Are you struggling to understand Obamacare and how it impacts your company? Do you want to learn about how to use employee benefits as a recruitment and retention tool? This presentation will provide valuable insight into employee benefits in the Obamacare world and how to maximize its impact. Under Obamacare, employers are offered the option to "pay or play." But, for most companies there is no choice—they must “play” in order to recruit and retain employees. This not only includes offering health insurance but also life, disability, and the whole spectrum of employee benefits. Here you'll learn about the impact of Obamacare on the employee benefits mix and employer decision-making process, along with understanding the importance of insurance benefits as a mandatory piece of the total compensation puzzle.

1. 2014 ISRI Convention
Presented by:
Joseph Appelbaum
President
Potomac Companies, Inc.

2. Purpose
Employers are offered the option to "Pay or Play"
under Obamacare, but for most companies there is
no choice - they must play in order to recruit and
retain employees. Not only must they play in the
health insurance market, but also life, disability, and
the whole spectrum of employee benefits from leave
to pet insurance. In this session we will discuss the
impact of Obamacare on the employee benefits mix
and employer decision-making, along with the
importance of insurance benefits as a mandatory
piece of the total compensation puzzle.

3. THE BASICS
Patient Protection & Affordable Care
Act (PPACA or Obamacare)

4. PPACA (Obamacare)
 Key Components
Individual
Mandate
(2014)
• Subsidies
• Penalties
Insurance
Mandates
State
Mandates
(Exchanges)

5. Individual Mandate
 Beginning in 2014, ACA requires individuals to
maintain health insurance for themselves and their
dependents
 Most individuals will be required to maintain
"minimum essential coverage", which includes
 employer coverage
 individual coverage
 federal programs such as Medicare and Medicaid
 Those who do not maintain minimum essential
coverage, and who are not exempt from the
mandate, will be required to pay a tax penalty for
noncompliance

6. Individual Mandate
 Individual annual Penalties:
 2014: $95 per adult and $47.50 per child, up to a
family maximum of $285 or 1 percent of family
income, whichever is greater
 2015: $325 per adult and $162.50 per child, up to
a family maximum of $975 or 2 percent of family
income, whichever is greater
 2016: $695 per adult and $347.50 per child, up to
a family maximum of $2,085 or 2.5 percent of
family income, whichever is greater

7. Employer Mandate
Employer Play or Pay
 Applies to Applicable Large Employers
 Employers with 50 or more Full-Time
Equivalent Employees (FTEs)
 ER penalty applies if coverage is not offered
or coverage is offered but "Unaffordable"
and a Full-Time Employee (30+ hrs/week)
receives A Subsidy in an Exchange
Penalty
ALE &
Insurance
Not Offered
OR
Is Unafford-
able
Full-Time
Employee
Obtains
Insurance in
an Exchange
Employee
receives
Federal
subsidy
$
$
$ $

8. Employer Mandate
Employers who do not provide coverage
 Employers who do not provide health coverage
to at least 95% of all full-time employees (and
their children under age 26) are subject to a
penalty
• If at least one full-time employee (30+hrs/wk or 130+
hrs/mo) receives a subsidy to purchase Exchange
coverage for himself or herself, the employer is subject to
an annual penalty of $2,000 × all full-time employees
(reduced by 30)
• Penalty is assessed monthly ($167.67 per full-time
employee per month)

9. Employer Mandate
Employers who provide "unaffordable"
coverage
 Coverage is "affordable" if:
1. The employee's cost for single coverage does not exceed 9.5%
of household income (or Box 1 W-2 wages or another safe
harbor), and
2. The plan provides "minimum value" (it has at least a 60%
actuarial value)
 Annual penalty is $3,000 for each full-time employee who
receives a subsidy for Exchange coverage (not to exceed the
"no coverage" penalty)
• Penalty is assessed monthly ($250 per subsidy-receiving full-
time employee per month)

10. Transition Relief
 For , the rules will apply to
employers with 100 or more full-time
equivalent employees (employers in the 50-
99 range will need to certify eligibility for this
transition relief)
 For , the rules will apply to
employers with 50 or more full-time
equivalent employees

11. Transition Relief
 To avoid a penalty in 2015, employers subject to
the mandate (100+ FTEs) must offer coverage to
at least 70% of their full-time employees
(instead of 95%)
 To avoid a penalty in 2016, employers subject to
the mandate must offer coverage to 95% of their
full-time employees
 Employers with non-calendar year plans are
subject to the mandate based on the start of
their 2015 plan year rather than on January 1,
2015 (may be extended to 50-99 FTE employers
for their 2016 plans)

12. Transition Relief
 Other transition relief contained in the
proposed regulations were extended:
 The ability to use a short timeframe (at least 6
months) to determine whether an employer is large
enough to be subject to the mandate
 A delay in the requirement to provide coverage to
dependent children to 2016 (as long as the
employer is taking steps to arrange for such
coverage to begin in 2016)
 For 2015 ONLY, penalty calculated by reducing
number of employees by 80 instead of 30

13. Additional Items of Note
 90-Day Enrollment
Requirement
(EFFECTIVE 2014)
 If EE clearly eligible,
must be enrolled on
or before 90th day
 This means coverage
begins by 91st day
 Acceptable waiting
period: coverage
effective 1st of month
following 60 days
 Affordability Safe
Harbors
 W-2 safe harbor
 Rate of pay safe
harbor
 Federal poverty line
safe harbor

14. Exchanges
 Types of Exchanges:
 State Exchange
 Partnership Exchange
 Federally-Facilitated Exchange (in states
that did not choose to develop their own
exchange)

15. Exchanges
 The Metals—Exchanges to Offer Four Levels
of Coverage:
Bronze (60%)
Silver (70%)
Gold (80%)
Platinum (90%)
 And a catastrophic plan for individuals
under 30

16. Premium Tax Credits
 Premium tax credits are federal
subsidies—direct payments to insurance
companies to subsidize coverage for lower-
income individuals in the state-based
Exchanges
 The subsidy helps lower-income people
between 100% and 400% of Federal
Poverty Level (FPL) purchase a silver level
plan (70% plan)

17. RECRUITMENT & RETENTION
Why Choose to “Play”?

18. Getting & Keeping Employees
 The cost of employee turnover can be
extensive – 1/2 to 2 times annual
pay per lost employee
 Cost of losing trained EE
 Cost of temp or OT while position empty
 Recruitment costs
 Training costs
 Lost productivity costs

19. Getting & Keeping Employees
 Average national turnover rate has been
running at 25% for manufacturing,
construction, scrap recycling & related
industries
 Example: 25% turnover; 200
employees; average pay rate $12.00
per hour; turnover cost at 1/2 X pay
Turnover costs to company equals $624K
on an annual basis based on this
example

20. Getting & Keeping Employees
 Employers are using benefits as leverage
to recruit & retain employees: Total
Rewards
 Health care & retirement savings are the
most leveraged benefits for
recruitment & retention*
 Employees must have health insurance
now – easiest place to get it is through
their employer
 Premiums tax deductible to the employer &
employee

21. Getting & Keeping Employees
 If turnover can be reduced through
the increase of the Total Reward
package (i.e., added benefits), why
not use the savings to fund the added
benefits??
Improve
Total
Rewards
Reduce
Employee
Turnover
Reduce
Costs to
Fund Total
Rewards
package

22. Retention & Profitability
 Using the example of the 200 person
company:
 If the 25% turnover cost your organization
$624k/year, what would you do with that
money if it didn’t walk out the door?
 How do you minimize that loss and add it back
into your bottom line profitability?

23. Retention & Profitability
 Will 50 cents an hour change that?
 200 people times an average of 2,080 hours times 50
cents = $208k
 What would you do with $416k? What about
increasing benefits?
 Why are you losing employees?
 Are they transient?
 Will they move for an extra 50 cents an hour?
 Are you not offering benefits (ACA requirement)?
 Not contributing enough?
 Improper hiring practices? Or improper training?
 Settling for a belly button?

24. WHAT TO DO
Considering the Investment

25. Benefits in the Mix
 Health Insurance – 97% of ALL
employers offer health coverage for at
least the employee
 Dental – 96%
 Vision 79%
 Life Insurance – 84% of employers offer
life insurance
 Disability – 68% offer STD and 80%
offer LTD (primarily paid 100% by ER)
*Results from 2012 SHRM National Benefits Survey

26. Benefits in the Mix
 The Total Rewards package can be
any mix, though, that helps to recruit
& retain employees in your industry
 Compensation
 Health & welfare benefit plans
 Supplemental benefit plans
 Misc. Benefits – legal services, bonus
programs, incentive compensation,
flexible work environments, even pet
insurance & the list goes on

27. Employee Healthcare
 Despite the cost pressures of health
care benefits, majority of employers
will continue to offer coverage*, but…
 They are resetting benefit value
 They are actively engaging employees in
improving their own health
 They are focusing on choice
 They are exploring new options like
Private Exchanges & Self-Funding

28. Private Exchanges
 A private exchange is an on-line portal
used to sell insurance products directly to
employees
 Employees are allowed to become
consumers and shop from among a wide
variety of major medical health plans and
supplemental insurance products
 A private exchange reduces the role the
employer plays in the selection of
insurance coverage for its employees

29. Private Exchanges
 Why are employer’s looking at Private
HC Exchanges
 One-stop shopping across core
medical, life, disability, & voluntary
benefits
 Technology & choice eases employee
decision-making
 Collective buying power & influence
help control total benefit costs

30. Partially Self-Funding
 Partially self-funding insurance
benefits for groups with 50 or more
employees is an option for controlling
costs
 Not for everyone – works well for
groups with relatively low claims
costs (low plan utilizers)

31. Wrap-Up
 Your employees are a corporate asset
– retain them
 Your employees are what drives your
business
 Taking care of them is a required
business practice in today’s economy
- it translates into healthier, more
productive & longer term
employees

32. Wrap-Up
 Obamacare may seem complicated,
but it does not alter the fundamental
need for companies to offer a Total
Rewards package that effectively
attracts and retains employees
 Find the right guidance in a broker or
consultant to help you navigate the
Total Rewards options

33. Thank you!
Joseph Appelbaum
President
Potomac Companies, Inc.
www.potomacco.com