Health Reform Update: Large Employers
Transcript of Health Reform Update: Large Employers
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Health Reform Update:
Large Employers
Presented by:Presented by:Presented by:Presented by:
Eric Johnson | Eric Johnson | Eric Johnson | Eric Johnson | 817-366-7536 | [email protected]
Copy of Presentation: http://comedyce.com/edwardsandsherlock
Have you ever…
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Source: http://www.benefitspro.com/2013/04/10/where-in-the-world-is-kathleen-sebelius
I just see a huge train
wreck coming down.
Senator Max Baucus
Chairman, Senate Finance Committee,
Key Architect of Health Reform
Legislation
What will the public think?
Source: http://www.benefitspro.com/2013/04/30/nearly-half-of-americans-dont-know-ppaca-is-law
What will the public think? Who are these people?
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Size Matters! It’s all relative
Sometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be
bigbigbigbigSometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be
smallsmallsmallsmall
Good BadBadBadBad
Large Group
Counting Lessons 4 Different Definitions
Small Group
Tax Credit
Large Group
Mandate
Minimum Medical
Loss Ratio (MLR)
Small Group Market Rules
Market Rules
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Small EmployersSmall Employers – Big Impact Market Segment Determines:
•Benefits that must be offered
•Rating rules
•Premiums
HHS Dictionary
Small Group =
2222----50505050“employees”
Who counts as an “employee”? We don’t know yet…
• Texas that would defines “small group” as 2-50 employees for
the next two years.
• In 2016, the default definition of small group is 1-100
employees, so employers with 51-100 employees will have to
comply with the small group market rules.
• But what’s an employee? We don’t know yet.
• HHS says that they’ll issue future guidance to tell us how to
determine employer status (large or small) for market rules
purposes.
• HIPAA guidance suggests that carriers will continue to base the
count on “eligible” employees who do not have other coverage.
Some win…
Some lose…
Rate Compression
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Higher Premiums for Some Groups
3 Reasons:3 Reasons:3 Reasons:3 Reasons:
• Essential Benefits
• Cost Sharing Limits
• Modified Adjusted Community Rating Essential Benefits = Mandates
Source: http://www.tdi.texas.gov/hmo/documents/lhmanben.pdf
Small Group Mandates in Texas
• Ambulatory patient services
• Emergency services
• Hospitalization
• Maternity & newborn care
• Mental health & substance abuse
• Prescription drugs
• Rehabilitative services
• Laboratory services
• Preventive Services
• Pediatric dental & vision care
Mandates Required by the ACA
90% 80% 70% 60%
Actuarial Value
Source: http://www.kff.org/healthreform/upload/8303.pdf
Tied to HSA max
Single: $6,350
Family: 12,700
Out of Pocket Limit
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Deductible Limit
• $2,000 single coverage
• $4,000 family coverage
Small Group Rating Process (TX)
1.1.1.1. Actuaries Actuaries Actuaries Actuaries rate based on case characteristicsrate based on case characteristicsrate based on case characteristicsrate based on case characteristics
� Group size (20% variation allowed)
� Industry (15% variation allowed)
� Age mix of group
� Gender mix of group
� Location
2.2.2.2. Underwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristics
� Medical conditions
� Longevity with carrier
� Other risk characteristics
� “Rate up” of 67% allowed year one and 15% at renewal time
NoteNoteNoteNote: These rules do not currently apply to the individual market in Texas: These rules do not currently apply to the individual market in Texas: These rules do not currently apply to the individual market in Texas: These rules do not currently apply to the individual market in Texas....
The Rules are Changing
1.1.1.1. Actuaries Actuaries Actuaries Actuaries rate based on case characteristicsrate based on case characteristicsrate based on case characteristicsrate based on case characteristics
� Group size (20% variation allowed)
� Industry (15% variation allowed)
� Age mix of group
� Gender mix of group
� Location
2.2.2.2. Underwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristics
� Medical conditions
� Longevity with carrier
� Other risk characteristics
� “Rate up” of 67% allowed year one and 15% at renewal time
Note: These rules will apply to plans in the small group and individual Note: These rules will apply to plans in the small group and individual Note: These rules will apply to plans in the small group and individual Note: These rules will apply to plans in the small group and individual
marketsmarketsmarketsmarkets....
3 to 1 basis
New “Modified Adjusted Community Rating” Rules
lifestyle choices
Age: 3 to 1 Tobacco Use: 1.5 to 1 Family Status
Geographic Regions
Wellness Programs:Up to 50%
Not Gender or Medical
Premium Variations Allowed For:
Normal Trend: 12%
Premium Taxes: 3-5%
Product Increases: 3-4%
Factor 2013 2014
Industry 1.0 to 1.15 1.03
Group Size 1.0 to 1.20 1.04
Age 1.0 to 6.0 1.75 to 5.25
Medical 1.0 to 1.67 1.33
Gender Factored with age No longer a factor
* For illustration only – no carriers surveyed
Add it up…
-23% 14% 32% 100%
-10% 17% 37%
-23% 20% 39%
-5% 20% 39%
-28% 20% 40%
-1% 21% 40%
24%
Average = 18.65%
How High?
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Source: http://cciio.cms.gov/resources/files/market-reforms-guidance-2-25-2013.pdf
Standard CMS Rating Curve MemberMemberMemberMember----level rating requiredlevel rating requiredlevel rating requiredlevel rating required
The biggest problem with rating for tobacco use has to do with its
impact on a carrier’s ability to composite rate. HHS says:
for purposes of family coverage, any rating variation for age and
tobacco use must be applied based on the portion of the premium
attributable to each family member.
As HHS explains, “the law compels per-member rating because the
age and tobacco use factors must be attributable to individuals.”
This will create a mess in the small group market.
Less Impact for Large Employers
Small Group Market
In Texas, a bill was passed making small group 2-50 eligible
employees for the next 2 years. These groups:
• Must cover all “essential benefits”
• Have a $2,000 deductible limit
• Must comply with “modified adjusted community rating” rules
• May have “member level rating”
2-50
So…
Because the new mandated benefits (dental & vision for kids) and general
essential benefits requirements, cost-sharing limitations (specifically, the
maximum deductible), and weird modified adjusted community rating rules are
likely to have a severe negative impact on small group rates, employers actually
want to be large groups for the “market rules” definition.
Ironic, huh?
Little
Big
Eventually the cat runs out of lives…
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Employer Mandate
Employer Shared Responsibility Large Employers
IRS Dictionary
“Full-Time
Equivalents”
30
Full-Time Equivalent Employees
• Solely for purposes of determining whether an employer is an applicable large
employer for the current calendar year, section 4980H(c)(2)(E) provides that the
employer must calculate the number of full-time equivalent employees (FTEs) it
employed during the preceding calendar year and count each FTE as one full-time
employee for that year.
• The proposed regulations apply this provision using the calculation method for FTEs
that was included in Notice 2011–36. Under that method, all employees (including
seasonal workers) who were not fulltime employees for any month in the preceding
calendar year are included in calculating the employer’s FTEs for that month by (1)
calculating the aggregate number of hours of service (but not more than 120 hours of
service for any employee) for all employees who were not employed on average at
least 30 hours of service per week for that month, and (2) dividing the total hours of
service in step (1) by 120. This is the number of FTEs for the calendar month.
• In determining the number of FTEs for each calendar month, fractions are taken into
account. For example, if for a calendar month employees who were not employed on
average at least 30 hours of service per week have 1,260 hours of service in the
aggregate, there would be 10.5 FTEs for that month.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Defining FTEs
To determine the number of FTEs, the proposed regulations direct
employers to use the calculation IRS provided in Notice 2011-36
(86 PBD, 5/4/11; 38 BPR 905, 5/10/11). To calculate the number
of FTEs for a given month under that method, the regulations said,
“all employees (including seasonal workers) who were not full-time
employees for any month in the preceding calendar year are
included in calculating the employer’s FTEs for that month by (1)
calculating the aggregate number of hours of service (but not more
than 120 hours of service for any employee) for all employees who
were not employed on average at least 30 hours of service per
week for that month, and (2) dividing the total hours of service in
step (1) by 120.”
Source: http://about.bloomberglaw.com/law-reports/irs-releases-proposed-aca-regulations-on-employer-%E2%80%98shared-responsibility/
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Defining FTEs
For employees who are paid on an hourly basis, the proposed
regulations require employers to “calculate actual hours of service
from records of hours worked and hours for which payment is
made or due for vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty or leave of absence.”
Source: http://about.bloomberglaw.com/law-reports/irs-releases-proposed-aca-regulations-on-employer-%E2%80%98shared-responsibility/
Defining FTEs
The proposed regulations provide three methods of calculating
hours for employees not paid on an hourly basis: using the same
method as for hourly employees; using a days-worked equivalency
method, whereby each employee would be credited with eight
hours of service for each day the employee worked; or using a
weeks-worked equivalency, whereby each employee would be
credited 40 hours of service for each week the employee worked.
Employers “need not use the same method for all non-hourly
employees. Rather, an employer may apply different methods for
different classifications of non-hourly employees, so long as the
classifications are reasonable and consistently applied,” the
proposed regulations said.
Source: http://about.bloomberglaw.com/law-reports/irs-releases-proposed-aca-regulations-on-employer-%E2%80%98shared-responsibility/
Defining FTEs
“However, consistent with Notice 2011-36, these proposed
regulations prohibit the use of the days-worked or weeks-worked
equivalency method if the result would be to substantially
understate an employee’s hours of service in a manner that would
cause that employee not to be treated as a full-time employee,”
IRS said in the proposed regulations.
“The proposed regulations are consistent with IRS notices that
have previously been issued and describe approaches that can be
used for various circumstances, such as for employees who work
variable hour schedules, seasonal employees, and teachers who
have time off between school years,” IRS said in a fact sheet about
the employer shared responsibility provisions.
Source: http://about.bloomberglaw.com/law-reports/irs-releases-proposed-aca-regulations-on-employer-%E2%80%98shared-responsibility/
Full Time = 30+ Hours
Part Time = % of Full-Time
Transition rule
In determining large employer status for 2014, an employer may
use a period of at least six consecutive calendar months in 2013
rather than the entire calendar year as otherwise required.
No Coverage for Part-Timers
While part-timers and seasonal employees are counted in
determining full-time equivalents, there is no requirement to offer
them coverage and no penalties if you don’t.
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Full-Time Employee Defined
“Full-time employee” for this purpose is defined as an employee
who works an average of 30 or more hours per week with 130
hours per month treated as equivalent to 30 hours per week.
Cap A Penalties
• Employers with 50 or more full-time equivalent (FTE) employees
are required to offer coverage to their full-time employees (those
who work 30+ hours per week).
• Applicable large employers that do not offer coverage must pay
a penalty of $2,000 per full-time employee with the first 30
excluded if even one employee accesses a subsidy through the
individual exchange.
• The penalty is not tax-deductible.
Example100 full-time employees, no coverage offered
Penalty is (100-30) x $2,000 = $140k
Cap B Penalties
• Employers with 50 or more full-time equivalent (FTE) employees
that do offer coverage pay a $3,000 penalty, but only on those
employees who access a subsidy. This can happen if:
• Coverage does not meet the 60% actuarial value requirement and is not
grandfathered.
• Coverage is unaffordable (employee’s share for EO premium exceeds
9.5% of household income).
• The penalty is not tax-deductible.
Example100 full-time employees, 5 access subsidy
Penalty is 5 x $3,000 = $15k
Making an Employer Shared
Responsibility Payment
16. How will an employer know that it owes an Employer Shared
Responsibility payment?
The IRS will contact employers to inform them of their potential
liability and provide them an opportunity to respond before any
liability is assessed or notice and demand for payment is made.
The contact for a given calendar year will not occur until after
employees’ individual tax returns are due for that year claiming
premium tax credits and after the due date for employers that
meet the 50 full-time employee (plus full-time equivalents)
threshold to file the information returns identifying their full-time
employees and describing the coverage that was offered (if any).
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
Certification Of Payment of Subsidy
Under section 4980H, an applicable large employer member is subject to an assessable
payment if at least one full-time employee of that member has been certified to the
member under section 1411 of the Affordable Care Act as having enrolled in a qualified
health plan with respect to which a premium tax credit is allowed or paid. Section 1411(a)
of the Affordable Care Act gives the Secretary of Health and Human Services the authority
to determine whether individuals are eligible to enroll in qualified health plans through
the Exchange and whether they are eligible for a premium tax credit. It is anticipated that,
in upcoming regulations to be proposed under section 1411(a) of the Affordable Care Act,
the Department of Health and Human Services (HHS) will establish a process under which
employees who have enrolled for a month in a qualified health plan with respect to which
an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect
to the employee will be certified to the employer and that, pursuant to the proposed
regulations, the certification to the employer will consist of methods adopted by the IRS to
provide this information to an employer as part of its determination of liability under
section 4980H. Existing HHS regulations also provide for a separate process for
notification of employers.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Making an Employer Shared
Responsibility Payment
17. How will an employer make an Employer Shared Responsibility
payment?
If it is determined that an employer is liable for an Employer
Shared Responsibility payment after the employer has responded
to the initial IRS contact, the IRS will send a notice and demand for
payment. That notice will instruct the employer on how to make the
payment. Employers will not be required to include the Employer
Shared Responsibility payment on any tax return that they file.
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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How do we get out of this?
“But I don’t know my employees’
household income.”
Safe Harbor Rules
The IRS realizes that employers do not know the employee’s
household income, so there are three safe harbors that will allow
an employer to avoid a penalty:
• W-2
• Rate of Pay
• FPL
W-2 Safe Harbor
Source: http://www.shrm.org/legalissues/federalresources/pages/affordability-safe-harbors.aspx
Rate of Pay Safe Harbor
Source: http://www.shrm.org/legalissues/federalresources/pages/affordability-safe-harbors.aspx
Federal Poverty Line Safe Harbor
Source: http://www.shrm.org/legalissues/federalresources/pages/affordability-safe-harbors.aspx
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How does this affect carve-outs?
Carve Outs
Under what circumstances will an employer owe an Employer Shared Responsibility Under what circumstances will an employer owe an Employer Shared Responsibility Under what circumstances will an employer owe an Employer Shared Responsibility Under what circumstances will an employer owe an Employer Shared Responsibility
payment?payment?payment?payment?
In 2014, if an employer meets the 50 full-time employee threshold, the employer
generally will be liable for an Employer Shared Responsibility payment only if:
(a) The employer does not offer health coverage or offers coverage to less than 95% of its less than 95% of its less than 95% of its less than 95% of its
fullfullfullfull----time employeestime employeestime employeestime employees, and at least one of the full-time employees receives a premium tax
credit to help pay for coverage on an Exchange; OR
(b) The employer offers health coverage to at least 95% of its full-time employees, but at
least one full-time employee receives a premium tax credit to help pay for coverage on an
Exchange, which may occur because the employer did not offer coverage to that
employee or because the coverage the employer offered that employee was either
unaffordable to the employee (see question 11, below) or did not provide minimum value
(see question 12, below).
After 2014, the rule in paragraph (a) applies to employers that do not offer health
coverage or that offer coverage to less than 95% of their full time employees and the
dependents of those employees.
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
So…
It appears that carve-outs are going away in 2014.
Do I have to be compliant January 1st?
Transition Relief
I understand that the Employer Shared Responsibility provisions do not go into I understand that the Employer Shared Responsibility provisions do not go into I understand that the Employer Shared Responsibility provisions do not go into I understand that the Employer Shared Responsibility provisions do not go into
effect until 2014. However, the health plan that I offer to my employees runs on effect until 2014. However, the health plan that I offer to my employees runs on effect until 2014. However, the health plan that I offer to my employees runs on effect until 2014. However, the health plan that I offer to my employees runs on
a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make
sure my plan complies with these new requirements in 2013 when the next sure my plan complies with these new requirements in 2013 when the next sure my plan complies with these new requirements in 2013 when the next sure my plan complies with these new requirements in 2013 when the next
fiscal plan year starts?fiscal plan year starts?fiscal plan year starts?fiscal plan year starts?
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
Transition Relief
For an employer that as of December 27, 2012, already offers health coverage
through a plan that operates on a fiscal year (a fiscal year plan), transition relief
is available. First, for any employees who are eligible to participate in the plan
under its terms as of December 27, 2012 (whether or not they take the
coverage), the employer will not be subject to a potential payment until the first
day of the fiscal plan year starting in 2014.
Second, if (a) the fiscal year plan (including any other fiscal year plans that have
the same plan year) was offered to at least one third of the employer’s
employees (full-time and part-time) at the most recent open season or (b) the
fiscal year plan covered at least one quarter of the employer’s employees, then
the employer also will not be subject to the Employer Shared Responsibility
payment with respect to any of its full-time employees until the first day of the
fiscal plan year starting in 2014, provided that those full-time employees are
offered affordable coverage that provides minimum value no later than that first
day.
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Transition Relief
So, for example, if during the most recent open season preceding December 27,
2012, an employer offered coverage under a fiscal year plan with a plan year
starting on July 1, 2013 to at least one third of its employees (meeting the
threshold for the additional relief), the employer could avoid liability for a
payment if, by July 1, 2014, it expanded the plan to offer coverage satisfying the
Employer Shared Responsibility provisions to the full-time employees who had
not been offered coverage.
For purposes of determining whether the plan covers at least one quarter of the
employer’s employees, an employer may look at any day between October 31,
2012 and December 27, 2012.
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
Summarized (in English)
• Coverage in effect 12/27/2012, no change in renewal date
• Plan offered to at least 1/3 of all employees (full and part time)
or covered at least 1/4 of all employees (full and part time) at
renewal date in 2013
• Can wait until renewal date in 2014 to comply – no penalty will
be assessed
Carve Out Example
• 100 total employees, 40 in the covered class – ok,
can wait until renewal date in 2014 to offer to all full-
time employees
• 200 total employees, 20 in covered class – does not
satisfy requirements of transition rule, must be in
compliance January 1, 2014
Yes
No
Not Just Carve Outs
Most fiscal year plans will be able to qualify for this transition rule.
Employers that have a disproportionately low number of eligible
employees, however, may not.
Also note that even if coverage is not provided until the fiscal year
begins, the employer must report whether employees have been
offered affordable minimum value coverage for the entire 2014
calendar year.
Source: http://www.mondaq.com/unitedstates/x/234970/employee+rights+labour+relations/IRS+Proposed+Regulations+Provide+Additional+Guidance+For+Compliance+With+The+Employer+Shared+Responsibility+Rules
Transition Relief
19. Is transition relief available to help employers that are close to
the 50 full-time employee threshold determine their options for
2014?
Yes. Rather than being required to use the full twelve months of
2013 to measure whether it has 50 full-time employees (or an
equivalent number of part-time and full-time employees), an
employer may measure using any six-consecutive-month period in
2013. So, for example, an employer could use the period from Jan.
1, 2013, through June 30, 2013, and then have six months to
analyze the results, determine whether it needs to offer a plan,
and, if so, choose and establish a plan.
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
What about common ownership?
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Common Ownership – PPACA
PPACA Section 1513
Rules for Determining Employer SizeRules for Determining Employer SizeRules for Determining Employer SizeRules for Determining Employer Size
Application of Aggregation Rule for Employers – All persons treated
as a single employer under subsection (b), (c), (m), or (o), of section
414 of the Internal Revenue Code of 1986 shall be treated as 1
employer.
Section 414, Subsection (b)
(b) Employees of controlled group of corporations Employees of controlled group of corporations Employees of controlled group of corporations Employees of controlled group of corporations
For purposes of sections 401, 408 (k), 408 (p), 410, 411, 415,
and 416, all employees of all corporations which are members of a
controlled group of corporations (within the meaning of section
1563 (a), determined without regard to section 1563 (a)(4) and
(e)(3)(C)) shall be treated as employed by a single employer. With
respect to a plan adopted by more than one such corporation, the
applicable limitations provided by section 404 (a) shall be
determined as if all such employers were a single employer, and
allocated to each employer in accordance with regulations
prescribed by the Secretary.
Section 414, Subsection (c)
(c) Employees of partnerships, proprietorships, etc., which are Employees of partnerships, proprietorships, etc., which are Employees of partnerships, proprietorships, etc., which are Employees of partnerships, proprietorships, etc., which are
under common control under common control under common control under common control
For purposes of sections 401, 408 (k), 408 (p), 410, 411, 415,
and 416, under regulations prescribed by the Secretary, all
employees of trades or businesses (whether or not incorporated)
which are under common control shall be treated as employed by a
single employer. The regulations prescribed under this subsection
shall be based on principles similar to the principles which apply in
the case of subsection (b).
Section 414, Subsection (m)
(m) Employees of an affiliated service group Employees of an affiliated service group Employees of an affiliated service group Employees of an affiliated service group
(1) In general In general In general In general For purposes of the employee benefit requirements listed in paragraph (4), except to the extent
otherwise provided in regulations, all employees of the members of an affiliated service group shall be treated
as employed by a single employer.
(2) Affiliated service group Affiliated service group Affiliated service group Affiliated service group For purposes of this subsection, the term “affiliated service group” means a group
consisting of a service organization (hereinafter in this paragraph referred to as the “first organization”) and
one or more of the following:
� (A) any service organization which—
• (i) is a shareholder or partner in the first organization, and
• (ii) regularly performs services for the first organization or is regularly associated with the first
organization in performing services for third persons, and
� (B) any other organization if—
• (i) a significant portion of the business of such organization is the performance of services (for the
first organization, for organizations described in subparagraph (A), or for both) of a type historically
performed in such service field by employees, and
• (ii) 10 percent or more of the interests in such organization is held by persons who are highly
compensated employees (within the meaning of section 414(q)) of the first organization or an
organization described in subparagraph (A).
(3) Service organizations Service organizations Service organizations Service organizations For purposes of this subsection, the term “service organization” means an organization
the principal business of which is the performance of services.
Section 414, Subsection (m)
(4) Employee benefit requirements Employee benefit requirements Employee benefit requirements Employee benefit requirements For purposes of this subsection, the employee benefit requirements listed in
this paragraph are—
� (A) paragraphs (3), (4), (7), (16), (17), and (26) of section 401 (a), and
� (B) sections 408 (k), 408 (p), 410, 411, 415, and 416.
(5) Certain organizations performing management functions Certain organizations performing management functions Certain organizations performing management functions Certain organizations performing management functions For purposes of this subsection, the term “affiliated
service group” also includes a group consisting of—
� (A) an organization the principal business of which is performing, on a regular and continuing basis,
management functions for 1 organization (or for 1 organization and other organizations related to such 1
organization), and
� (B) the organization (and related organizations) for which such functions are so performed by the
organization described in subparagraph (A).
� For purposes of this paragraph, the term “related organizations” has the same meaning as the term
“related persons” when used in section 144 (a)(3).
(6) Other definitions Other definitions Other definitions Other definitions For purposes of this subsection—
� (A) Organization defined Organization defined Organization defined Organization defined The term “organization” means a corporation, partnership, or other organization.
� (B) Ownership Ownership Ownership Ownership In determining ownership, the principles of section 318 (a) shall apply.
Section 414, Subsection (o)
(o) Regulations Regulations Regulations Regulations
The Secretary shall prescribe such regulations (which may provide rules in
addition to the rules contained in subsections (m) and (n)) as may be necessary
to prevent the avoidance of any employee benefit requirement listed in
subsection (m)(4) or (n)(3) or any requirement under section 457 through the
use of—
(1) separate organizations,
(2) employee leasing, or
(3) other arrangements.
The regulations prescribed under subsection (n) shall include provisions to
minimize the recordkeeping requirements of subsection (n) in the case of an
employer which has no top-heavy plans (within the meaning of section 416 (g))
and which uses the services of persons (other than employees) for an
insignificant percentage of the employer’s total workload.
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Common Ownership – IRS FAQs
If two or more companies have a common owner or are otherwise related, are they If two or more companies have a common owner or are otherwise related, are they If two or more companies have a common owner or are otherwise related, are they If two or more companies have a common owner or are otherwise related, are they
combined for purposes of determining whether they employ enough employees to be combined for purposes of determining whether they employ enough employees to be combined for purposes of determining whether they employ enough employees to be combined for purposes of determining whether they employ enough employees to be
subject to the Employer Shared Responsibility provisions?subject to the Employer Shared Responsibility provisions?subject to the Employer Shared Responsibility provisions?subject to the Employer Shared Responsibility provisions?
Yes, consistent with longstanding standards that apply for other tax and employee benefit
purposes, companies that have a common owner or are otherwise related generally are
combined together for purposes of determining whether or not they employ at least 50
full-time employees (or an equivalent combination of full-time and part-time employees).
If the combined total meets the threshold, then each separate company is subject to the
Employer Shared Responsibility provisions, even those companies that individually do not
employ enough employees to meet the threshold. (The rules for combining related
employers do not apply for purposes of determining whether an employer owes an
Employer Shared Responsibility payment or the amount of any payment). The proposed
regulations provide information on the rules for determining whether companies are
related and how they are applied for purposes of the Employer Shared Responsibility
provisions.
Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act
Common Ownership – Proposed Rules
No Aggregation in Determining Liability of An Applicable Large No Aggregation in Determining Liability of An Applicable Large No Aggregation in Determining Liability of An Applicable Large No Aggregation in Determining Liability of An Applicable Large
Employer MemberEmployer MemberEmployer MemberEmployer Member
The proposed regulations address the application of section 4980H to an
applicable large employer member. As noted in section I.A.2. of this preamble,
under section 4980H(c)(2), the determination of applicable large employer
status is made on a controlled group basis applying the aggregation rules under
section 414(b), (c), (m), and (o). Section 4980H(c)(2)(D) provides that, in
calculating the liability under section 4980H(a), the applicable large employer,
as determined applying these same aggregation rules, is permitted one
reduction of 30 full-time employees, and that the reduction must be allocated
ratably among the members of the applicable large employer based on each
member’s number of full-time employees.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Common Ownership – Proposed Rules
The proposed regulations provide that, although applicable large
employer status and the 30-employee reduction is determined on
an aggregated basis, the determination of whether an employer is
subject to an assessable payment and the amount of any such
payment is determined on a member-by-member basis. Therefore,
the liability for, and the amount of, any assessable payment under
section 4980H is computed and assessed separately for each
applicable large employer member, taking into account that
member’s offer of coverage (or lack thereof) and based on that
member’s number of full-time employees.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Common Ownership – Proposed Rules
For example, if a parent corporation owns 100 percent of all
classes of stock of 20 subsidiary corporations, and the controlled
group is an applicable large employer, each of the 21 members of
this controlled group (the parent corporation plus 20 subsidiary
corporations) is considered separately in computing and assessing
a section 4980H payment. In addition, each of the 21 group
members is liable only for its separate section 4980H assessable
payment.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Can I re-classify my employees as 1099 or
temporary?
Staffing Companies
• The Treasury Department and the IRS recognize that the application of
section 4980H may be particularly challenging for temporary staffing
agencies because of the distinctive nature of their employees’ work
schedules. In particular, several commenters discussed the challenges
involved in applying the look-back measurement method to employees of
temporary staffing agencies.
• Seeking comments (due March 18th)
• Do not want employees jumping in-between group coverage and subsidized
individual plans in the exchange.
• Will not allow employers to fire employees and re-hire them from one or more
staffing companies.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Edwards & Sherlock - Large Employer Presentation 06.13.2013
16
Anti-Abuse Rules
The Treasury Department and the IRS are aware of various structures being
considered under which employers might use temporary staffing agencies (or
other staffing agencies) purporting to be the common law employer to evade
application of section 4980H.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Anti-Abuse Rules
In one structure, the employer (referred to in this section as the “client”) would
purport to employ its employees for only part of a week, such as 20 hours, and
then to hire those same individuals through a temporary staffing agency (or
other staffing agency) for the remaining hours of the week, thereby resulting in
neither the “client” employer nor the temporary staffing agency or other staffing
agency appearing to employ the individual as a full-time employee. In another
structure, one temporary staffing agency (or other staffing agency) would purport
to employ an individual and supply the individual as a worker to a client for only
part of a week, such as 20 hours, while a second temporary staffing agency or
other staffing agency would purport to employ the same individual and supply
that individual as a worker to the same client for the remainder of the week,
thereby resulting in neither the temporary staffing agencies or the other staffing
agencies, nor the client, appearing to employ the individual as a full-time
employee.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Anti-Abuse Rules
The Treasury Department and the IRS anticipate that only in rare circumstances,
if ever, would the “client” under these fact patterns not employ the individual
under the common law standard as a full-time employee. Rather, the Treasury
Department and the IRS believe that the primary purpose of using such an
arrangement would be to avoid the application of section 4980H.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Anti-Abuse Rules
It is anticipated that the final regulations will contain an anti-abuse rule to
address the situations described in this section of the preamble. Under that
anticipated rule, if an individual performs services as an employee of an
employer, and also performs the same or similar services for that employer in
the individual’s purported employment at a temporary staffing agency or other
staffing agency of which the employer is a client, then all the hours of service are
attributed to the employer for purposes of applying section 4980H. Similarly, to
the extent an individual performs the same or similar services for the same
client of two or more temporary staffing agencies or other staffing agencies, it is
anticipated that all hours of service for that client are attributed to the client, if
the client is the common law employer, or, if not, one of the temporary staffing
agencies (or other staffing agencies) that purports to employ the individual with
respect to services performed for that client.
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
1099 Contract Workers
•As with staffing companies,
it’s possible that a 1099 worker
could be treated as a
company’s “common law”
employee
•Factors determining
classification include exclusive
work agreements, use of tools,
control of schedule, etc.
What if my employees only work part of the
year?
Edwards & Sherlock - Large Employer Presentation 06.13.2013
17
Seasonal Workers
• Section 4980H(c)(2)(B)(ii) provides that if an employer’s workforce exceeds
50 full-time employees for 120 days or fewer during a calendar year, and the
employees in excess of 50 who were employed during that period of no more
than 120 days were seasonal workers, the employer is not an applicable
large employer.
• In addition, the 120-day period referred to in section 4980H(c)(2)(B)(ii) is
relevant only for applying the seasonal worker exception for determining
status as an applicable large employer, and is not relevant for determining
whether an employee is a seasonal employee for purposes of the look-back
measurement method (meaning that an employee who provides services for
more than 120 days per year may nonetheless qualify as a seasonal
employee).
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
Seasonal Employee Defined
§ 4980H(c)(2)(B)(ii) provides that, for this purpose, seasonal worker
means a worker who performs labor or services on a seasonal basis,
as defined by the Secretary of Labor, including (but not limited to)
workers covered by 29 CFR 500.20(s)(1) and retail workers employed
exclusively during holiday seasons. The statute does not address how
the term “seasonal employee” might be defined for purposes other
than the determination of applicable large employer status, such as
the determination of whether a new employee of an applicable large
employer is reasonably expected to work full time for purposes of
determining the amount of any assessable payment under § 4980H.
Through at least 2014, employers are permitted to use a reasonable, Through at least 2014, employers are permitted to use a reasonable, Through at least 2014, employers are permitted to use a reasonable, Through at least 2014, employers are permitted to use a reasonable,
good faith interpretation of the term “seasonal employee” for good faith interpretation of the term “seasonal employee” for good faith interpretation of the term “seasonal employee” for good faith interpretation of the term “seasonal employee” for
purposes of this notice.purposes of this notice.purposes of this notice.purposes of this notice.
Source: http://www.irs.gov/pub/irs-drop/n-12-58.pdf
My employees work variable hours. How do I determine if someone’s
really full time?
Variable Hour Employees
•Optional look back period
•Up to 12 months
•Determined by employer
•Average number of hours an
employee works during look-
back period determines status
(FT or PT) during the
stabilization period
•Stabilization period must be at
least as long as the look-back
Safe Harbor Rules
The IRS allows employers to use an optional “look back period” to
determine whether employees are full-or part-time.
• Ongoing employees
• New employees
• Seasonal employees
Guidance was issued in Notice 2012-58
http://www.irs.gov/pub/irs-drop/n-12-58.pdf
Purpose and Overview
This notice describes safe harbor methods that employers may use
(but are not required to use) to determine which employees are
treated as full-time employees for purposes of the shared employer
responsibility provisions of § 4980H of the Internal Revenue Code
(Code).
This guidance is intended to encourage employers to continue
providing and potentially to expand group health plan coverage for
their employees by permitting employers to adopt reasonable
procedures to determine which employees are full-time employees
without becoming liable for a payment under § 4980H, to protect
employees from unnecessary cost, confusion, and disruption of
coverage, and to minimize administrative burdens on the
Affordable Insurance Exchanges (Exchanges).
Edwards & Sherlock - Large Employer Presentation 06.13.2013
18
Still no final answers…
Shared Responsibility: Proposed Rules
Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule
The IRS has closed the loopholes
Strategies
Move renewal date to 12/1
The transition rule says a group
must keep the effective date it
had 12/27/2012.
Move employees to part-time
Be careful – it may violate labor
laws.
Edwards & Sherlock - Large Employer Presentation 06.13.2013
19
How cutting employee hours due to
health reform may infringe federal law
Countless employers and their advisers are considering a health
care reform strategy of cutting employees' weekly hours to less
than 30 hours to try to avoid dealing with coverage requirements
under the Affordable Care Act. At first blush, this approach seems
to provide cover from a variety of costs associated with the ACA by
getting employees off the health plan eligibility list.
However, a potential problem exists with this strategy and it is
found in the backwaters of ERISA Section 510 which refers back to
ERISA Section 502. This could be fodder for attorneys depending
on the motive of the employer in taking employees part time.
Source: http://eba.benefitnews.com/news/how-cutting-employee-hours-due-to-health-reform-may-infringe-federal-law-2733435-1.html
How cutting employee hours due to
health reform may infringe federal law
The poignant part of ERISA Section 510 states: "It shall be unlawful
for any person to discharge, fine, suspend, expel, discipline or
discriminate against a participant or beneficiary for exercising any
right to which he is entitled under the provisions of an employee
benefit plan ... or for the purpose of interfering with the attainment
of any right to which such participant may become entitled under
the plan ... "
A plan participant in an ERISA plan (health plans are ERISA plans)
has a legal right to participate in the plan without undo
interference.
Source: http://eba.benefitnews.com/news/how-cutting-employee-hours-due-to-health-reform-may-infringe-federal-law-2733435-1.html
How cutting employee hours due to
health reform may infringe federal law
For sure, employers can - and do - cut employees' hours for
reasons of legitimate business necessity. Sometimes a cut in hours
relegates a benefit plan participant to ineligibility to participate in
the plan under the terms of the plan's eligibility requirements.
Now, let us look at the single motive that some employers are
considering to avoid offering health benefits under the terms of the
ACA. This is key to a potential ERISA Section 510 claim against an
employer.
Source: http://eba.benefitnews.com/news/how-cutting-employee-hours-due-to-health-reform-may-infringe-federal-law-2733435-1.html
How cutting employee hours due to
health reform may infringe federal law
If the single motive for cutting employees hours is to avoid the
purposes of the ACA, to me, that sounds like a subterfuge that
interferes with a plan participant's rights to their health plan. That
is one of the very prohibitions that ERISA Section 510 was written
to prevent.
The bottom line is that you and your employer client may be on
shaky ground using the cut-in-hours strategy to knock plan
participants off the health plan eligibility list and avoid further
provision of health benefits to otherwise qualified plan
participants.
Source: http://eba.benefitnews.com/news/how-cutting-employee-hours-due-to-health-reform-may-infringe-federal-law-2733435-1.html
Penalties
Penalties always get attention. A violation of the employee's rights
to participate in their plan or retaliation of the sort that results in a
loss of group health plan coverage for reasons already discussed
can be prohibitively expensive for the employer.
First, a plan participant may start a civil action to address loss of
ERISA rights or retaliation for seeking to exercise rights under the
plan. Second, the DOL can assess fines for each violation against
the fiduciaries of the plan.
When all is said and done, messing with employees' rights to a
health plan is tricky and potentially an expensive proposition.
Source: http://eba.benefitnews.com/news/how-cutting-employee-hours-due-to-health-reform-may-infringe-federal-law-2733435-1.html
Offer a skinny plan
In theory this can work, but be
careful.
Edwards & Sherlock - Large Employer Presentation 06.13.2013
20
Employers Eye Bare-Bones Health Plans
Under New Law
Employers are increasingly recognizing they may be able to avoid
certain penalties under the federal health law by offering very
limited plans that can lack key benefits such as hospital coverage.
Benefits advisers and insurance brokers—bucking a commonly held
expectation that the law would broadly enrich benefits—are
pitching these low-benefit plans around the country. They cover
minimal requirements such as preventive services, but often little
more. Some of the plans wouldn't cover surgery, X-rays or prenatal
care at all. Others will be paired with limited packages to cover
additional services, for instance, $100 a day for a hospital visit.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
Federal officials say this type of plan, in concept, would appear to
qualify as acceptable minimum coverage under the law, and let
most employers avoid an across-the-workforce $2,000-per-worker
penalty for firms that offer nothing. Employers could still face other
penalties they anticipate would be far less costly.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
Pan-American Life Insurance Group Inc. has promoted a package
including bare-bones plans, according to brokers in California,
Kansas and other states and company documents. Carlo
Mulvenna, an executive at New Orleans-based Pan-American,
confirmed the firm is developing these types of products, and said
it would adjust them as regulators clarify the law.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
The idea that such plans would be allowable under the law has
emerged only recently. Some benefits advisers still feel they could
face regulatory uncertainty. The law requires employers with 50 or
more workers to offer coverage to their workers or pay a penalty.
Many employers and benefits experts have understood the rules to
require robust insurance, covering a list of "essential" benefits such
as mental-health services and a high percentage of workers' overall
costs. Many employers, particularly in low-wage industries, worry
about whether they—or their workers—can afford it.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
But a close reading of the rules makes it clear that those mandates
affect only plans sponsored by insurers that are sold to small
businesses and individuals, federal officials confirm. That affects
only about 30 million of the more than 160 million people with
private insurance, including 19 million people covered by
employers, according to a Citigroup Inc. C +0.04% report. Larger
employers, generally with more than 50 workers, need cover only
preventive services, without a lifetime or annual dollar-value limit,
in order to avoid the across-the-workforce penalty.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
Such policies would generally cost far less to provide than paying
the penalty or providing more comprehensive benefits, say benefit-
services firms. Some low-benefit plans would cost employers
between $40 and $100 monthly per employee, according to
benefit firms' estimates.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Edwards & Sherlock - Large Employer Presentation 06.13.2013
21
Employers Eye Bare-Bones Health Plans
Under New Law
Administration officials confirmed in interviews that the skinny
plans, in concept, would be sufficient to avoid the across-the-
workforce penalty. Several expressed surprise that employers
would consider the approach.
"We wouldn't have anticipated that there'd be demand for these
types of band-aid plans in 2014," said Robert Kocher, a former
White House health adviser who helped shepherd the law. "Our
expectation was that employers would offer high quality insurance."
Part of the problem: lawmakers left vague the definition of
employer-sponsored coverage, opening the door to unexpected
interpretations, say people involved in drafting the law.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
Limited plans may not appeal to all workers, and while employers
would avoid the broader $2,000-per-worker penalty for all
employees not offered coverage, they could still face a $3,000
individual fee for any employee who opts out and gets a subsidized
policy on the exchanges.
But the approach could appeal to companies with a lot of low-wage
workers such as retailers and restaurant operators, who are willing
to bet that those fees would add up slowly because even with
subsidies, many workers won't want to pay the cost of the richer
exchange coverage.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
A full-time worker earning $9 an hour would have to pay as much
as $70 a month for a midlevel exchange plan, even with the
subsidies, according to Kaiser. At $12 an hour, the workers' share
of the premium would rise to as much as $140 a month.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will
replace its own mini-med with a new, skinny plan in July and will
aim to price the plan at less than $50 a month, about the same as
the current policy, said Barbara Newman, the chain's controller.
The new plan will have no dollar limits on benefits, but will cover
only preventive services, six annual doctors' visits and generic
drugs. X-rays and tests at a local urgent care chain will also be
covered. It wouldn't cover surgeries or hospital stays.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
Because the coverage is limited, workers who need richer benefits
can still go to the exchanges, where plans would likely be cheaper
than a more robust plan Bill Miller has historically offered to
management and that costs more than $200 per month. The chain
plans to pay the $3,000 penalty for each worker who gets an
exchange-plan subsidy.
But, "those are going to be the people who will be ill and need a
more robust plan," and insuring them directly could cost even
more, Ms. Newman said.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
Many more workers, she expects, will continue to go without
insurance, despite the exchanges and the limited plan. Currently,
only one-quarter of workers eligible for the mini-med plan take it.
Ms. Newman said, "We really feel like the people who are not
taking it now will not take it then."
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Edwards & Sherlock - Large Employer Presentation 06.13.2013
22
Employers Eye Bare-Bones Health Plans
Under New Law
Tex-Mex restaurant chain El Fenix also said it would offer limited
plans to its 1,200 workers, covering doctors visits, preventive care
and drugs, but not hospital stays or surgery. "What our goal was all
along was to make [offering coverage] financially palatable for the
company as a whole, so we didn't do damage and have to let
people go or slow down our growth," said Brian Livingston, chief
financial officer of Dallas-based Firebird Restaurant Group LLC,
owner of El Fenix.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Employers Eye Bare-Bones Health Plans
Under New Law
Some benefits advisers worry that since the idea of the low-benefit
plans is so new, they could yet invite scrutiny from regulators, and
may run afoul of other health law requirements.
John Owens, a broker for the Lewer Agency in Kansas City, Mo.,
said a large Midwestern convenience store chain is considering
signing up for such a policy and is awaiting guidance from
regulators.
"What I'm telling people is, this may work, but you better have a
plan B," said Andrew Ky Haynes, a Kansas City, Mo.-based benefits
lawyer.
Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html
Be Careful
The IRS suggested what it sees as a possible problem: A large
employer might offer a low-value health plan, then try to get out of
paying PPACA "no minimum-value health plan" penalties by keeping
employees from applying for the premium assistance tax credit.
If an employer did that, regulators "may treat such arrangements
as impermissible interference with an employee's ability to access
premium tax credits," the IRS said.
Source: http://www.lifehealthpro.com/2013/05/01/irs-drafts-large-group-minimum-value-rules
Proposed Minimum Value Rules
Source: https://www.federalregister.gov/articles/2013/05/03/2013-10463/minimum-value-of-eligible-employer-sponsored-plans-and-other-rules-regarding-the-health-insurance
What about the dependents?
Subsidies
Edwards & Sherlock - Large Employer Presentation 06.13.2013
23
PremiumTax Credits
Cost SharingSubsidies
Total Exposure
Financial AssistancePremium Tax Credits
Income Level Premium as a Percent of Income
Up to 133% FPL 2%
133 – 150% FPL 3 – 4%
150 – 200% FPL 4 – 6.3%
200 – 250% FPL 6.3 – 8.05%
250 – 300% FPL 8.05 – 9.5%
300 – 400% FPL 9.5%
Cost Sharing Subsidies
Income Level Reduction in OOP Liability
100 – 200% FPL Reduced by two-thirds
200 – 250% FPL Reduced by 20%
Income Level Actuarial Value
100 – 150% FPL 94%
150 – 200% 87%
200 – 250% FPL 73%
2013 Federal Poverty Guidelines
Household Size 100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 $15,510 $20,628 $23,265 $31,020 $46,530 $62,040
3 $19,530 $25,975 $29,295 $39,060 $58,590 $78,120
4 $23,550 $31,322 $35,325 $47,100 $70,650 $94,200
5 $27,570 $36,668 $41,355 $55,140 $82,710 $110,280
6 $31,590 $42,015 $47,385 $63,180 $94,770 $126,360
7 $35,610 $47,361 $53,415 $71,220 $106,830 $142,440
8 $39,630 $52,708 $59,445 $79,260 $118,890 $158,520
Each extra person $4,020 $5,347 $6,030 $8,040 $12,060 $16,080
48 Contiguous States and DCSource: http://www.familiesusa.org/resources/tools-for-advocates/guides/federal-poverty-guidelines.html
Eligibility Criteria
• In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.
• Cannot have access to minimum essential coverage, other than individual market coverage:Cannot have access to minimum essential coverage, other than individual market coverage:Cannot have access to minimum essential coverage, other than individual market coverage:Cannot have access to minimum essential coverage, other than individual market coverage:
• Minimum essential coverage is defined as any coverage in the individual, small group or large group markets, Medicare, Medicaid, CHIP, TRICARE, veterans' health care and Peace Corps coverage, and any other coverage the Departments of Health and Human Services and IRS deem minimum essential coverage in future regulations.
• There is an exception to this rule if coverage offered by an employer either does not meet a minimum value test (at least 60 percent actuarial value) or an affordability test (the employee share of the premium for self-only coverage cannot exceed 9.5 percent of household income).
• Credit only applies to coverage months for an individual market QHP purchased through an Affordable Care Act Exchange.
• Married couples must file a joint tax return.Married couples must file a joint tax return.Married couples must file a joint tax return.Married couples must file a joint tax return.
• Those receiving advance premium tax credits are required to file a tax return for the taxable year in which the advanced payment is received.
• Must be a legal resident.
• Cannot be incarcerated.
• An individual cannot be an "applicable taxpayer" if the individual can be claimed as a dependent by another taxpayer
• Taxpayer's share of the premium for the coverage month must be paid in full by the taxpayer's tax filing date.
Source: http://www.bcbsm.com/content/microsites/health-care-reform/en/reform-alerts/irs-issues-final-rule-regarding-premium-tax-credits-for-the-exch.html
Edwards & Sherlock - Large Employer Presentation 06.13.2013
24
Can someone eligible for group
coverage qualify for a subsidy?
Only if:Only if:Only if:Only if:
• The group coverage does not meet the “minimum essential
coverage” standards
• Minimum essential coverage = bronze level 60% actuarial
value level, government plan, or grandfathered plan.
• OR the group coverage is deemed “unaffordable”
• “Unaffordable” means that the employee’s cost for single
coverage after the employer contribution would exceed 9.5%
of his household income.
Final Rules – February 1, 2014
• The proposed regulations provided that, for taxable years beginning before
January 1, 2015, an eligible employer-sponsored plan is affordable for
related individuals if the portion of the annual premium the employee must
pay for self-only coverage (the required contribution percentage) does not
exceed 9.5% of the taxpayer’s household income. While several comments
supported this rule, other comments asserted that the affordability of
coverage for related individuals should be based on the portion of the annual
premium the employee must pay for family coverage.
• These final regulations adopt the proposed rule without change. The
language of section 36B, through a cross-reference to section
5000A(e)(1)(B), specifies that the affordability test for related individuals is
based on the cost of self-only coverage.
Source: https://www.federalregister.gov/articles/2013/02/01/2013-02136/health-insurance-premium-tax-credit#print_view
Final Rules – February 1, 2014
• By contrast, section 5000A, which establishes the shared responsibility
payment applicable to individuals for failure to maintain minimum essential
coverage, addresses affordability for employees in section 5000A(e)(1)(B)
and, separately, for related individuals in section 5000A(e)(1)(C).
• Thus, proposed regulations under section 5000A, which the Treasury
Department is releasing concurrently with these final regulations, provide
that, for purposes of applying the affordability exemption from the shared
responsibility payment in the case of related individuals, the required
contribution is based on the premium the employee would pay for employer-
sponsored family coverage.
Source: https://www.federalregister.gov/articles/2013/02/01/2013-02136/health-insurance-premium-tax-credit#print_view
Exclude spouse from eligibility
The shared responsibility rule
doesn’t require the employer to
offer coverage to the spouse
Section 4980H Coverage for Dependents
In response to commenters’ questions regarding who would qualify
as a dependent for coverage under Section 4980H, the proposed
regulations define “dependents” for purposes of Section 4980H as
“an employee’s child (as defined in section 152(f)(1)) who is under
26 years of age.”
“Thus, an offer of coverage to an employee’s spouse is not
required for purposes of section 4980H because section 4980H
refers only to dependents,” the proposed regulations said.
Source: http://about.bloomberglaw.com/law-reports/irs-releases-proposed-aca-regulations-on-employer-%E2%80%98shared-responsibility/
Section 4980H Coverage for Dependents
Because employers that currently do not offer dependent coverage
“will require substantial revisions to their plans and to their
procedures for administration of the plans,” IRS said in the
proposed rule that it will provide transitional relief with respect to
dependent coverage for plan years that begin in 2014.
“Accordingly, any employer that takes steps during its plan year
that begins in 2014 toward satisfying the section 4980H
provisions relating to the offering of coverage to full-time
employees’ dependents will not be liable for any assessable
payment under section 4980H solely on account of a failure to
offer coverage to the dependents for that plan year,” the proposed
rule said.
Source: http://about.bloomberglaw.com/law-reports/irs-releases-proposed-aca-regulations-on-employer-%E2%80%98shared-responsibility/
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Why your boss is dumping your wife
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
Why your boss is dumping your wife
By denying coverage to spouses, employers not only save the
annual premiums, but also the new fees that went into effect as
part of the Affordable Care Act. This year, companies have to pay
$1 or $2 “per life” covered on their plans, a sum that jumps to $65
in 2014. And health law guidelines proposed recently mandate
coverage of employees’ dependent children (up to age 26), but
husbands and wives are optional. “The question about whether it’s
obligatory to cover the family of the employee is being thought
through more than ever before,” says Helen Darling, president of
the National Business Group on Health.
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
Why your boss is dumping your wife
While surcharges for spousal coverage are more common, last
year, 6% of large employers excluded spouses, up from 5% in
2010, as did 4% of huge companies with at least 20,000
employees, twice as many as in 2010, according to human
resources firm Mercer. These “spousal carve-outs,” or “working
spouse provisions,” generally prohibit only people who could get
coverage through their own job from enrolling in their spouse’s
plan.
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
Why your boss is dumping your wife
Such exclusions barely existed three years ago, but experts expect
an increasing number of employers to adopt them: “That’s the next
step,” Darling says. HMS, a company that audits plans for
employers, estimates that nearly a third of companies might have
such policies now. Holdouts say they feel under pressure to follow
suit. “We’re the last domino,” says Duke Bennett, mayor of Terre
Haute, Ind., which is instituting a spousal carve-out for the city’s
health plan, effective July 2013, after nearly all major employers in
the area dropped spouses.
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
Why your boss is dumping your wife
But when employers drop spouses, they often lose more than just
the one individual, when couples choose instead to seek coverage
together under the other partner’s employer. Terre Haute, which
pays $6 million annually to insure nearly 1,200 people including
employees and their family members, received more than 20 new
plan members when a local university, bank and county
government stopped insuring spouses, according to Bennett. “We
have a great plan, so they want to be on ours. All we’re trying to do
is level the playing field here,” he says.
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
Why your boss is dumping your wife
While couples generally prefer to be on the same health plan,
companies often find that spouses are more expensive to insure
than their own employees. That’s because, say benefits experts,
covered spouses tend to be women, who as a group not only spend
more on health care, but also have more free time to go to the
doctor if they don’t work. Indeed, JetBlue’s covered spouses cost
50% more than crewmembers themselves, according to the
airline’s online Q&A about its health plan, which this year extended
wellness incentives to spouses for the first time.
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Why your boss is dumping your wife
About a fifth of companies had policies to discourage spouses from
joining their health plan in 2012, according to Mercer, though most
just charged extra—$100 a month, on average—to cover spouses
who could get insurance elsewhere, rather than deny coverage
entirely. Indeed, large firms including generics maker Teva and
supply chain manager Intermec have spousal surcharges costing
$100 a month, or $1,200 annually, while Xerox charges $1,000 for
the year.
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
Why your boss is dumping your wife
But experts say more firms are likely to drop spouses altogether,
whether they work or not—especially when the new federal health-
care exchanges open in 2014, providing an alternative for spouses
left out in the cold. “When there’s a place for people to go,
employers won’t feel as beholden or compelled to cover the
spouse,” says Joan Smyth, an employee benefits consultant with
Mercer.
Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/
But will it really be worth it?
Calculating the Subsidy in a Split Household.Calculating the Subsidy in a Split Household.Calculating the Subsidy in a Split Household.Calculating the Subsidy in a Split Household.
QuestionQuestionQuestionQuestion: If only the husband needs coverage in a household of
two. Wife has medicare. How is premium and credits calculated. Is
the price on online tool give for both people in household?
Answer:Answer:Answer:Answer: I’ll use an example to illustrate how the subsidy is
calculated. For example, assume that your family income (2
people) is $37,000 annually). The Covered California Calculator
shows your premium at $236 per month. This is the amount you
would pay, even though your spouse does not need coverage in the
exchange. The federal (tax credit) subsidy would pay the rest of the
total premium.
Source: http://www.cahba.com/advice/2013/04/split_household_premium_calculation.html
Should employers drop coverage
altogether?
Higher paid employees don’t qualify for
$$$
• If you don’t offer coverage, you’re throwing your higher paid
employees to the wolves.
• Individual premiums will increase even more than small group
premiums.
Plus…
• You don’t know household income, so some of your lower paid
employers may not qualify for a subsidy (1 in 6 people who earn
less than $20k per year live in a household that earns over
400% of the FPL).
• If an employee’s spouse works and is eligible for group health
coverage, the family may already be blocked from getting a
subsidy.
• In other words, you may not actually be helping your employee In other words, you may not actually be helping your employee In other words, you may not actually be helping your employee In other words, you may not actually be helping your employee
by not offering coverage.by not offering coverage.by not offering coverage.by not offering coverage.
Edwards & Sherlock - Large Employer Presentation 06.13.2013
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Explain CHIP at enrollment meetings
CHIP eligibility allows for higher
income levels than Medicaid –
a lot of people will qualify
CHIP eligibility criteria
Source: http://www.chipmedicaid.org/en/Can-I-Get-It
2013 Federal Poverty Guidelines
Household Size 100% 133% 150% 200% 300% 400%
1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960
2 $15,510 $20,628 $23,265 $31,020 $46,530 $62,040
3 $19,530 $25,975 $29,295 $39,060 $58,590 $78,120
4 $23,550 $31,322 $35,325 $47,100 $70,650 $94,200
5 $27,570 $36,668 $41,355 $55,140 $82,710 $110,280
6 $31,590 $42,015 $47,385 $63,180 $94,770 $126,360
7 $35,610 $47,361 $53,415 $71,220 $106,830 $142,440
8 $39,630 $52,708 $59,445 $79,260 $118,890 $158,520
Each extra person $4,020 $5,347 $6,030 $8,040 $12,060 $16,080
48 Contiguous States and DCSource: http://www.familiesusa.org/resources/tools-for-advocates/guides/federal-poverty-guidelines.html
How Much?
My Advice
Be Open Minded
Listen to Listen to Listen to Listen to
your your your your
consultant!consultant!consultant!consultant!
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Brainstorming Stage Wait and See…
Until the IRS gets around to
issuing the final rules, we’re still
in “wait and see” mode – we
don’t know all the rules yet, so
it’s difficult to advise our clients. Questions?
Thank You!