Healthcare Reform - Bracing for Impact

Smart Business Thought Leadership Webinar Series - March 26, 2013 Smart Business Thought Leadership Webinar Series - March 26, 2013

By Joe Popp, JD, LLM

What you need to know about health care reform

Bracing for Impact:

Smart Business Thought Leadership Webinar Series - March 26, 2013

Pay or Play

Starting in 2014 “large employers” must:

Offer minimum essential coverage that is both affordable and provides minimum value to full-time employees.

or

Pay penalties.

Report various elements to the IRS and employees.

© 2013. All rights reserved. Rea & Associates, Inc.


What Does This Mean for Employers

If you are a large employer:

Which employees will you be penalized for if you don’t cover them?

• How much? How often? How can you estimate this?

Which employees can get vouchers on the new exchanges?

These are different issues! Example: You may NOT be penalized for a particular employee who can

go to the exchange to get a voucher due to employer safe harbors.



Who is a Large Employer

On average, 50 or more full-time employees during the year (for the prior year).

Common law employees, with some subtractions.

All employees of a controlled or affiliated group are considered together.

Both full- and part-time employees count.

Calculated monthly.

New employers must use reasonable estimates to determine if they will have 50 FTEs.



Who’s a Full-Time Employee

Workers with 30+ “hours of service” a week.

IRS guidance is 130 hours of service/month is full-time.

Hours of service is any time paid for:

• Holidays, military leave, jury duty, illness, etc.

Based on actual hours of service:

• Penalty safe harbors and measurement/stability periods don’t apply.



Calculating (FTE) Full-Time Equivalent

For part-timers working less than 30+ hours a week:

Add up all part-time employee time for the month.

Divide that total time by 120 hours.

Example: 10 people x 20 hours a week = 7 FTEs.

Add FTE to your full-time worker number for complete monthly worker count.



When Making Calculations…

Measure your prior year full-time count by month.

Average of all months = full-time count for the year.

Transitional relief is available for 2014.

Can measure large employer status using any consecutive six month time period in 2013.

Secure status for 2014 by making needed changes prior to July 1.



Managing the 50 FTE Threshold

If you are…

Under 50, investigate steps to ensure you stay under 50.

Expanding over 50, investigate what your additional costs from health care reform will be as part of your expansion planning.

Over 50, understand how to comply.



The Employer Mandate

Each month (starting January 2014), you will be:

Playing, if you offer affordable essential minimum coverage to your full-time employees.

Paying, if you fail to offer coverage to at least 95% of your full-time employees. (Penalty a)

Paying, if you offer coverage to 95% of full-time employees, but it is either not affordable or adequate insurance. (Penalty b)



Penalty for Not Offering Coverage


If you don’t offer coverage to at least 95% of full-time employees – pay 4980H(a) penalty $166 per full-time employee per month ($2,000

annually).

First 30 employees are free of penalty each month.

Requires testing plans against the bronze metal tier standard.


The Two Questions You Need to Ask

1.Do we have a plan that provides essential minimum coverage?

2. If so, did we offer it to 95% or more of our full-time employees?



What is Essential Minimum Coverage?

Includes a number of different kinds of plans: Government sponsored programs.

Employer sponsored plans. • Group health plans – self-insured and insured.

Grandfathered health plans.

Other plans: self-funded student plans, foreign plans, etc.

Must offer to full-time workers and their dependents under 26.



What is Essential Minimum Coverage? - continued

Some Obamacare changes apply to the employer mandate area and some do not.

Requirement of plans containing benefits in 10 essential categories applies to exchange insurance, not large employer plans.

Non–discrimination does apply.

• Self-insured: Income to high comp.

• Insured: $100/person/day.



Full-Time Testing for Penalty Status

Identify your full-time workers:

Anyone with 130+ hours in a month.

Hourly employees: Must calculate actual hours.

Non-hourly: IRS safe harbors are available. • 8 hours/day, 40 hours/week, actual time.



Measurement and Stability Periods

A period of time to test if someone is full-time.

Initial measurement period – intended for new hires and based on hire date.

Standard measurement period – for existing employees.

You can select different periods for different classes of employees.

Administrative period – 90 days

There is a period of time after the measurement period where you can rely on the results – a stability period.



Did You Offer Minimum Essential Coverage for the Month?

Waivers

Initial measurement period

Failed stability period

If one of the above doesn’t apply, they are full-time and not offered coverage.



Penalty for Providing Unaffordable/Not Minimum Value Coverage

If you offer coverage to 95% or more of your full- time employees, but it’s not affordable or adequate – pay a 4980H(b) penalty.

$250 per full-time employee failure per month ($3,000 annually).

First 30 are NOT free.

Never more than 4980H(a) penalty – max is $166/month per (full-time employees - 30).

Must test each full-time employee for affordability.



Testing Adequate Coverage

Employee fails the test if premiums are more expensive than the limit (a percentage of worker income).

Test applies to those making 400% of poverty level or less.

Current limit is 9.5% of household income (indexed for inflation).



The Premium Test

Several IRS safe harbors:

Premium cost of single insurance does not exceed 9.5% of box 1, form w-2 income.

Premium cost of single insurance does not exceed 9.5% of monthly income (salary or 130 hours times hourly rate).

Premium cost of single insurance is less than 9.5% of federal poverty level for a single person.

• Approximately $1,100 annual premium.

If you don’t meet one of these safe harbors, you have a harder road ahead.



Does Plan Provide Essential Minimum Value?

New metal tiers benchmark whether plans provide a certain level of coverage.

An apples-to-apples comparison – at least within basic and premium coverage.

To provide essential minimum value,

employer-provided insurance must at least meet the bronze medal test.



What is a Bronze-Level Plan?

Provides no less than 60% of medical costs – employees pay up to 40%.

Based on actuarial cost of insurance for a certain class of insured, not your particular workforce.

IRS and HSA calculator for taxpayers to use.

Checklist of benchmarks to come.

Can have actuary certify.



Using the Calculator

Input details from your plan:

All cost sharing provisions, including co-pays, deductibles, caps, etc.

Benefits in the four core categories of benefits:

• physician and mid-level practitioner care

• hospital and emergency room services

• pharmacy benefits

• laboratory and imaging services.

Employer HSA contributions.



Should You Be Worried?

Majority of employer-offered plans provide bronze metal tier coverage or better.

Your plan may fail if you only offer:

High-deductible plans.

Plans with really high copays.

Plans that skimp on the core service benefits.

If you don’t meet the bronze level, you won’t pass the offer of coverage test!



Who Do You Have to Cover and When?

Employees who are not full-time (30+ hours a week).

Generally have a 90 day window after start date to offer coverage to a full-time employee.

Complex penalty rules for not providing coverage and when to offer it (measurement / stability periods).

These requirements go live for large employers January 1, 2014.



Key Takeaways

If you have 50+ FTEs, you are a large employer and must provide minimum essential coverage.

If you do not do this, you will be fined. Each month you will either pay:

4980H(a) penalty – you did not offer essential minimum coverage to 95%+ of full-time employees.

• $166 per full-time employee per month ($2,000 annually).

4980H(b) penalty – while you offered essential minimum coverage, it was not affordable to some employees.

• $250 per full-time employee failure per month ($3,000 annually).



Develop an Action Plan

Get help NOW for 2014.

Understand other impacts of Obamacare – nondiscrimination.

Seek different planning options in actual dollar terms.

Get help with the tracking.

Determine what help you’ll need with the new IRC section 6056 reporting.



Questions? Joe Popp, JD, LLM

614.889.8725 [email protected]

Documents

Healthcare Reform - Bracing for Impact