Health Care Reform Key Employer Concerns Timeline Reform Overview - PowerPoint PPT Presentation

Health Care Reform Key Employer Concerns

Timeline – Reform Overview 20 2010 20 2011-20 -2013 2014 2015 Coming soon oming soon Grandf Grandfathe ather status tatus Individual Ind vidual mandat mandate Emplo ployer er M Mand ndat ate e Emplo ployer er mandat ndate e Medical loss ratio Medical loss ratio for 1 100+ 00+ emplo ployees for 50+ r 50+ No-pre ex f No-pre e for r rebat rebates Exchan Ex changes children < children < 19 Look Look back back / / Summary benefit Summar benefit Subsidies Subsidi measu measuremen ent t Cadillac llac Tax ki kicks cks i in Coverag Co rage for r requir irement ements ( (SBCs) s) period in peri in pla play - 2 - 2018 depen dependen ents <26 ts <26 Med Medicaid e caid expa pans nsion ion Comparativ Com arative e Lifeti Lif time lim limit t ef effectiv ctiveness eness Insurer f Insure r fee restric restriction ions research f resear fee Essential Benef Essential Benefits ts Annual max Annual max Medica Medical de devi vice ce restric restriction ions manu manufactu cturer tax tax No Pre ex f No Pre e for r everyone ev No cost-sharing No cost-sharing f for r W2 reporting W2 repor ing preventi pre tive benefi benefits ts 90 day max 90 da y max FSA Cont. cap – FSA Cont. cap – proba obationar ionary p period riod $2500 $2500 Non-discrim Non-discrimination nation 30 hours = full time 30 hour s = full time (still d till dela layed) d)

Individual “Mandate”  Beginning in 2014, if you are uninsured, not exempt from the new mandate, and refuse to sign up for health care coverage , there is a “penalty” collected by the IRS as part of your federal income taxes. The penalty will be the greater of: 1) A flat dollar amount per person. $95 in 2014; $325 in 2015 ; and $695 in 2016; increases indexed to inflation after that, subject to a cap. OR 2) A percentage of your taxable income fixed % of household income in excess of tax filing threshold equal 1% in 2014; 2% in 2015 ; 2.5% in 2016.  For dependents under 18, the penalty is half the individual amount. Individual exemptions:  Income does not meet the federal tax ‐ filing threshold In 2014 single under 65 ‐ $10,150

The “Exchanges” On ‐ line federally administered system to purchase individual health insurance policy.  Moderately successful: WA STATE – Washington Health Plan finder – Open enrollment Nov 15 th  to December 23 rd …….closed on federal marketplace  Tax credits potentially available for those making up to 400% of federal poverty level (roughly $46K for an individual) – based on a sliding scale Note: Premiums are paid with after tax dollars 1. Once open enrollment is complete, difficult to enroll on the plan – cant just 2. jump on. Better know what your buying 3. Supreme Court agreed to hear a case that challenges the federal 4. government’s ability to provide subsidies to individuals in nearly three dozen states where the federal government operates the online marketplaces, or exchanges

Why the Individual “Mandate” matters to all employers The interaction between the “exchanges” and employers is increasing

Employer “Mandate” EMPLOYER SIZE 1 ‐ 49 Full time employees 50 ‐ 99 full time employees 100 or more full time employees 2015 Plan Year DOES NOT APPLY DOES NOT APPLY Employer must offer coverage to 70% of full time employees and dependents* to age 26 2016 Plan Year DOES NOT APPLY Employer must offer coverage Employer must offer coverage to 95% of full time employees to 95% of full time employees and dependents* to age 26 and dependents* to age 26

Am I am large employer or not? – Calculating full time employees Number of Full time employees ‐ A full time employee is defined as an employee who is employed an average of at least 30 hours of per week. or 130 hours in a calendar month So for example: For part ‐ time employees , employer must also include them into the 38 Full time employees calculation to determine whether or not they are a large employer and therefore subject to the employer mandate. This is done by: 48 part time employees X 25 hrs on average = 1,200 1. Taking the total hours worked by all part ‐ time employees in any given 1,200 / 120 = 10 month 2. Dividing that total by 120. 38 + 10 = 48 The result of this equation is the number of full time equivalent employees or FTEs . The FTEs then must be added back to the full time employee count

Understanding Employer Mandate Penalties Failing to offer coverage to full ‐ time employees $2,000 per full time employee (minus first 30) • Failing to offer “affordable” or minimum essential coverage $3,000 per employee where this is applicable • NOTE: At least one employee must qualify and purchase subsidized coverage • in the exchange to trigger penalties These penalties are not tax deductible •

QUICK FACTS: Employer Mandate What exactly am I required to do: 1. Offer a health insurance plan to employees and dependents Note dependents under the ACA is children under the age of 26 – not spouses 2. Offer a plan that meets Minimum Essential Coverage every plan our we offer our clients meets this qualification. 3. Offer an “Affordable” Minimum Essential Coverage plan Affordability under the ACA is defined as the employees portion of the premium of the lowest cost plan, not exceeding 9.5% of their W2 earnings TIP: Make sure if employees elect not to come onto your plan, you get a signed waiver from them.

Measurement Periods What do you do with employees who come and go, are project based, or you in “good faith” upon hiring them do not know how long they will be employed? Put employees in separate buckets…. 1. Full Time Employees – employees are those that upon getting hired or currently employed are reasonably expected to work at least 30 hours a week or 130 hours in a month, on average. 2. Part Time Employees – these employees are not expected to work on average 30 hours a week, or 130 in a month or are expected to work less than 120 days in the calendar year. You are not obligated to provide health insurance benefits to these “bucket.” 3. “Variable Hour” employees – An employee is a variable hour employee if, based on the facts and circumstances at the employee’s start date, the employer cannot determine that the employee is reasonably expected to be employed on average at least 30 hours per week / 130 hours per month on average

Measurement Period  For a new “variable hour employee”, an employer may use an initial measurement period of between 3 and 12 months to track hours and make a determination on whether or not an employee is eligible for benefits…….. employed an average of 30 or more hours of service per week / 130 hours per month during this period  The initial measurement period must begin on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date Stability Period If an employee is determined to be a full ‐ time employee during the initial measurement • period, then the new employee must be offered coverage during the new employee stability period or else the employer could be liable for a penalty. In addition, this stability period must be at least 6 months and is no shorter in duration • than the initial measurement period. TIP: If your company decides to use a measurement Administration Period period, you need to provide affected employees with time between measurement and stability periods to make determinations, offer coverage • and administer enrollments. this policy in writing and have them sign it Note that the initial measurement period and administration period may not extend • beyond 13 months. acknowledging they are not eligible for coverage.

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IRS reporting 2016 What exactly am I required to do: Effective 2015 (with the first cycle of reports due in early 2016), large • employers (over 50 FTEs) have new reporting requirements. The IRS will use the new reporting requirements to verify that • individuals have a minimum essential coverage, large employers are providing minimum essential coverage, and to determine potential penalties or tax consequences for the employer or individual should there be any. This general method uses Form 1094 ‐ C….info included: • 1. the months MEC was available 2. the employee’s share of the lowest cost monthly premium 3. name, address and social security number and the months, if any, when the employee was covered under an eligible employer sponsored health plan TIP: Make sure your payroll vendor or your internal team understands this requirement