013 – Itemized Deductions for Medical Expenses and Employer Drug Subsidy Deduction Eliminated  Increases the threshold for the itemized deduction for unreimbursed medical expenses from 7.5% of adjusted gross income to 10% of adjusted gross income; waives the increase for individuals age 65 and older for tax years 2013 through 2016.  Employer tax deduction for Medicare Part D retiree drug subsidies eliminated because double dip due to being tax free to retirees.
  19. 19. 2013 Health FSA Cap of $2500  HEALTH FSA EMPLOYEE CONTRIBUTIONS CAPPED AT $2500. Contributions to health flexible savings accounts (FSAs) for healthcare will be limited to $2,500 per year, indexed by the Consumer Price Index in subsequent years.  Employer contributions are limited to $500, so the total annual medical reimbursement benefit can be $3000 if the employer also contributes to the plan.  $2500 limit applies per employer plan and per person, so spouses, even if employed by same employer, have separate $2500 limit. An individual employed by unrelated employers can have two $2500 limits.
  20. 20. 2013 Medicare Taxes  Wages and earned income – from a rate of 1.45% to 2.35% - for singles earning more than $200,000 a year and families above $250,000, for a total of 3.8% paid by employer and employee above the threshold.  Investment Income – A new “Medicare” tax is imposed on investment income for those with income above these $200,000/$250,000 levels. • Tax does not apply to income exempt from gross income, such as exempt gain from the sale of a principal residence, tax-exempt bonds, etc. • Tax also does not apply to IRA and retirement plan distributions. • Tax does not apply to S corporation distributions.
  21. 21. July 31, 2013 and Thereafter – Payment of PCORI Fees  IRS Form 720 is used to report and pay the Patient Centered Outcomes Research Institute Fee ("PCORI fee") to the IRS. The tax and return is due July 31 following the calendar year in which the plan year ends. Insurers pay the tax for insured plans  The PCORI fee for plan years ending on or after October 1, 2012, and before October 1, 2013 is $1.00 multiplied by the average number of covered lives in the group health plan. The PCORI fee for the second year will increase to $2.00 times the average number of covered lives in the group health plan and is indexed for increases in national health expenditures for the following years.  The fee applies to certain "specified health insurance" policies and includes medical policies, retiree-only policies, any accident or health insurance policy (including a policy under a group health benefit plan) issued to individuals residing in the United States.
  22. 22. HRAs & MERPs– Payment of PCORI Fees  Health reimbursement arrangements (HRAs) and medical expense reimbursement plans (MERPs) are self-funded employer paid health plans subject to the PCORI fee.  If the plan sponsor also maintains a self-funded medical plan with the same plan year, the medical plan and HRA may be treated as one plan for purposes of the PCORI fee.  However, if the medical plan is fully insured, the medical plan and HRA must be treated as separate plans for purposes of the PCORI fee, with the insurer paying the fee for the medical plan and the employer/plan sponsor paying the fee for the HRA.
  23. 23. October 1, 2013 and Thereafter Employer Provided Exchange Notice  The employer’s health plan year is not relevant as to the required delivery of this notice. Originally required March 1, 2013, this notice must be provided by all employers subject to the Fair Labor Standards Act, regardless of size, to employees by Oct. 1, 2013. Notices must be provided to both active part-time and full-time employees (not spouse or dependents, regardless of whether eligible for the employer’s health plan, if any.  New employees hired on and after October 1, 2013 must receive the notice within 14 days of hire. This 14-day notification period for new hires is in effect from October 1, 2013 through 2014 (the timing to be revisited at that point).  Notice can be sent first class mail or electronically.
  24. 24. More On Employer Provided Exchange Notice  There are 2 model notices. For employers with a health plan, see http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf. For employers with no health plan, see http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf.  Part B of the Notice for employers with health benefits may be confusing to participants, as it gives them current year information about the employer’s health plan when an employer may be exploring different or no insurance in following year, which is when the employee may be eligible to go to the exchange insurance marketplace.
  25. 25. Employer Provided Exchange Notice - Who is Subject To FLSA? Employers subject to the Fair Labor Standards Act (FLSA) must give the notice. Most firms under $500,000 in annual dollars received from sales made or business done are exempt from the FLSA and thus the notice requirement other than those specifically included regardless of income, which are hospitals; institutions primarily engaged in the care of the sick, aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state, and local government agencies.
  26. 26. Employer Provided Exchange Notice – Who Is Subject to FLSA? Only employers engaged in interstate commerce are subject to the FLSA. Examples of engaging in interstate commerce include: • An employee uses a telephone, facsimile machine, the U.S. mail, or a computer e-mail system to communicate with persons in another state for the business; • An employee drives or flies to another state while performing his or her job duties; • The business uses goods from an out of state supplier; or • The business uses an electronic device that authorizes a credit/debit card purchase.
  27. 27. Administration Extension from 2013 to 2016 of Non-ACA Compliant Individual & Small Group Insurance The administration announced on March 5, 2014 that non-compliant individual health and small group policies can be extended an additional two years for policy years beginning on or before Oct. 1, 2016. As with the original extension, the state insurance regulator must agree to approve such policies, and the health insurance companies must decide to continue offering such policies. States can elect to extend the transitional policy for a shorter period than through October 1, 2016 but may not extend it to policy years beginning after October 1, 2016.
  28. 28. Optional 2013-2014 Fiscal Year Cafeteria Plan Amendment An employer with a non-calendar year cafeteria plan may amend it to allow one-time participant election in or out of group health coverage during the 2013-2014 plan year (written amendment due by December 31, 2014.
  29. 29. 2014 – No More Pre-Tax Employer Payment Plans For Individual Coverage The term “employer payment plan” is defined very broadly by IRS Notice 2013-54, and includes any pre-tax arrangement (including salary-reduction-funded health FSAs and HRAs, MERPs and other premium reimbursement arrangements) used to purchase individual health insurance coverage in the individual market or on an exchange unless the plan is for a single employee or solely for retirees.
  30. 30. 2014 Limits on HRAs and Health FSAs  Most stand-alone (those not integrated with comprehensive medical coverage) health reimbursement accounts (“HRAs”) and medical expense reimbursement plans (“MERPs”) generally will not comply with the ACA's PHSA “group health plan” rules effective for plan years beginning in 2014 prohibiting annual and lifetime dollar limits and the preventive care requirements. Stand-alone HRAs are permitted if limited to 1 participant or retirees. Stand-alone health FSAs are also generally prohibited.  Penalty - $100/day/participant or $36,500/year/participant.
  31. 31. HRA LIMITATIONS  HRAs that are integrated with other major medical coverage as part of a group health plan will not violate the annual dollar limit rules so long as the other coverage on its own would comply because the combined benefit satisfies the requirements. The HRA participants must also be participants in the employer’s major medical plan or participate in another major medical plan, such as through a spouse’s employer.  Stand-alone HRAs, even if they only reimburse excepted benefits (vision, dental, etc) are not themselves excepted benefits.  HRA plans must provide for participant opt out so they can get subsidy on exchange if otherwise qualified.
  32. 32. No Stand-Alone Health FSAs in 2014 and Thereafter Health FSAs are group health plans subject to no annual dollar limit and preventive care mandate and cannot be excepted benefits merely by providing only, for instance, for dental and vision expenses. Health FSAs are excepted benefits only if (1) the employer also makes available (the employee can turn it down) to that employee group major medical health plan coverage and (2) the health FSA maximum benefit payable to any participant cannot exceed two times the participant's salary reduction election for the FSA for the year (a dollar-for-dollar match) or, if greater, $500 plus the amount of the participant's salary reduction election. Moreover, an FSA that is an excepted benefit must be offered through a Section 125 cafeteria plan to be exempt from the annual dollar limit prohibition.
  33. 33. 2014 and Thereafter – Individual Mandate  Minimum Penalty. Most Americans must have major medical health insurance with minimum essential coverage or pay this tax of $95 in 2014, $325 in 2015, and $695 in 2016 (or, if greater, up to 1%, 2%, and 2.5 % of household income above threshold amount for filing tax return). Families will pay half the penalty amount for children under 18, up to a cap of $2,085 per family (equal to 3 people, no matter how large the family). After 2016, the dollar amounts are indexed to Consumer Price Index – CPI-U. A couple with one child over 18 (or two children age 18 or under), and no coverage, would pay a minimum of $285 in 2014, $975 in 2015 and $2,085 in 2016.  Maximum Penalty. The annual national average premium cost for a Bronze plan if that is less than the applicable percentage of a person’s household income.
  34. 34. EXCEPTIONS TO INDIVIDUAL MANDATE  Individuals Who Cannot Afford Coverage. If an employer offers coverage that would cost the employee more than 8 percent of his or her household income (for self-only coverage) that individual is exempt from the tax.  Taxpayers With Income Below Filing Threshold. Also exempt are those who earn too little to be required to file tax returns. For 2013, thresholds are $10,000 for a single person under age 65, and $20,000 for a married person filing jointly with a spouse. The thresholds go up each year in line with inflation, so those cut-offs will be higher in 2014.  Hardships. HHS can grant hardship exemptions, which will be granted liberally to those whose 2013 coverage was cancelled.  Other Exemptions. Also exempt are undocumented aliens, members of Indian tribes, persons with gaps in coverage < 3 months, those in jail, and members of certain religious groups exempt from Social Security taxes, i.e., Anabaptist (Mennonite, Amish, and Hutterite).
  35. 35. Health Reform’s Out-of-Pocket Limits Generally Effective in 2014 – One Delayed Effective Date Healthcare reform’s requirement that health insurance individual and small group plans cap how much consumers must pay out-of-pocket each year for medical care will take effect as scheduled in 2014 for some and 2015 for others. For 2014 and thereafter, the health reform law requires that private insurance plans offered in the individual and small group markets limit how much in cost-sharing charges — deductibles, copayments, and coinsurance — that people enrolled in a plan must pay each year for covered benefits provided by the plan’s network of health care providers.
  36. 36. More On Out Of Pocket Limits  The requirement does not apply to “grandfathered” plans or to self-insured employer plans, large group employer plans, or large group market insurers. In 2014, the maximum out-of-pocket limit is $6,350 for an individual and $12,700 for a family (the same as for HSA compatible high deductible plans, and applies to health insurance offered in the individual, nongroup, market.  Deductible Limit. The deductible cannot exceed $2,000 for a plan covering a single individual, or $4,000 for any other plan.  The annual deductible limit as applying only to employers and insurers in the individual and small group markets for non-grandfathered plans. In the case of a plan using a network of providers, cost sharing paid by, or on behalf of, an individual for benefits provided outside of such network does not count toward the annual limitation on cost sharing or the annual limitation on deductibles.
  37. 37. Still More On Out Of Pocket Limits  One Delay Until 2015. However, employer plans that have “separately administered” benefits, such as a primary package of health benefits and a different insurer or administrator for other benefits, such as prescription drugs, need not comply until 2015. Employer plans with separately administered benefits that qualify for the delay must apply some out-of- pocket limits in 2014. These plans must ensure that their primary package of health benefits has an out-of-pocket limit of no more than $6,350 for individuals and $12,700 for families. A separately administered benefit, such as prescription drugs, that already has an existing limit on out-of-pocket costs must also comply with the limits of $6,350 for individuals and $12,700 for families in 2014.
  38. 38. 2014 – Individual Responsibility Tax  Both insured and self-funded plans will pay into state-based program during 2014-2016 to cover high cost claimants enrolled for individual coverage in and outside the exchange  The per member fee in 2014 is $63; states can charge additional fees to reinsure their individual, small and large group insured markets  Post-65 retiree coverage excluded along with HIPAA-excepted benefits; includes COBRA  Tax Deductible  May be paid from ERISA plan assets
  39. 39. 2014 Health Care Exchanges (Marketplaces)  These new state-based marketplaces will give individuals and small businesses in 2015 and thereafter (with 100 or fewer employees, or just 50 if state elects) a place to shop for standardized, private health insurance. Subsidies are provided for those earning less than 400% of the federal poverty level. In states that opt out of expanding Medicaid, some people making below 138% of FPL will be eligible for Medicaid, some will be eligible for subsidized coverage through marketplaces, and about 7 million others will not be eligible for exchange subsidies or Medicaid.  Offerings at platinum, gold, silver and bronze levels. In 2017, SHOP exchanges can be expanded to employers with over 100 employees at option of exchange.
  40. 40. 2014 Health Care Exchanges (Marketplaces)  16 states are setting up their own exchanges. 8 additional states are partnering with HHS to set up their exchanges. In the rest of the states, HHS has set up the state marketplace.  While the statute says the individual tax subsidy for exchange purchased insurance for qualifying individuals applies to insurance purchased on an exchange established by a state, IRS regulations include all state exchanges, including those established by HHS.  DC court has ruled that these IRS regulations are valid.
  41. 41. EXCHANGE (MARKETPLACE) PREMIUM SUBSIDIES Obamacare premium subsidies and cost assistance will be based on the Federal Poverty Level (FPL) Guidelines at the start of the open enrollment period (October 1st 2013 for 2014). Thus, premium subsidies, cost-sharing assistance, and taxes for 2014 are based on the 2013 Federal Poverty Guidelines. • If you make less than four times (400% of the FPL) you may qualify for reduced premiums through the marketplace due to advanced premium tax credits. • If your income is below two and a half times (250%) the FPL you qualify for a policy with reduced deductibles, copayments and lower maximum out of pocket costs.
  42. 42. Exchange Subsidies For Income Below 400% Of Federal Poverty Level 100% of FPL 400% of FPL Household Size (2013) (2013) Premium Max Range 1 $11,490 $45,960 $ 0 -$363.85/month 2 $15,510 $62,040 $ 0 -$491.15/month 4 $23,550 $94,200 $ 0 -$745.75/month Note – the FPL is greater in Alaska and Hawaii.
  43. 43. 2014 – Exchange Insurance Loophole  Persons purchasing insurance on exchange can have 12 months of coverage by only paying first 9 months of premiums. Intent was to give people who can’t pay premiums due to hardship, such as layoff, a chance to catch up.  If Individual does not pay last 3 months premiums, the insurance pays providers in month 10 but not months 11 and 12.  Such an individual remains eligible to buy exchange insurance the next year even if missed premiums never paid!!
  44. 44. Plan Years Beginning In 2014 90-Day Waiting Period Maximum; PHSA 2708  The maximum 90-day wait rule applies for plan years beginning on or after January 1, 2014. All calendar days are included in the 90-day period, including weekends and holidays. Both grandfathered and non-grandfathered group health plans must comply. The test applies solely for eligible employees.  If a group health plan conditions eligibility on an employee regularly working a specified number of hours per period (or working full time), and it cannot be determined that a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full time), the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition. The plan may require that any employee having completed a number of cumulative hours of service not to exceed 1,200 hours.  Violations are subject to the 4980H excise tax.
  45. 45. 2014 – Additional Items  MEDICAID ELIGIBILITY will increase to 133 % of poverty level for all nonelderly individuals in states adopting the Medicaid expansion. States will receive increased federal funding to cover these new populations. There is no deadline for a state to adopt expansion.  AUTO-ENROLLMENT DELAYED. Any employer with 200 or more full-time employees must begin auto-enrolling all eligible employees into its health plan, providing employees notice and allowing them to opt-out of coverage. Technical Release 2012-01 states that employers are not required to comply with the automatic enrollment provision until final regulations are issued and become applicable.
  46. 46. Extension Of 2014 Employer Mandate To 2015 or 2016 IRS Postponed Effective Date From 2014 to 2015. “Applicable Large Employers” with at least 50 full-time (30 or more hours per week) and full-time equivalent US employees in preceding year must offer insurance meeting specified requirements to all but 5% (or 5 if greater) of its full-time employees or pay a $2,000 per full-time worker penalty after its first 30 employees if any of its full-time employees receive a federal premium subsidy through a state exchange. Employer with average between 50 and 99 Full-Time (including full-time equivalents) Employees in 2014:has a one-year delay in the employer mandate, until January 1, 2016 (and for non-calendar-year plans, any calendar months during the plan year beginning in 2015 that fall in 2016) if employer did not lay-off employees to fall below the 100 employee threshold and that employer did not reduce any coverage you were already offering, and beginning on February 9, 2014 and ending on Dec. 31, 2014, employer does not eliminate or materially reduce the health coverage, if any, offered as of February 9, 2014.
  47. 47. MORE ON EMPLOYER MANDATE EXTENSION 2014 final regulations provide new transitional relief for two types of employers. The applicable large employer status (what triggers the potential application of the mandate) for a calendar year is still based on the number of employees in the preceding calendar year. Transition rules, discussed below, include those for non-calendar year health plans, the ability to count employees for less than 12 months in 2014 to determine applicable large employer status, initial offers of health coverage in 2015, dependent coverage, employers with at least 50 but less than 100 full-time and full-time equivalent (FTE) employees, and reduction of the 95% offer of health coverage requirement to 70% for 2015.
  48. 48. SEASONAL EMPLOYEES NOT COUNTED FOR ALE STATUS If the number obtained is 50 or greater full-time and full-time equivalent U.S. employees and the employer included seasonal employees, the employer may then apply the special rule for seasonal employees to see if they can be excluded. If the employer only exceeds 49 full-time and full-time equivalent employees for four or less calendar months (not necessarily consecutive) or 120 or fewer days (not necessarily consecutive) and the excess over 49 for those four months or 120 days are seasonal employees, then the employer is not an applicable large employer.
  49. 49. Employer Mandate Reduction Strategy Applicable large employers offering employee pay all coverage or a low benefit minimum essential coverage plan (need not cover all 10 essential health benefits) are not subject to the 4980H(a) penalty but could still face the 4980H(b) penalty of $3000 per year per full-time employee (there is no subtraction of 30 here) for workers who go to an exchange and qualify for subsidized coverage if the employer’s coverage is either (1) not affordable (self-only coverage more than 9.5% of income) or (2) lacks minimum value. Whether this will be a significant penalty depends on how many of an employer’s employees qualify for and purchase subsidized health insurance on an exchange. In many cases, the result could be much less expensive than the 4980H(a) penalty where many employees, especially those with low incomes, will not go to the exchanges due to the relatively high cost of the coverage after the subsidy, the availability of care at hospital emergency rooms, with the employee mandate tax being less than the out of pocket insurance cost.
  50. 50. More Health Reform Employer Mandate Avoidance Strategies (1) Make more employees part-time; (2) Subcontract work to independent contractors; (3) increase part-time employees; (4) Hire older workers on Medicare. Employers that are facing significant cost increases because of the requirements to cover new groups of employees will want weigh all these possible alternatives. Caution - reducing hours of current employees who would have coverage to less than 30 so that the employer need not provide coverage runs serious risk of an ERISA § 510 anti-discrimination violation.
  51. 51. Employer Mandate Avoidance Strategies - PEO Use Is Risky Can a controlled group of employers with more than 50 FTEs with more than 30 working over 30 hours per week wanting to provide health insurance to key managers move them to a staffing company (professional employment organization or PEO) and not cover the remaining employees if remaining employees total less than 50 FTEs or none work over 30 hours per week? The final employer mandate regulations say that where employers seek to use temporary staffing agencies or professional employer organizations (PEOs) purporting to be the common law employers to evade application of §4980H, the actual employer is determined using the common law employee rules used by the IRS.
  52. 52. Practical Results of HCR More Exchange Insurance Subsidies Than Planned? Health reform provides strong incentives for employers, perhaps with the agreement of their employees, to drop employer-sponsored health insurance for as many as 35 million Americans . . . and raising the gross taxpayer cost of the subsidies to roughly $1.4 trillion in the first 10 years. This could be the cost of health insurance subsidies. From: Holtz-Eakin & Smith, “Labor Markets and Health Care Reform: New Results,” AMERICAN ACTION FORUM (May 2010)
  53. 53. Health Reform Does Nothing For Cost Shifting  Health insurance reform does not address the inequities between provider costs paid by government-sponsored plans and those paid by employer-sponsored plans. Medicare and Medicaid have lower payment rates than private insurers, leaving providers looking to the private sector to make up for these lower reimbursements.  The one thing reform does for states participating in the Medicaid expansion is to reduce uncompensated charity care, a help to health care providers, i.e., hospitals and physicians.
  54. 54. Practical Results Employers Must Look At What Competitors Are Doing Health insurance is only one portion of the overall compensation package employees receive. If one portion of that package is reduced or eliminated, wages will likely be increased to retain and attract valuable labor where there is competition for these employees. Thus, the key question is whether the employer can keep the employee happy by discontinuing health coverage and increasing wages. Of course, this would subject larger employers to the employer mandate penalty, but that penalty is far less that the cost of health coverage.
  55. 55. Practical Results Potential Higher After-Tax Costs For Highly Compensated If high-wage workers want to continue to receive health insurance, the new non-discrimination rules, if and when they become effective, force employers to offer equivalent insurance to most workers. For those firms dominated by lower-wage workers that will provide no coverage and, if they now provide it but discontinue it, resulting in paying the workers increased compensation and the employer mandate penalty (if an applicable large employer), then once the nondiscrimination rules are effective for insured plans, employer will not be able to provide health insurance solely for the high wage workers or the employer will have a $100/day ($36,500 per year) penalty times 75% of its employees.