Healthcare Reform Compliance Strategy

Healthcare Reform Compliance Strategy A Proactive Approach to Protecting Company Profitability

Russell J. Carpentieri, Partner

Executive Tax Forum - November 7, 2013

One Year Delay on Penalties

• The Obama Administration delayed enforcing certain employer requirements.

• Opus will provide practical, accurate and time-sensitive solutions aimed at exploiting the opportunities that exist for employers/employees under the ACA, to prepare for the enforcement stage.

• As new information becomes available, alternate strategies may be suggested.

This presentation has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal, state, and/or local laws that may impose additional obligations on you and your company.

2 Executive Tax Forum - November 7, 2013

Terminology

State/Federal Exchanges Individuals can access coverage from various carriers (varies by state) and choose from set plan designs. Individuals may be eligible for a subsidy dependent upon income.

SHOP Exchanges (Small Business Health Options) Exchanges will be available to Small Group employers with 50 or fewer full-time equivalent (FTE) employees.

Private Exchanges Technology based platforms that aggregate carrier plans options (including multiple plan designs options). Rates are underwritten and are the same as in the open market.

Open Market Current small and large group marketplace


SHOP Exchange • Effective January 1, 2014, SHOP (Small Business Health Options Program)

Exchanges will be available to Small Group employers with 50 or fewer full-time equivalent (FTE) employees.

• If you plan to use SHOP, you must offer coverage to all of your full-time employees –generally those working 30 or more hours per week on average.

• If employer is currently receiving a tax credit, they must secure coverage through the SHOP exchange in order to preserve the tax credit.

• There is a participation requirement, but no requirement for employers to pay for coverage.

• New York City Area (Region 4 - Bronx, Kings, New York, Queens, Richmond, Rockland, Westchester)

– Health Republic Insurance Metro Plus – MVP Health Care North Shore – LIJ – Oxford Health Insurance


Sample SHOP Exchanges

5

Plan Highlights Platinum Standard Bronze Standard

Classification All active full-time employees All active full-time employees

Network Liberty Liberty

HealthCare Platform PPO EPO

In- Network Out-of-Network In- Network Out-of-Network

UCR Percentile Negotiated Fee 140% of Medicare Negotiated Fee N/A

PCP Copay $15 Ded & Coins. 50% After Ded N/A

Specialist Copay $35 Ded & Coins. 50% After Ded N/A

In-Patient Hospital Copay $500 Ded & Coins. 50% After Ded N/A

Out-Patient Hospital Copay $100 Ded & Coins. 50% After Ded N/A

Radiology Copay $35 Ded & Coins. 50% After Ded N/A

ER Copay $100 50% After Ded

Deductible None $2,000/$4,000 $3,000/$6,000 N/A

Coinsurance 100% 70% 50% N/A

Out of Pocket (w/ded) $2,000/$4,000 $5,000/$10,000 $6,350/$12,700 N/A

Lifetime Maximum Unlimited Unlimited Unlimited N/A

RX Drug-Retail $10/$30/$60 N/A

$10/$35/$70 After

Medical Ded

Referral Needed Yes N/A Yes N/A

Mail Order Prescriptions 2.5x Retail 2.5x Retail

Deductible Accumulator Calendar Year Calendar Year

Deductible must be met prior to

Plan Cost any (non-preventive) services being

covered

Monthly Rates

Employee $836.98 $473.25

Employee + Child(ren) $1,422.87 $804.53

Employee + Spouse $1,673.96 $946.50

Family $2,385.39 $1,348.76

Executive Tax Forum - November 7, 2013

Step 1: Are You a Large Employer Under the ACA?

• Employers who employed at least 50 full-time employees, including full-time equivalent employees (FTEs), on business days during the preceding calendar year. – Full-Time Employees

Employees who are employed on average at least 30 hours of service per week, measured over one month (130+ hours/month)

– Full-Time Equivalent Employees (FTEs)

Based on hours of ALL employees (including seasonal employees) who are NOT full-time.

• Example: In a calendar month, employees who are not full-time employees work 1,260 hours. Therefore, there would be 10.5 FTEs for that month (1,260 hours / 120)

Note: ACA created IRC Section 4980H: Employer Shared Responsibility Assessment (penalty)


What Companies Have to be Included?

• Commonly-controlled and commonly-owned organizations are considered a “single” employer for regulatory purposes

– “Parent-Subsidiary” controlled group exists when one company owns 80% or more of another.

– “Brother-Sister” controlled group occurs when five or fewer individuals (i) own 80%+ of the businesses; AND (ii) the same five or fewer people own over 50% of the businesses counting only identical ownership.

– “Affiliated Service Group” exists when several organizations regularly collaborate on the services they provide to the public and are linked by a material level of cross-ownership.


Step 2: Who Must be Covered?

• Must offer coverage to:

– Full-Time Employees

– Full-Time Employees’ Dependents (at employees’ cost)

• Not Required to offer coverage to:

– Part-Time (working less than 1,560 hours per year)

– Seasonal (apply a reasonable, good faith interpretation of the term “seasonal worker” until further guidance is issued)


Step 2: Who Must be Covered?

• May have to offer coverage to:

– Variable Hour Employees

• Measured over a “look-back/stability” period between 3-12 months

• Employer could determine eligibility for a period of time and subsequently cover the employee for a period of time


Look-Back/Stability Period • For 2014 plans only, employer establishes look-back period of

6-to-12- months (“standard measurement period”).

• At the expiration of the standard measurement period, employer looks-back at hours worked by variable hour employees during standard measurement period to determine which worked more than 130 hours per month on average.

– 2014 can be the year systems are used to track hours.

• Employees who worked more than 130 hours per month on average over the standard measurement period are considered ELIGIBLE full- time employees and must be covered during a 6-to-12-month stability period.


Step 3: What are the Employer Requirements?

• Minimum Value – defined by proposed regulations released in December 2012

– Plan meets “minimum value” requirement if it pays out at least 60% of the costs of the plan as determined by three methods

• Affordability

– Annual premium charged to employee cannot exceed 9.5% of the employee’s income derived from employer (W-2 income)

– Premium contribution applies to “employee-only” coverage, not to dependent coverage

New Trend: New plans are being released in the market that provide Minimum Essential Coverage (MEC). These plans are projected to be less expensive than Minimum Value Plans.


Possible Strategy A. Offer plan A or plan B that meets “Minimum Value” and

“Affordability”

B. Offer another plan that meets Minimum Essential Coverage (MEC)

– Provides very basic coverage as per the ACA

– If an employee signs up, they avoid the individual mandate penalty and no penalty for the employer.

C. Secure a waiver from employee (advised, but not necessary)

– Employer will have to provide documentation to the Gov’t in 2015


What Triggers a Penalty ?

• Employers will only be subject to a penalty if they either:

– Do not offer any coverage to full-time employees

– Offer coverage, but do not offer minimum value coverage that is affordable for the lowest paid eligible employee

• AND employee(s) found eligible for a tax credit(1) or cost-sharing reduction in the Exchange

(1)Eligible for a tax credit is household income between 100% to 400% of the Federal Poverty Level


What are the Employer Penalties Starting in 2015

If You Offer Coverage

– Employers with over 50 full-time (FT) and full-time equivalent (FTE) employees in the prior calendar year must offer coverage to all but 5% or, if greater than 5, FTs (and their dependents) that is affordable and meets “minimum value” requirements

• No penalty if employer is compliant

If You Do Not Offer or Provide Adequate Coverage

– Employer does NOT provide coverage to all but 5% or, if greater than 5, FTs (and their dependents) and one of the FT’s receives subsidized coverage through exchange

• Penalty is $2,000 per FT (minus 30 employees)

– Employer provides coverage that is unaffordable or does not meet “minimum value” requirements and one of the FTs receives subsidized coverage through exchange

• Penalty is lesser of $3,000 per FT receiving tax credit or $2,000 per FT (minus 30 employees)


Trends/Best Practices • Boards and Sr. Management are taking actives roles in the

renewal process

• Companies are now gravitating to alternate methods – employing mathematics and algorithms to measure risk – analyzing probability of claims vs. premiums – dismissing and/or challenging broker/carrier recommendations – providing HR with the resources to executive – state of the art technology for reimbursement methods – communication initiatives – removing the internal “excuses” as to why the company should pass

on the savings

• Aligning with fee (non broker)solutions and third party oversight with performance guarantees


Best Practices Companies are providing third party oversight with the following objectives:

• Work with existing brokers on the renewal and design process

– Bring new ways of thinking and capabilities

– Cross check recommendations

– Challenge conventional approaches

– Make sure brokers are aligned with clients interest


Our Role for ACA Compliance/Strategies

• Step 1: Gather historical census and plan information

• Step 2: Develop a series of strategies or recommendations that will:

– Guarantee full ACA compliance with verification to protect against audit

– Properly categorize workforce to maximize opportunity under the ACA and avoid or mitigate employer 2K/3K penalty

– Maintain high quality coverage and multiple plan offerings while complying with ACA

– Exploit the opportunity for employees to receive government subsidized healthcare thus reducing employers’ cost

– Create a long term solution to manage costs/penalties

Note: Services provided on a fee basis or as Broker of Record


ACA Compliance Team

• Russell J. Carpentieri – Partner, Opus Advisory Group, LLC

• Nancy E. Taylor, Esq. – Co-Chair-Health & FDA Business Practice, Greenberg Traurig, LLP

• Howard Rosenfeld, MAAA, MSPA, EA – President & Chief Actuary, Rosenfeld / Tortu Retirement Planning Co.,

Inc.

• Adam Rolewicz – Director, Opus Advisory Group, LLC


Addendum A: Employee Categories Defined • Full-Time Employees. With respect to a calendar month, an employee who is employed an average of at least 30 hours of

service per week with an employer, or 130 hours of service in a calendar month, is full-time. Determine through look-back measurement method, followed by a stability period in which coverage must be offered to full-time employees.

• Full-Time Employees’ Dependents. Employers must offer coverage (not necessarily affordable) to full-time employees’ dependents, defined as the children of an employee who have not attained age 26. Dependent does not include a spouse.

• Full-Time Equivalent (FTE) Employees. FTE means a combination of all employees not otherwise treated as a full-time, based on their average hours of service per week. The hours of service of all FTEs are combined, allocated, and counted as the equivalent of a full-time employee solely for purposes of determining whether the employer is an applicable large employer.

• Ongoing Employees. Those who have been employed for at least 1 complete standard measurement period.

• New, Full-Time Employees. New employees reasonably expected to work full-time as of their start date.

• New, Variable Hour Employees. Based on the facts and circumstances at their start date, it cannot be determined whether they are reasonably expected to provide, on average, at least 30 hours of service per week during the initial measurement period.

• Seasonal Workers. Those employees who perform labor or services on a seasonal basis as defined by the Secretary of Labor, including (but not limited to) agricultural workers and retail workers employed exclusively during holiday seasons. Employers may apply a reasonable, good faith interpretation of the term “seasonal worker” until further guidance is issued.


Questions?

Executive Tax Forum - November 7, 2013 20

Healthcare Reform Compliance Strategy

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