Checklist and Decisions for Employers Facing Healthcare Law
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Transcript of Checklist and Decisions for Employers Facing Healthcare Law
Action Items and Decisions Facing Employers with the Patient Affordable Care Act
Chris Hodge, District ManagerOasis OutsourcingFebruary 21, 2013
Timeline of Key Provisions2011
• Adult children to age 26 (early adopter)
• No lifetime or annual maximums
• 100% preventive care coverage
• FSAs cannot reimburse over-the-counter (OTC) expenses without Rx
• No preexisting condition exclusions under age 19
• Prohibition on rescissions
• New claims and appeals rules
2012
• W-2 reporting requirements for health care coverage (for January 2013 W-2s)
• Summary of Benefits and Coverage and Uniform Glossary rules
• Nondiscrimination testing rules in all plans, including insured plans
• Medical Loss Ratios Rebates
• Tax credit for employers with < 25 employees
2013
$2,500 health care FSA salary reduction limits
Increase in Medicare payroll tax on individuals making more than $200k/$250K
Investment income subject to Medicare tax for individuals making more than $200k/$250k
Expanded women’s preventive care
Comparative Effectiveness Fee per member participant on all health plans
Notify all employees about exchanges, services and contact info.
2014
Exchanges operational
Free rider penalty (employer mandate)
Individual mandate
Auto-enrollment
No preexisting condition exclusions
Wellness program discount expansion
Eligibility waiting period no longer than 90 days
Employer reporting of health insurance info to govt & participants
2013 Employer Checklist
$2,500 Flexible Spending Account LimitComparative Effectiveness Fee for all
health plan participantsEmployer must provide written notice
regarding the existence of insurance exchanges and that employee may qualify for subsidies
2014 Employer Mandate will be based on 2013 FTEs and hours worked.
2013 Employer Checklist
#1 $2,500 Flexible Spending Account Limit– Child Care spending limit is not affected– Employee Contributions to Medical Flexible
Spending Accounts are limited to $2,500/year
2013 Employer Checklist
#2 Comparative Effectiveness Fee• New fee to fund independent comparative
clinical research programs
• Fee became effective for plan years as of October 1, 2012 and later
• Initial fee is $1 per member per year, increasing to $2 per member in second year.
• Fee is due no later than July 31, 2013
• Assessed by the carrier
2013 Employer Checklist
# 3 Employer must provide written notice regarding the existence of insurance exchanges and that employee may qualify for subsidies• Originally due March 1, 2013• Postponed to early Autumn 2013. No exact
date yet.
2013 Employer Checklist
# 4. Employers that do not currently provide health insurance, evaluate headcount to determine whether your company will be subject to the employer mandate in 2014.
2013 Employer Checklist
# 5. Employers that do provide health insurance, evaluate plans to ensure that by 2014 insurance meets requirements:• Affordability• Adequate coverage
2014 Employer Checklist
Shared Responsibility Provision takes effect (for companies with 50+ employees)
Automatic Enrollment of New EmployeesLimits to waiting periods for coverageReporting of health insurance information
to government
2014 Employer Checklist
# 1 Shared Responsibility Provision takes effect• Applies only to employers with 50+ Full Time
EQUIVALENTS• $3,000 penalty per employee
• If premium contribution is greater than 9.5% of income – Example: For employee earning $35,000/year, 9.5% equals
$3,325 annually or $277 per month
• If plan covers less than 60% of allowable costs.
• The alternative penalty is $2,000 per employee for not offering coverage.
How Eligibility is Calculated
• Do you have 50 Full Time Equivalents?– Any employee averaging 30 or more hours a week is
considered a Full Time Employee.– Add to that number, the total number of hours worked
by all PTEs every month divided by 120.– Seasonal workers (<120 days/year) are excluded.
• Example: A firm has 35 FTEs & 20 PTEs working 24 hours/week (or 96 hours/month).– 20 PTEs X 96 (hours/month) / 120 = 16– 35 FTEs + 16 Calculated FTEs = 51 FT Equivalents
How Eligibility is Calculated
• Companies under common control are considered one company.– You can’t subdivide businesses to avoid
eligibility.– Separate businesses with common ownership
must be evaluated as a whole.
How the Penalties are Assessed
• Assessed differently than eligibility is assessed.• Tax penalty is assessed if at least one FULL-
TIME employee obtains coverage from through an exchange AND receives a premium credit.– No penalties for part-time workers.
• Premium credits are for workers who are 138% to 400% of the Federal poverty level.– Employee premium must be greater than 9.5% of
income.– Plan pays less than 60% of essential health benefits
Penalty for >50FTE Employer not offering Health Insurance
• Penalty applied to FT Employees (working over 30 hours a week) greater than 30.
• $166.67 per month penalty for every FTE greater than 30 who do not have company-sponsored health insurance.– 35 FTEs and 20 PTEs. Penalty would be:
35 - 30 = 5 X $166.67 = $833.35/mo.– 29 FTEs and 50 PTEs. Penalty would be:
29 - 30 = -1 or 0 X $166.67 = $0/mo.
Potential Penalties for Employers >50 FTE who do offer health
insurance• Penalty is applied if any of the employer’s FT
Employees (PTEs are excluded) receives a premium credit to purchase from an exchange.
• To get premium credit:– Employee must be 138-400% of FPL AND– Employee’s share of premium > 9.5% of income OR– Policy does not provide minimal essential coverage.
• Penalty is the lesser of:– FTEs – 30 X $2,000– FTEs receiving premium credits X $3,000
Potential Penalties SummarizedLess than 50 FTEs
Large Employer: 50 or more FTEsDoes not offer coverage Offers coverageNo FTEs
receive credit for exchange
coverage
1 or more FTEs receives credit for exchange
coverage
No FTEs receive credit for exchange
coverage
1 or more FTEs receives credit for
exchange coverage
No penalty No penalty Number of FTEs minus 30 multiplied by $2,000.
No penalty Lesser of:
- Number of FTEs minus 30 multiplied by $2,000.
- Number of FTEs who receive premium credit multiplied by $3,000
Online Tools to Determine Eligibility and Penalties
• Online calculator atwww.franchise.org/healthcare/calculator.aspx
• Government’s Outline of Rules
http://www.healthcare.gov/using-insurance/employers/index.html
• DHHS to be releasing a calculator for minimum essential coverage
How does this apply to 2013?
• The determination of the number of full-time vs part-time employees in 2014 will be based on a “Lookback Period” that includes 2013.– Each employee is classified FT or PT based
on the hours they worked in that period.– Period can be 3 to 12 months– Employer can determine the length of the
period
2014 Employer Checklist
# 2 Automatic Enrollment of New Employees– Applies only to employers with 200+
Employees– Employers must automatically enroll new full-
time employees in health plan– Employees may opt out
2014 Employer Checklist
# 3 Limits to waiting periods for coverage• No health plan may impose a waiting period
for benefits of greater than 90 days• Employers with 50+ employees will be fined
for waiting periods over 90 days ($600 per FTE in waiting period).
Decisions facing Employers
• If you do provide health insurance:– Should you continue to
provide coverage?– What changes should
you make to your plans?
– What changes should be made to contributions?
• If you don’t provide health insurance:– Should you start?– Can you stay below
the 50 employee threshold?
– What are the best vehicles to provide insurance?
Considerations in Deciding to Maintain or Buy Group Coverage
• Insurance premiums are tax-deductible but penalties are not.
• Cost of providing insurance is a function of the number of participants, not the number of employees.
• The Individual Mandate will make insurance important to employees who did not care before.
• Any additional compensation to cover Exchange costs will increase payroll (FICA/FUTA) taxes for the employer, and income and payroll (FICA) taxes for the employee.
• If you already provide coverage, why? Has that changed?
Considerations for the Providing Coverage
• Does the plan cover 60% of expenses?– DHHS Calculator– Common sense guide
• Does your contribution keep employees from paying more than 9.5% of their income for their plan?– Increase contribution?– Create classes that reverse discriminate?
Whatever you do (or don’t do)• Do the math!
Summary of Results: Pay or Play Analysis
Potential Penalties
Full-time Employees 73
Penalty (Cost) for not offering coverage to all full-time employees 0
Employees paying more than 9.5% of income for single coverage 29
Does plan pay for at least 60% of covered expenses for a typical population? YES
Penalty for employees paying more than 9.5% $87,000
Total Potential Penalties Accrued $87,000
Cost of Providing Coverage
Annual cost of current plan $198,756
Employee Contributions, including increased employer contribution for low income employees (89,556)
Value of Federal Tax Deduction (37,128)
Employer net cost of plan $72,072
Whatever you do (or don’t do)• Do the math!• Make sure your assumptions are accurate.• Spreadsheet your options• Base calculations on what is known and
minimize speculation.– We do know more than we don’t know– Many remaining questions will not be significant
enough to require a change in course.– If information changes, then change the spreadsheet.
• Re-assess after the exchanges have been around for a year.
Questions and Answers