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Action Items and Decisions
Facing Employers with the
Patient Affordable Care Act
       Chris Hodge, District Manager
             Oasis Outsourcing
             February 21, 2013
Timeline of Key Provisions
       2011                    2012                        2013                      2014
• Adult children to   • W-2 reporting         $2,500 health care FSA        Exchanges
  age 26 (early         requirements for       salary reduction limits        operational
  adopter)              health care coverage  Increase in Medicare
                        (for January 2013                                    Free rider penalty
• No lifetime or                               payroll tax on individuals
                        W-2s)                  making more than               (employer mandate)
  annual maximums
                                                    $200k/$250K
• 100% preventive     • Summary of Benefits                                 Individual mandate
                                              Investment income
  care coverage         and Coverage and      subject to Medicare tax        Auto-enrollment
• FSAs cannot           Uniform Glossary      for individuals making
  reimburse over-       rules                 more than $200k/$250k          No preexisting
  the-counter (OTC)                                Expanded women’s
                                                                              condition exclusions
                      • Nondiscrimination
  expenses without      testing rules in all        preventive care          Wellness program
  Rx                    plans, including           Comparative               discount expansion
• No preexisting        insured plans               Effectiveness Fee per
                                                    member participant on    Eligibility waiting
  condition
                      • Medical Loss Ratios         all health plans          period no longer
  exclusions under
                        Rebates                    Notify all employees      than 90 days
  age 19
                                                    about exchanges,
• Prohibition on      • Tax credit for                                       Employer reporting
                                                    services and contact
  rescissions           employers with < 25         info.                     of health insurance
                        employees                                             info to govt &
• New claims and
                                                                              participants
  appeals rules
2013 Employer Checklist
$2,500 Flexible Spending Account Limit
Comparative Effectiveness Fee for all
 health plan participants
Employer must provide written notice
 regarding the existence of insurance
 exchanges and that employee may qualify
 for subsidies
2014 Employer Mandate will be based on
 2013 FTEs and hours worked.
2013 Employer Checklist
# 1 $2,500 Flexible Spending Account Limit
  – Child Care spending limit is not affected
  – Employee Contributions to Medical Flexible
    Spending Accounts are limited to $2,500/year
2013 Employer Checklist
# 2 Comparative Effectiveness Fee
  • New fee to fund independent comparative
      clinical research programs
  •   Fee became effective for plan years as of
      October 1, 2012 and later
  •   Initial fee is $1 per member per year,
      increasing to $2 per member in second year.
  •   Fee is due no later than July 31, 2013
  •   Assessed by the carrier
2013 Employer Checklist
# 3 Employer must provide written notice
  regarding the existence of insurance
  exchanges and that employee may qualify
  for subsidies
  • Originally due March 1, 2013
  • Postponed to early Autumn 2013. No exact
    date yet.
2013 Employer Checklist
# 4. Employers that do not currently provide
  health insurance, evaluate headcount to
  determine whether your company will be
  subject to the employer mandate in 2014.
2013 Employer Checklist
# 5. Employers that do provide health
  insurance, evaluate plans to ensure that
  by 2014 insurance meets requirements:
  • Affordability
  • Adequate coverage
2014 Employer Checklist
Shared Responsibility Provision takes
 effect (for companies with 50+ employees)
Automatic Enrollment of New Employees
Limits to waiting periods for coverage
Reporting of health insurance information
 to government
2014 Employer Checklist
# 1 Shared Responsibility Provision takes effect
  • Applies only to employers with 50+ Full Time
    EQUIVALENTS
  • $3,000 penalty per employee
     • If premium contribution is greater than 9.5% of income
         – Example: For employee earning $35,000/year, 9.5% equals
           $3,325 annually or $277 per month
     • If plan covers less than 60% of allowable costs.
  • The alternative penalty is $2,000 per employee for not
    offering coverage.
How Eligibility is Calculated
• Do you have 50 Full Time Equivalents?
  – Any employee averaging 30 or more hours a week is
    considered a Full Time Employee.
  – Add to that number, the total number of hours worked
    by all PTEs every month divided by 120.
  – Seasonal workers (<120 days/year) are excluded.
• Example: A firm has 35 FTEs & 20 PTEs
  working 24 hours/week (or 96 hours/month).
  – 20 PTEs X 96 (hours/month) / 120 = 16
  – 35 FTEs + 16 Calculated FTEs = 51 FT Equivalents
How Eligibility is Calculated
• Companies under common control are
  considered one company.
  – You can’t subdivide businesses to avoid
    eligibility.
  – Separate businesses with common ownership
    must be evaluated as a whole.
How the Penalties are Assessed
• Assessed differently than eligibility is assessed.
• Tax penalty is assessed if at least one FULL-
  TIME employee obtains coverage from through
  an exchange AND receives a premium credit.
   – No penalties for part-time workers.
• Premium credits are for workers who are 138%
  to 400% of the Federal poverty level.
   – Employee premium must be greater than 9.5% of
     income.
   – Plan pays less than 60% of essential health benefits
Penalty for >50FTE Employer not
    offering Health Insurance
• Penalty applied to FT Employees (working
  over 30 hours a week) greater than 30.
• $166.67 per month penalty for every FTE
  greater than 30 who do not have
  company-sponsored health insurance.
  – 35 FTEs and 20 PTEs. Penalty would be:
    35 - 30 = 5 X $166.67 = $833.35/mo.
  – 29 FTEs and 50 PTEs. Penalty would be:
     29 - 30 = -1 or 0 X $166.67 = $0/mo.
Potential Penalties for Employers
   >50 FTE who do offer health
             insurance
• Penalty is applied if any of the employer’s FT
  Employees (PTEs are excluded) receives a
  premium credit to purchase from an exchange.
• To get premium credit:
   – Employee must be 138-400% of FPL AND
   – Employee’s share of premium > 9.5% of income OR
   – Policy does not provide minimal essential coverage.
• Penalty is the lesser of:
   – FTEs – 30 X $2,000
   – FTEs receiving premium credits X $3,000
Potential Penalties Summarized
Less               Large Employer: 50 or more FTEs
than 50       Does not offer coverage                   Offers coverage
FTEs           No FTEs        1 or more FTEs      No FTEs          1 or more FTEs
             receive credit   receives credit   receive credit    receives credit for
             for exchange      for exchange     for exchange     exchange coverage
               coverage          coverage         coverage


No penalty   No penalty       Number of FTEs    No penalty       Lesser of:
                              minus 30                           - Number of FTEs
                              multiplied by                      minus 30 multiplied
                              $2,000.                            by $2,000.

                                                                 - Number of FTEs
                                                                 who receive
                                                                 premium credit
                                                                 multiplied by $3,000
Online Tools to Determine Eligibility
          and Penalties
• Online calculator at
www.franchise.org/healthcare/calculator.aspx

• Government’s Outline of Rules
http://www.healthcare.gov/using-insurance/emp

• DHHS to be releasing a calculator for
  minimum essential coverage
How does this apply to 2013?
• The determination of the number of full-
  time vs part-time employees in 2014 will
  be based on a “Lookback Period” that
  includes 2013.
  – Each employee is classified FT or PT based
    on the hours they worked in that period.
  – Period can be 3 to 12 months
  – Employer can determine the length of the
    period
2014 Employer Checklist
# 2 Automatic Enrollment of New
  Employees
  – Applies only to employers with 200+
    Employees
  – Employers must automatically enroll new full-
    time employees in health plan
  – Employees may opt out
2014 Employer Checklist
# 3 Limits to waiting periods for coverage
  • No health plan may impose a waiting period
    for benefits of greater than 90 days
  • Employers with 50+ employees will be fined
    for waiting periods over 90 days ($600 per
    FTE in waiting period).
Decisions facing Employers
• If you do provide          • If you don’t provide
  health insurance:            health insurance:
  – Should you continue to      – Should you start?
    provide coverage?           – Can you stay below
  – What changes should           the 50 employee
    you make to your              threshold?
    plans?                      – What are the best
  – What changes should           vehicles to provide
    be made to                    insurance?
    contributions?
Considerations in Deciding to
   Maintain or Buy Group Coverage
• Insurance premiums are tax-deductible but penalties are
  not.
• Cost of providing insurance is a function of the number
  of participants, not the number of employees.
• The Individual Mandate will make insurance important to
  employees who did not care before.
• Any additional compensation to cover Exchange costs
  will increase payroll (FICA/FUTA) taxes for the employer,
  and income and payroll (FICA) taxes for the employee.
• If you already provide coverage, why? Has that
  changed?
Considerations for the Providing
             Coverage
• Does the plan cover 60% of expenses?
  – DHHS Calculator
  – Common sense guide
• Does your contribution keep employees
  from paying more than 9.5% of their
  income for their plan?
  – Increase contribution?
  – Create classes that reverse discriminate?
Whatever you do (or don’t do)
• Do the math!
                                      Summary of Results: Pay or Play Analysis

                                                   Potential Penalties

Full-time Employees                                                                            73

Penalty (Cost) for not offering coverage to all full-time employees                             0

Employees paying more than 9.5% of income for single coverage                                  29

Does plan pay for at least 60% of covered expenses for a typical population?                   YES

Penalty for employees paying more than 9.5%                                                  $87,000

Total Potential Penalties Accrued                                                            $87,000

                                              Cost of Providing Coverage

Annual cost of current plan                                                                  $198,756

Employee Contributions, including increased employer contribution for low income employees   (89,556)

Value of Federal Tax Deduction                                                               (37,128)

Employer net cost of plan                                                                    $72,072
Whatever you do (or don’t do)
•   Do the math!
•   Make sure your assumptions are accurate.
•   Spreadsheet your options
•   Base calculations on what is known and
    minimize speculation.
    – We do know more than we don’t know
    – Many remaining questions will not be significant
      enough to require a change in course.
    – If information changes, then change the spreadsheet.
• Re-assess after the exchanges have been
  around for a year.
Questions and Answers

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Checklist and Decisions for Employers Facing Healthcare Law

  • 1. Action Items and Decisions Facing Employers with the Patient Affordable Care Act Chris Hodge, District Manager Oasis Outsourcing February 21, 2013
  • 2. Timeline of Key Provisions 2011 2012 2013 2014 • Adult children to • W-2 reporting  $2,500 health care FSA  Exchanges age 26 (early requirements for salary reduction limits operational adopter) health care coverage  Increase in Medicare (for January 2013  Free rider penalty • No lifetime or payroll tax on individuals W-2s) making more than (employer mandate) annual maximums $200k/$250K • 100% preventive • Summary of Benefits   Individual mandate Investment income care coverage and Coverage and subject to Medicare tax  Auto-enrollment • FSAs cannot Uniform Glossary for individuals making reimburse over- rules more than $200k/$250k  No preexisting the-counter (OTC)  Expanded women’s condition exclusions • Nondiscrimination expenses without testing rules in all preventive care  Wellness program Rx plans, including  Comparative discount expansion • No preexisting insured plans Effectiveness Fee per member participant on  Eligibility waiting condition • Medical Loss Ratios all health plans period no longer exclusions under Rebates  Notify all employees than 90 days age 19 about exchanges, • Prohibition on • Tax credit for  Employer reporting services and contact rescissions employers with < 25 info. of health insurance employees info to govt & • New claims and participants appeals rules
  • 3. 2013 Employer Checklist $2,500 Flexible Spending Account Limit Comparative Effectiveness Fee for all health plan participants Employer must provide written notice regarding the existence of insurance exchanges and that employee may qualify for subsidies 2014 Employer Mandate will be based on 2013 FTEs and hours worked.
  • 4. 2013 Employer Checklist # 1 $2,500 Flexible Spending Account Limit – Child Care spending limit is not affected – Employee Contributions to Medical Flexible Spending Accounts are limited to $2,500/year
  • 5. 2013 Employer Checklist # 2 Comparative Effectiveness Fee • New fee to fund independent comparative clinical research programs • Fee became effective for plan years as of October 1, 2012 and later • Initial fee is $1 per member per year, increasing to $2 per member in second year. • Fee is due no later than July 31, 2013 • Assessed by the carrier
  • 6. 2013 Employer Checklist # 3 Employer must provide written notice regarding the existence of insurance exchanges and that employee may qualify for subsidies • Originally due March 1, 2013 • Postponed to early Autumn 2013. No exact date yet.
  • 7. 2013 Employer Checklist # 4. Employers that do not currently provide health insurance, evaluate headcount to determine whether your company will be subject to the employer mandate in 2014.
  • 8. 2013 Employer Checklist # 5. Employers that do provide health insurance, evaluate plans to ensure that by 2014 insurance meets requirements: • Affordability • Adequate coverage
  • 9. 2014 Employer Checklist Shared Responsibility Provision takes effect (for companies with 50+ employees) Automatic Enrollment of New Employees Limits to waiting periods for coverage Reporting of health insurance information to government
  • 10. 2014 Employer Checklist # 1 Shared Responsibility Provision takes effect • Applies only to employers with 50+ Full Time EQUIVALENTS • $3,000 penalty per employee • If premium contribution is greater than 9.5% of income – Example: For employee earning $35,000/year, 9.5% equals $3,325 annually or $277 per month • If plan covers less than 60% of allowable costs. • The alternative penalty is $2,000 per employee for not offering coverage.
  • 11. How Eligibility is Calculated • Do you have 50 Full Time Equivalents? – Any employee averaging 30 or more hours a week is considered a Full Time Employee. – Add to that number, the total number of hours worked by all PTEs every month divided by 120. – Seasonal workers (<120 days/year) are excluded. • Example: A firm has 35 FTEs & 20 PTEs working 24 hours/week (or 96 hours/month). – 20 PTEs X 96 (hours/month) / 120 = 16 – 35 FTEs + 16 Calculated FTEs = 51 FT Equivalents
  • 12. How Eligibility is Calculated • Companies under common control are considered one company. – You can’t subdivide businesses to avoid eligibility. – Separate businesses with common ownership must be evaluated as a whole.
  • 13. How the Penalties are Assessed • Assessed differently than eligibility is assessed. • Tax penalty is assessed if at least one FULL- TIME employee obtains coverage from through an exchange AND receives a premium credit. – No penalties for part-time workers. • Premium credits are for workers who are 138% to 400% of the Federal poverty level. – Employee premium must be greater than 9.5% of income. – Plan pays less than 60% of essential health benefits
  • 14. Penalty for >50FTE Employer not offering Health Insurance • Penalty applied to FT Employees (working over 30 hours a week) greater than 30. • $166.67 per month penalty for every FTE greater than 30 who do not have company-sponsored health insurance. – 35 FTEs and 20 PTEs. Penalty would be: 35 - 30 = 5 X $166.67 = $833.35/mo. – 29 FTEs and 50 PTEs. Penalty would be: 29 - 30 = -1 or 0 X $166.67 = $0/mo.
  • 15. Potential Penalties for Employers >50 FTE who do offer health insurance • Penalty is applied if any of the employer’s FT Employees (PTEs are excluded) receives a premium credit to purchase from an exchange. • To get premium credit: – Employee must be 138-400% of FPL AND – Employee’s share of premium > 9.5% of income OR – Policy does not provide minimal essential coverage. • Penalty is the lesser of: – FTEs – 30 X $2,000 – FTEs receiving premium credits X $3,000
  • 16. Potential Penalties Summarized Less Large Employer: 50 or more FTEs than 50 Does not offer coverage Offers coverage FTEs No FTEs 1 or more FTEs No FTEs 1 or more FTEs receive credit receives credit receive credit receives credit for for exchange for exchange for exchange exchange coverage coverage coverage coverage No penalty No penalty Number of FTEs No penalty Lesser of: minus 30 - Number of FTEs multiplied by minus 30 multiplied $2,000. by $2,000. - Number of FTEs who receive premium credit multiplied by $3,000
  • 17. Online Tools to Determine Eligibility and Penalties • Online calculator at www.franchise.org/healthcare/calculator.aspx • Government’s Outline of Rules http://www.healthcare.gov/using-insurance/emp • DHHS to be releasing a calculator for minimum essential coverage
  • 18. How does this apply to 2013? • The determination of the number of full- time vs part-time employees in 2014 will be based on a “Lookback Period” that includes 2013. – Each employee is classified FT or PT based on the hours they worked in that period. – Period can be 3 to 12 months – Employer can determine the length of the period
  • 19. 2014 Employer Checklist # 2 Automatic Enrollment of New Employees – Applies only to employers with 200+ Employees – Employers must automatically enroll new full- time employees in health plan – Employees may opt out
  • 20. 2014 Employer Checklist # 3 Limits to waiting periods for coverage • No health plan may impose a waiting period for benefits of greater than 90 days • Employers with 50+ employees will be fined for waiting periods over 90 days ($600 per FTE in waiting period).
  • 21. Decisions facing Employers • If you do provide • If you don’t provide health insurance: health insurance: – Should you continue to – Should you start? provide coverage? – Can you stay below – What changes should the 50 employee you make to your threshold? plans? – What are the best – What changes should vehicles to provide be made to insurance? contributions?
  • 22. Considerations in Deciding to Maintain or Buy Group Coverage • Insurance premiums are tax-deductible but penalties are not. • Cost of providing insurance is a function of the number of participants, not the number of employees. • The Individual Mandate will make insurance important to employees who did not care before. • Any additional compensation to cover Exchange costs will increase payroll (FICA/FUTA) taxes for the employer, and income and payroll (FICA) taxes for the employee. • If you already provide coverage, why? Has that changed?
  • 23. Considerations for the Providing Coverage • Does the plan cover 60% of expenses? – DHHS Calculator – Common sense guide • Does your contribution keep employees from paying more than 9.5% of their income for their plan? – Increase contribution? – Create classes that reverse discriminate?
  • 24. Whatever you do (or don’t do) • Do the math! Summary of Results: Pay or Play Analysis Potential Penalties Full-time Employees 73 Penalty (Cost) for not offering coverage to all full-time employees 0 Employees paying more than 9.5% of income for single coverage 29 Does plan pay for at least 60% of covered expenses for a typical population? YES Penalty for employees paying more than 9.5% $87,000 Total Potential Penalties Accrued $87,000 Cost of Providing Coverage Annual cost of current plan $198,756 Employee Contributions, including increased employer contribution for low income employees (89,556) Value of Federal Tax Deduction (37,128) Employer net cost of plan $72,072
  • 25. Whatever you do (or don’t do) • Do the math! • Make sure your assumptions are accurate. • Spreadsheet your options • Base calculations on what is known and minimize speculation. – We do know more than we don’t know – Many remaining questions will not be significant enough to require a change in course. – If information changes, then change the spreadsheet. • Re-assess after the exchanges have been around for a year.