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2014 ISRI Convention
Employee Benefits in the Obamacare World & How To Maximize Its Impact
Presented by:
Joseph AppelbaumPresidentPotomac Companies, Inc.
Purpose
Employers are offered the option to "Pay or Play" under Obamacare, but for most companies there is no choice - they must play in order to recruit and retain employees. Not only must they play in the
health insurance market, but also life, disability, and the whole spectrum of employee benefits from leave to pet insurance. In this session we will discuss the impact of Obamacare on the employee benefits mix
and employer decision-making, along with the importance of insurance benefits as a mandatory
piece of the total compensation puzzle.
PPACA (Obamacare)
Key Components
Individual Mandate (2014)• Subsidies• Penalties
Insurance
Mandates
State Mandate
s (Exchang
es)
Employer
Mandate (postponed
to 2015 / 2016)
Individual Mandate
Beginning in 2014, ACA requires individuals to maintain health insurance for themselves and their dependents
Most individuals will be required to maintain "minimum essential coverage", which includes employer coverage individual coverage federal programs such as Medicare and Medicaid
Those who do not maintain minimum essential coverage, and who are not exempt from the mandate, will be required to pay a tax penalty for noncompliance
Individual Mandate
Individual annual Penalties: 2014: $95 per adult and $47.50 per child, up to a
family maximum of $285 or 1 percent of family income, whichever is greater
2015: $325 per adult and $162.50 per child, up to a family maximum of $975 or 2 percent of family income, whichever is greater
2016: $695 per adult and $347.50 per child, up to a family maximum of $2,085 or 2.5 percent of family income, whichever is greater
Employer Mandate
Employer Play or PayApplies to Applicable Large Employers
Employers with 50 or more Full-Time Equivalent Employees (FTEs)
ER penalty applies if coverage is not offered or coverage is offered but "Unaffordable" and a Full-Time Employee (30+ hrs/week) receives A Subsidy in an Exchange
PenaltyALE &
Insurance Not Offered
ORIs Unafford-
able
Full-Time Employee Obtains
Insurance in an Exchange
Employee receives Federal subsidy
$
$
$ $
Employer Mandate
Employers who do not provide coverage Employers who do not provide health coverage
to at least 95% of all full-time employees (and their children under age 26) are subject to a penalty• If at least one full-time employee (30+hrs/wk or 130+
hrs/mo) receives a subsidy to purchase Exchange coverage for himself or herself, the employer is subject to an annual penalty of $2,000 × all full-time employees (reduced by 30)
• Penalty is assessed monthly ($167.67 per full-time employee per month)
Employer Mandate
Employers who provide "unaffordable" coverage
Coverage is "affordable" if:1. The employee's cost for single coverage does not exceed 9.5%
of household income (or Box 1 W-2 wages or another safe harbor), and
2. The plan provides "minimum value" (it has at least a 60% actuarial value)
Annual penalty is $3,000 for each full-time employee who receives a subsidy for Exchange coverage (not to exceed the "no coverage" penalty)• Penalty is assessed monthly ($250 per subsidy-receiving full-
time employee per month)
Transition Relief
For 2015, the rules will apply to employers with 100 or more full-time equivalent employees (employers in the 50-99 range will need to certify eligibility for this transition relief)
For 2016, the rules will apply to employers with 50 or more full-time equivalent employees
Transition Relief
To avoid a penalty in 2015, employers subject to the mandate (100+ FTEs) must offer coverage to at least 70% of their full-time employees (instead of 95%)
To avoid a penalty in 2016, employers subject to the mandate must offer coverage to 95% of their full-time employees
Employers with non-calendar year plans are subject to the mandate based on the start of their 2015 plan year rather than on January 1, 2015 (may be extended to 50-99 FTE employers for their 2016 plans)
Transition Relief
Other transition relief contained in the proposed regulations were extended: The ability to use a short timeframe (at least 6
months) to determine whether an employer is large enough to be subject to the mandate
A delay in the requirement to provide coverage to dependent children to 2016 (as long as the employer is taking steps to arrange for such coverage to begin in 2016)
For 2015 ONLY, penalty calculated by reducing number of employees by 80 instead of 30
Additional Items of Note
90-Day Enrollment Requirement (EFFECTIVE 2014) If EE clearly eligible,
must be enrolled on or before 90th day
This means coverage begins by 91st day
Acceptable waiting period: coverage effective 1st of month following 60 days
Affordability Safe Harbors W-2 safe harbor Rate of pay safe
harbor Federal poverty line
safe harbor
Exchanges
Types of Exchanges: State ExchangePartnership Exchange Federally-Facilitated Exchange (in states
that did not choose to develop their own exchange)
Exchanges
The Metals—Exchanges to Offer Four Levels of Coverage: Bronze (60%) Silver (70%) Gold (80%) Platinum (90%)
And a catastrophic plan for individuals under 30
Premium Tax Credits
Premium tax credits are federal subsidies—direct payments to insurance companies to subsidize coverage for lower-income individuals in the state-based Exchanges
The subsidy helps lower-income people between 100% and 400% of Federal Poverty Level (FPL) purchase a silver level plan (70% plan)
Getting & Keeping Employees
The cost of employee turnover can be extensive – 1/2 to 2 times annual pay per lost employeeCost of losing trained EECost of temp or OT while position emptyRecruitment costsTraining costsLost productivity costs
Getting & Keeping Employees
Average national turnover rate has been running at 25% for manufacturing, construction, scrap recycling & related industries
Example: 25% turnover; 200 employees; average pay rate $12.00 per hour; turnover cost at 1/2 X payTurnover costs to company equals $624K
on an annual basis based on this example
Getting & Keeping Employees
Employers are using benefits as leverage to recruit & retain employees: Total Rewards
Health care & retirement savings are the most leveraged benefits for recruitment & retention*
Employees must have health insurance now – easiest place to get it is through their employer
Premiums tax deductible to the employer & employee
Getting & Keeping Employees
If turnover can be reduced through the increase of the Total Reward package (i.e., added benefits), why not use the savings to fund the added benefits??
Improve
Total Rewards
Reduce Employee Turnover
Reduce Costs to Fund Total Rewards package
Retention & Profitability
Using the example of the 200 person company: If the 25% turnover cost your organization
$624k/year, what would you do with that money if it didn’t walk out the door?
How do you minimize that loss and add it back into your bottom line profitability?
Retention & Profitability
Will 50 cents an hour change that? 200 people times an average of 2,080 hours times 50
cents = $208k What would you do with $416k? What about
increasing benefits? Why are you losing employees?
Are they transient? Will they move for an extra 50 cents an hour? Are you not offering benefits (ACA requirement)? Not contributing enough? Improper hiring practices? Or improper training? Settling for a belly button?
Benefits in the Mix
Health Insurance – 97% of ALL employers offer health coverage for at least the employeeDental – 96%Vision 79%
Life Insurance – 84% of employers offer life insurance
Disability – 68% offer STD and 80% offer LTD (primarily paid 100% by ER)
*Results from 2012 SHRM National Benefits Survey
Benefits in the Mix
The Total Rewards package can be any mix, though, that helps to recruit & retain employees in your industryCompensationHealth & welfare benefit plansSupplemental benefit plansMisc. Benefits – legal services, bonus
programs, incentive compensation, flexible work environments, even pet insurance & the list goes on
Employee Healthcare
Despite the cost pressures of health care benefits, majority of employers will continue to offer coverage*, but…They are resetting benefit valueThey are actively engaging employees in
improving their own healthThey are focusing on choiceThey are exploring new options like
Private Exchanges & Self-Funding
Private Exchanges
A private exchange is an on-line portal used to sell insurance products directly to employees
Employees are allowed to become consumers and shop from among a wide variety of major medical health plans and supplemental insurance products
A private exchange reduces the role the employer plays in the selection of insurance coverage for its employees
Private Exchanges
Why are employer’s looking at Private HC ExchangesOne-stop shopping across core
medical, life, disability, & voluntary benefits
Technology & choice eases employee decision-making
Collective buying power & influence help control total benefit costs
Partially Self-Funding
Partially self-funding insurance benefits for groups with 50 or more employees is an option for controlling costs
Not for everyone – works well for groups with relatively low claims costs (low plan utilizers)
Wrap-Up
Your employees are a corporate asset – retain them
Your employees are what drives your business
Taking care of them is a required business practice in today’s economy - it translates into healthier, more productive & longer term employees
Wrap-Up
Obamacare may seem complicated, but it does not alter the fundamental need for companies to offer a Total Rewards package that effectively attracts and retains employees
Find the right guidance in a broker or consultant to help you navigate the Total Rewards options
Thank you!
Joseph AppelbaumPresident
Potomac Companies, Inc.www.potomacco.com