1. AFFORDABLE CARE ACT 2014
District Roadmap
Association of California School
Administrators
Superintendents Symposium
January 31, 2014

2. Agenda
I. ACA Check-In
II. What Districts Need to Do
A. Timetable of ACA Provisions (Play or Pay)
B. Actuarial Value Assessment
C.
Affordability Report
D. Variable Hour Tracking Assessment
E.
Cadillac Tax Projection
F.
ACA Compliance Audit
III. ACA Taxes and Fees Calculator
IV. ACA Strategies and Cost Control Ideas
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3. ACA Check-In
To get a feel of where each of you are on the path to implementing
Affordable Care Act requirements, please briefly share:
1. What do you consider your comfort/proficiency level as it relates to
leading your district through the ACA mandates? Beginning, Intermediate or
Advanced?
2. Is your district rate structure tiered or composite? If composite, are you
familiar with tiered rates and how they work?
3. Do you feel your district is strategically engaged in regard to ACA?
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4. Timetable of Key ACA Provisions
2010 and PY > 9/23/10
Next Steps
• No more lifetime limits on
essential health benefits
(“EHB”)
• Only restricted annual limits
on EHB
• No more pre-existing
condition exclusions for those
< age 19
• Coverage of adult children to
age 26
• No rescissions
• No cost sharing and coverage
for certain in-network
preventive health services
• New consumer and patient
protections
• Early retiree reimbursement
program
• New claims and appeals rules
• Small business health care tax
credit
• Whistleblower protections
• Nondiscrimination testing for
fully insured plans (delayed)
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2011
• OTC drugs not
reimbursable
from FSAs,
HRAs, or HSAs
without
prescription
(except insulin)
• Excise tax
increase for
HSAs
• CLASS Act
(repealed)
• Medicare Part D
discounts for
certain drugs in
the donut hole
2012
2013
• Deliver
Summary of
Benefits and
Coverage
(“SBC”)
beginning 1st
open
enrollment on
or after
9/23/12
• W-2 Reporting (for
2012 PY)
• Medical Loss
Ratio rebates
(fully insured
plans) first due
for 2011 PY
• No cost sharing
for women’s
preventive
health
coverage
(generally
applies to PYs
beginning on
or after
8/1/12)
• Comparative
effectiveness fee
due 7/31/13 for
plans with PY
ending 10/1/1212/31/12
• Notice to inform
employees of
exchange coverage
options
2014
• Individual mandate
• Medicaid expansion
• State exchanges
• 90-day waiting period max
• Increased max on wellness
program credits
• New cost sharing and OOP
limits for group health plans
• No pre-existing condition
exclusions
• Health Care FSA
contributions
limited to $2,500,
as indexed
• Guaranteed Issue/
Renewability
• Deduction for
expenses allocable
to retiree drug
subsidy eliminated
• Clinical trial coverage
requirements
• Medicare tax on
individuals making
> $200k
• Coverage of adult children to
age 26- no exceptions
• No annual dollar limitations
on EHBs
• Transitional reinsurance fees
2015-2018
• Employer (“play
or pay”)
mandate
• New employer
reporting
requirements
(2016 for 2015
PY)
• Large groups
(>100
employees)
potentially
permitted to
enroll in
exchange for
group coverage
(2017)
• Excise tax on the
high cost
coverage
(“Cadillac Tax”)
(2018)
• Health insurer fee (fully
insured plans)
• Auto enrollment (delayed)
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5. Pay Overview: Potential Penalties
OPTION
1
Pay: Eliminate coverage and let employees find
their own insurance coverage
• Annual penalty of $2,000 x all full-time employees
• Penalty Enforcement Effective Date Delayed to
January 1, 2015
• Applies to all full-time employees, not just benefit eligible
• Annual penalty does not apply to first 30 full-time employees
• Penalties are non-deductible
• Full-time = all employees working 30 or more hours per week on
average
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6. Play Overview: Potential Penalties
OPTION
2
Play: Continue to provide coverage
• Possibility of Annual penalty of $3,000 per full-time employee
receiving premium subsidy assistance granted by ACA
• Penalty Enforcement Effective Date Delayed to January 1, 2015
• Penalty ONLY applies if lowest cost plan is deemed unaffordable
(9.5% rule) or doesn’t provide minimum value (60%/bronze level)
• Penalty ONLY applies IF:
• Employee is deemed to have unaffordable plan (9.5% rule)
• Employee’s plan option doesn’t meet criteria for 60%/bronze level plan
• Employee applies for and actually receives federal subsidy
• Full-time = all employees working 30 or more hours per week on
average
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7. PPACA – Federal Poverty Level Impact
Employer Sponsored Plan
Employee Premium Contribution as a Percent of Household
Income
Employee Premium as
Percentage of Pay
0.0% - 9.5%
9.5% +
Federal Poverty Level (FPL)
401%
139% - 400%
0% - 138%
Not Eligible for Premium Subsidy
Not Eligible for Premium Subsidy
Eligible for PremiumSubsidy
Eligible for Premium Subsidy
Medicaid Eligible
No Employer Penalties for Medicaid-Enrolled Employees
Please note, Medicaid Eligible are not eligible for premium subsidy
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8. Individual Decision Tree – 2014
Stay on employer plan
Go to exchange
No health insurance
Pay annual EE portion of
exchange premium (assumed to
be between $1,200 - $1,700)
Pay annual penalty of $95 or 1%
of household income in 2014
(increases thereafter)
Pay Tenthly EE portion of
Kaiser - $100.00
HMO - $600.00
PPO - $1,900.00
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9. Next Steps for My District
• Conduct ACA financial modeling by end of 1st quarter
2014
• Share report with union groups and other District
partners
• Determine “Affordability” plan protection
• Most plans offered by Carriers, JPA’s and Trust will
exceed 60% minimum value (Bronze)
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10. What Districts Need To Do
Actuarial Value Test
The ACA requires employers to offer plans that meet a Minimum Actuarial Value (MAV)
of 60%.
•
All offered plans must meet the MAV of 60%
•
Actuarial Value Calculator provided by Department of Health and Human
Services (HHS) @ www.hhs.gov
SAMPLE TEST RESULT: PASS (All plans meet MAV)
PLAN
100-A, $20 OV, $0 Deductible
100-D, $10 OV, $300 Deductible
$2,500 HSA
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ACTUARIAL VALUE
99.4%
95.6%
60.7%
TEST RESULT
PASS
PASS
PASS
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11. What Districts Need To Do
Affordability Test
An employee's affordability of the District's plan is based on the lowest cost plan option
that also meets the MAV of 60%.
•
Safe harbor method for determining affordability is 9.5% of an employee’s W-2
wages
•
Measured against Employee Only contribution portion of the lowest cost single
rate (offered to all employees)
•
Potential for federal subsidies
•
Federal Poverty Level (FPL) ranges
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12. Affordability Test
Affordability Test
•
HMO Employee Annual Cost: $258.77
•
W-2 Salary Threshold (9.5% rule): $258.77 / 0.095= $2,723.89
•
Hourly Rate/30 Hours = $1.75
•
Hourly Rate/40 Hours = $1.31
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13. What Districts Need To Do
Affordability Test
Penalty Enforcement Delayed to January 1, 2015
Annual penalty of $3,000 per Full-Time employee (30+ hours) receiving federal subsidy:
Penalty ONLY applies if:
1.
2.
3.
Employee’s plan option doesn’t meet the criteria for a bronze level
plan (60% MAV)
and / or
Employee is deemed to have unaffordable coverage (9.5% rule)
and
Employee applies for and actually receives federal subsidy
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14. Safe Harbor Provisions – Special Employee
Groups
Seasonal/Short Term/Hourly Employees
•
Treat as variable hour employees
Teachers
•
•
General rule: treat traditional school breaks as paid leaves
Unpaid leaves of more than 4 consecutive weeks (other than
FMLA/USERRA/jury duty leaves)
• Use averaging method so that employee who works full-time
during the active portions of the academic year is treated as FT
for full measurement period OR credit employee with average
weekly rate
• Max 501 hours during calendar year
Adjunct faculty, Bus Driver, Coaches, Stipend employees
•
•
•
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Use reasonable method consistent with the purposes of ACA
W-2 vs. 1099 Employees
Take into account classroom preparation time (adjunct faculty,
substitute teachers)
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15. What Districts Need To Do
Variable Hour Employees
Measurement Period (MP)
Administrative Period (AP)
Stability Period (SP)
3–12 months
Up to 90 days (60 days in CA)
Same Length MP
1. Take inventory of your variable hour employee groups to assess potential
exposure based on current employee population (e.g., use 2012 or 2013 year
as a guide). Provide to Burnham for assessment.
2. Identify employment classification for new hires – is new hire reasonably
expected to work full-time (FT) or is he or she a variable hour or seasonal
employee?
3. Design plan eligibility rules to ensure compliance with the look-back and
stability period requirements; full-time employee definition
4. Measure and track hours worked
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16. What Districts Need To Do
MP = Measurement Period
AP = Administrative Period
SP = Stability Period
Variable Hour Employees
12 Month Option
2013
2014
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Jul
2016
2015
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Initial MP (12 mos.)
AP (2 mos.)
Jul
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Jul
Aug Sep Oct Nov Dec
Initial SP (12 mos.)
2nd MP (12 mos.)
AP (2 mos.)
2nd SP (12 mos.)
3rd MP (12 mos.)
AP (2 mos.)
6 Month Option
2014
Feb Mar Apr May Jun
Jul
2016
2015
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Initial MP (6 mos.)
AP (2 mos.)
Jul
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Jul
2017
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Initial SP (6 mos.)
2nd MP (6 mos.)
AP (2 mos.)
2nd SP (6 mos.)
3rd MP (6 mos.)
AP (2 mos.)
3rd SP (6 mos.)
4th MP (6 mos.)
AP (2 mos.)
4th SP (6 mos.)
5th MP (6 mos.)
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AP (2 mos.)
5th SP (6 mos.)
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17. What Districts Need To Do
Variable Hour Employees
Hours per Week
Annualized Hours
(potential full impact)
Number of Employees
40 or more hours per week
2,080
1,052
30 - 39.99 hours per week
1,560 - 2,079.5
652
24 - 29.99 hours per week
1,248 - 1,559.5
326
20 - 23.99 hours per week
1,040 - 1,247.5
120
19.99 hours per week and below
1,039.5
543
Average/Total:
1,554.4 - 1,594.6
2,693
•
How will hours be monitored?
•
What is the best way to ensure all applicable employees have benefits access?
•
What is the potential premium impact?
•
Who are the employees who fit into the 24-29.99 range?
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18. What Districts Need To Do
Cadillac Tax Test
Beginning January 1, 2018, “Cadillac” plans will be subject to a 40% excise tax on the
amount of premium that exceeds an annual limit.
•
Employer and employee contributions are included
•
For 2018, the limits are $10,200 for individuals and $27,500 for families
(indexed)
•
Stand alone dental and vision benefits are excluded, but employer contributions
to HSAs and Archer MSAs are included, and health FSAs and HRAs are included
•
Who pays?
• The insurer, if fully insured
• The employer, for HSAs and Archer MSAs
• The person that administers the plan, if self-funded
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19. Sample Cadillac Tax Analysis:
(Super Composite Rate)
2013
PPO
2014
PPO
2015
PPO
2016
PPO
2017
PPO
2018
PPO
Actual EE Annual Premium
$17,670.24
$19,172.21
$20,955.23
$22,945.97
$25,125.84
$27,512.79
Excise Tax Threshold EE Only
$6,551.00
$7,107.84
$7,768.87
$8,506.91
$9,315.07
$10,200.00
($11,119.24)
($12,064.37)
($13,186.36)
($14,439.06)
($15,810.77)
($17,312.79)
NO
NO
NO
NO
NO
NO
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Excise Tax Threshold EE+SP
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
Difference from Actual
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
N/A
N/A
N/A
N/A
N/A
N/A
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Excise Tax Threshold EE+CH(REN)
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
Difference from Actual
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
N/A
N/A
N/A
N/A
N/A
N/A
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Excise Tax Threshold Family
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
Difference from Actual
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
N/A
N/A
N/A
N/A
N/A
N/A
Gross Annual Premium
Difference from Actual
Pass (YES/NO)
Actual EE+SP Annual Premium
Pass (YES/NO)
Actual EE+CH(REN) Annual Premium
Pass (YES/NO)
Actual Family Annual Premium
Pass (YES/NO)
- Year-over-year changes in premium are based upon the 10 year cost projection performed by Milliman. The changes include 8.5% for 2014, 9.3% for 2015, 9.5% for 2016,
9.5% for 2017, and 9.5% for 2018.
Tier
Burnham Benefits
Subs
40% of Difference
Tax
EE Only
EE+SP
EE+CH(REN)
FAMILY
364
0
0
0
($6,925.12)
$0.00
$0.00
$0.00
($2,520,742.89)
$0.00
$0.00
$0.00
($2,520,742.89)
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20. Sample Cadillac Tax Analysis: (4 Tier Rates)
2013
PPO
2014
PPO
2015
PPO
2016
PPO
2017
PPO
2018
PPO
Actual EE Annual Premium
$7,074.24
$7,675.55
$8,389.38
$9,186.37
$10,059.07
$11,014.68
Excise Tax Threshold EE Only
$6,551.00
$7,107.84
$7,768.87
$8,506.91
$9,315.07
$10,200.00
Difference from Actual
($523.24)
($567.71)
($620.51)
($679.46)
($744.00)
($814.68)
NO
NO
NO
NO
NO
NO
Actual EE+SP Annual Premium
$14,148.48
$15,351.10
$16,778.75
$18,372.73
$20,118.14
$22,029.37
Excise Tax Threshold EE+SP
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
Difference from Actual
$3,513.54
$3,812.19
$4,166.73
$4,562.57
$4,996.01
$5,470.63
YES
YES
YES
YES
YES
YES
Actual EE+CH(REN) Annual Premium
$12,733.63
$13,815.99
$15,100.88
$16,535.46
$18,106.33
$19,826.43
Excise Tax Threshold EE+CH(REN)
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
Difference from Actual
$4,928.39
$5,347.30
$5,844.60
$6,399.84
$7,007.83
$7,673.57
YES
YES
YES
YES
YES
YES
Actual Family Annual Premium
$21,222.72
$23,026.65
$25,168.13
$27,559.10
$30,177.22
$33,044.05
Excise Tax Threshold Family
$17,662.02
$19,163.29
$20,945.48
$22,935.30
$25,114.16
$27,500.00
Difference from Actual
($3,560.70)
($3,863.36)
($4,222.65)
($4,623.80)
($5,063.06)
($5,544.05)
NO
NO
NO
NO
NO
NO
Gross Annual Premium
Pass (YES/NO)
Pass (YES/NO)
Pass (YES/NO)
Pass (YES/NO)
- Year-over-year changes in premium are based upon the 10 year cost projection performed by Milliman. The changes include 8.5% for 2014, 9.3% for 2015, 9.5% for 2016,
9.5% for 2017, and 9.5% for 2018.
Tier
Burnham Benefits
Subs
40% of Difference
Tax
EE Only
EE+SP
EE+CH(REN)
FAMILY
85
32
19
72
($325.87)
$0.00
$0.00
($2,217.62)
($27,699.26)
$0.00
$0.00
($159,668.71)
($187,367.97)
20

21. District: Financial Modeling Results
Play or Pay Financial Model:
• The following Play or Pay model is an example.
• The District passes the minimum actuarial value test for all
plans (The minimum accepted actuarial value is 60% for all plans).
• Kaiser – 91.4%
• HMO – 89.9%
• PPO – 86.8%
Cadillac Tax:
• All 3 plans have at least one tier that exceeds a Cadillac Tax
threshold ($10,200-EE, $27,500-any family tier).
• Total potential Cadillac Tax liability in 2018 - $637,115.83
• Kaiser - $0.00
• HMO - $0.00
• PPO - $637,115.83
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22. District ACA Taxes and Fees Calculator
October 1, 2013
October 1, 2014
Total Subscribers
Total Members (2.55 ACS based upon census)
2012 Data
Monthly Premium
Annual Premium
2013 Annual ACA Taxes and Fees
PCORI Fee
Insurer Fee (UHC only)
Transitional Reinsurance Fee
Average Monthly Taxes and Fees
2,862
7,298
$3,668,800.04
$44,025,600.48
$1.00
0.25%
$3.94
2013 Renewal
Monthly Premium
Annual Premium
$7,298.00
$119,769.94
$344,830.50
$39,324.87
$3,980,648.04
$47,767,776.52
Proposed Increase Over Current
2013 Proposed Premium minus ACA Taxes and Fees
Monthly Premium without Taxes and Fees
Annual Premium without Taxes and Fees
8.50%
$3,941,323.17
$47,295,878.08
Value of Taxes and Fees
Proposed Increase without fees
0.99%
7.51%
Total Subscribers
Total Members (2.55 ACS based upon census)
2013 Data
Monthly Premium
Annual Premium
2014 Annual ACA Taxes and Fees
PCORI Fee
Insurer Fee (UHC only)
Transitional Reinsurance Fee
Average Monthly Taxes and Fees
$3,980,648.04
$47,767,776.52
$2.00
0.33%
$5.25
2014 Renewal
Monthly Premium
Annual Premium
Proposed Increase Over Current
2013 Proposed Premium minus ACA Taxes and Fees
Monthly Premium without Taxes and Fees
Annual Premium without Taxes and Fees
Value of Taxes and Fees
Proposed Increase without fees
2,862
7,298
$14,596.00
$174,544.72
$459,774.00
$54,076.23
$4,350,848.31
$52,210,179.74
9.30%
$4,296,772.08
$51,561,265.01
1.24%
8.06%
* Projections based on analysis of study by Oliver Wyman & AHIP 2012
Burnham Benefits
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23. ACA Cost Control Strategies
• Evaluate 2, 3, or 4 tier rate structures
• Gather District demographic information to make
educated decisions on tiered rates
• Review medical plans offered and if “Bronze” plan is
needed
• Meet or form benefits committee to include union
groups
• Explore ACA new Wellness options/regulations
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24. 2014 Creative Cost Savings Options
•
•
•
•
Offer bronze level plan in benefits portfolio
Narrow HMO network option
Participating HMO contract
Explore self-funded medical inside or outside JPA or
Trust
• Tie District cap to participation in Wellness
• Incentives to reduce spouse enrollment on plan
• Go to market; explore options
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25. What Districts Need To Do
Next Steps
•
Conduct ACA financial modeling & Assess need for variable hour tracking
(1) Actuarial Value Assessment, (2) Affordability Report,
(3) Cadillac Tax Projection, (4) ACA Compliance Audit,
(5) Variable Hour Tracking
•
Work with consultant, broker, JPA or trust
•
Educate & Communicate effectively with all district partners
•
Develop a long term strategy through 2018
•
Explore all medical benefit options, consider unbundling, tiered rates, lower
cost plan options
•
Evaluate the financial implications associated with moving from a
composite rate to a tiered structure
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26. Questions
Dan Exceen
Sr. Vice President
949.252.4586
exceen@burnhambenefits.com
Burnham Benefits