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Affordable Care ActCounty of Sacramento

September 26, 2012

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Employer Timeline & Compliance 2012 – 2015+

Employee Timeline 2014 and Group Insurance California Health Benefits Exchange Wrap-Up

Agenda

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Employer Timeline & Compliance

2012 – 2015+

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Employer’s Timeline & Compliance2012 2013 2014 2015 +

SBC (OE/PY 9/23/12)

SBC Carve Out Arrangements

Uniform Glossary (PY 9/23/12)

60-day notice of material change (Mid-PY Only)

Preventive care for women (NGF PY 8/1/12) (Plan amendment)

Plan for Form W-2 Reporting

$2 million annual limit on EHB (PY 1/1/13) – Plan amendment required

Definition of EHB $2,500 cap HFSA

(PY 1/1/13) – Plan amendment required by 12/31/14

Report value of coverage on Form W-2 (1/31/13) – Coordinate with payroll

Notice of Exchange (3/31/13)

Clinical Effectiveness Research Fee for 2012 (File IRS Form 720 with payment due 7/31/13)

Additional .9% HI FICA withholding on wages exceeding $200,000

2014 Planning

Coverage for all adult children regardless of other coverage (PY 1/1/14) Amendment

No dollar limits on EHB (PY 1/1/14) Amendment

No Pre-ex regardless of age

90-day waiting period (PY 1/1/14) Amendment

Clinical Trial coverage (NGF)(PY 1/1/14) Amendment

Reinsurance Program Fee (3/31/14)

“Voluntary” Reporting to Exchange by employers (1/1/14)

Amend FSA by 12/31/14 retroactive to 2013 $2,500 Cap

Automatic Enrollment

Employer reporting to IRS about employee coverage

Tax penalties assessed on employers who do not offer any medical coverage or affordable coverage of minimum value in 2014

Discrimination rules issued on insured executive medical plans

• 2018: Cadillac Tax

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Summary of Benefits and Coverage • Effective for open enrollments and plan years

beginning on or after September 23, 2012• Applies to every group health plan (excluding

excepted benefits such as dental and vision)• Must be provided to eligible employees and

family members• Must be provided in a culturally and

linguistically appropriate manner• Electronic delivery permitted but paper copy

must be made available free of charge• Carve out plans have special challenges

2012– Summary of Benefits and Coverage and Related Documents

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Uniform Glossary• Same model document for everyone• Found at DOL and HHS websites• Employer may post on its intranet but inform

employees of this fact in the SBC and advise that a paper copy is available free of charge

60-Day notice of material change to SBC• Any material change to a plan during the plan

year that would cause a change to the SBC requires 60 days advance notice before change becomes effective

2012– Summary of Benefits and Coverage and Related Documents

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2012 Preventive Care for Women Preventive Care for Women (NGF Plans)

Effective for Plan Years on/after 8/1/12 Well women visits Screening for gestational diabetes Human papillomavirus testing Counseling for STDs Counseling and Screening for HIV All FDA approved contraceptive methods except

vasectomies Breastfeeding support and counseling Screening and counseling for domestic violence

Market these benefits – You have paid for them Value-Based Designs are permitted

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Not a tax – just a reporting Report value of 2012 health coverage by January 31, 2013

• Includes employer and employee portion of:▫ Major medical and Rx; wellness, EAP and on-site medical

clinics if COBRA; employer contribution to Health FSA▫ Pre-tax payments for voluntary benefits, or if paid by

employer (e.g. cancer insurance)• Use unsubsidized COBRA rate to calculate value

(minus administrative fee) Issues to address:

• Reporting on employees who leave mid-year• Off-month payroll cycle – final payroll• Information obtained after the close of the plan year• Non-calendar year plans• Mid-month changes• Optional reporting

2012– Planning for W-2 Reporting

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2012– Planning for W-2 Reporting

Coverage Type Report Do Not Report Optional

Major Medical X

Dental/vision not integrated with

Medical

X

HFSA funded solely by employee salary

X

HFSA employer contributions

X

HRA Contributions X

HSA Contributions X

Specified Illness paid after-tax

X

Specified Illness paid pre-tax or by

employer

X

EAP, On-site medical clinic, wellness

IF COBRA component If no COBRA component

Domestic Partner coverage include in

income

X

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$2 million overall aggregate annual dollar limit on “Essential Health Benefits”

$2,500 contribution cap to Health Flexible Spending Arrangements (“Health FSA”)

Report value of health coverage on IRS 2012 Form W-2

Notice of Exchange Clinical Effectiveness Research Fee for 2012 .9% HI FICA withholding on wages

exceeding $200,000

ACA Compliance 2013

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$2 million overall aggregate annual dollar limit on Essential Health Benefits• Effective for Plan Years beginning on/after

January 1, 2013• Plan Amendment required• Review your definition of Essential Health

Benefit• Consider converting dollar limits to visit

limits

2013– Annual Dollar Limit Floor Rises

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Self-insured plans and fully-insured large group health plans will not be required to offer Essential Health Benefits, but, if they do offer an EHB, the definition applies to: • Lifetime limits• Annual limits

Sponsors may continue to use good faith effort to define what is, and what is not, an Essential Health Benefit until guidance is issued.

Likely that the definition will be effective for 2014

Examples: acupuncture, TMJ, durable medical equipment

2013– Definition of Essential Health Benefits

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$2,500 salary reduction cap to Health FSAs• Effective for plan years beginning on or after

January 1, 2013• $2,500 limit applied on an employee-by-

employee basis• Plan amendment required but no later than

December 31, 2014 retroactive to 2013 provided that the plan is operated in compliance for the 2013 Plan Year

2013– Health FSA Cap

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Plan Sponsor must deliver to employees no later than March 31, 2013

Anticipate a model form for 2013 Informs employees of availability of health

coverage on the Exchange Advises of the potential for government

subsidies and reduced cost-sharing Advises of penalties for failure to have Minimum

Essential Coverage

2013– Notice of Exchange

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Supports federally mandated research on best practices for most effective treatments• $1.00/covered life for the 2012 Plan Year• $2.00/covered life for each year thereafter to

2019• Sponsor liability for self-insured plans• Insurance carrier liability for fully-insured

plans• Annual Tax Return and payment

▫ Payment due no later than July 31

2013– Clinical Effectiveness Research

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Plans must offer coverage for all children to age 26 regardless of their eligibility for other coverage

No overall aggregate annual dollar limits on Essential Health Benefits

No preexisting condition exclusions regardless of age

Eligibility waiting periods limited to no more than 90 days

Non-grandfathered plans may not prohibit participation in clinical trials and must cover routine services of clinical trials

Exchange Reinsurance Program Fee imposed on plans

Employer reporting to Exchange Amend FSA by end of 2014 for 2013 $2,500 cap

ACA Compliance 2014

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Plans must offer coverage for all children to age 26 regardless of their eligibility for other coverage• Covered under any parent plan• Covered under their employer’s plan• Covered under their spouse’s plan• Coordination of Benefits challenges• Mid-Year Enrollment Rights – Need for

guidance

2014– Dependent Coverage to age 26

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No overall aggregate annual dollar limits on Essential Health Benefits• Revisit definition of Essential Health Benefits• Take advantage of visit limits as compared to

dollar limits• No need to offer Essential Health Benefits

No preexisting condition exclusions regardless of age• Certificate of Creditable Coverage may be

obsolete

2014– No Annual Dollar Limits

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Eligibility waiting periods limited to no more than 90 days• If eligibility is based on time-served only• 90-day period starts when all other

requirements satisfied. For example, promotion to new classification

• Confirm probationary period not tied to eligibility for benefits

• Check collective bargaining agreement for work rules for full-time employees – may need to re-define FTE

• Part-Time employees can be required to satisfy an hours-worked requirement before the 90-day period commences. For example, 1250 hours of service for eligibility...then 90-day waiting period begins

2014– Limits on Waiting Periods

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Non-grandfathered plans must cover routine services for clinical trials• Cannot prevent participation in a Clinical

Trial if (1) recommended by participant’s physician; or (2) participant makes the case that he/she satisfies the eligibility requirements for the Clinical Trial

• Must cover all routine costs of Clinical Trial that are covered under group health plan (e.g. blood draw)

2014– Coverage for Clinical Trials

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Exchange Reinsurance Program Fee imposed on plans from 2014 to 2016• Paid by the (i) carrier; or (ii) TPA on behalf of

sponsor• To U.S. Department of Health and Human

Services• Additional amounts may be required by the

California Health Benefit Exchange• Carrier/TPA reports to HHS• Amount has not yet been determined but $60 -

$80 per participant has been suggested

2014– Exchange Reinsurance Program Fee

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2014 Compliance – Reporting and FSA

• Exchange states that employer reporting to the Exchange will be “voluntary”

• 2013 amendment for Health FSA must be adopted before the end of 2014, provided the FSA operated in compliance with the $2,500 cap for 2013

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Employee Timeline2012 – 2015+

(ACA From the Employee’s Point of View)

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Employee Timeline2012 2013 2014 2015 +

SBC (OE/PY 9/23/12)

Uniform Glossary (PY 9/23/12)

$2,500 cap HFSA (PY 1/1/13) – Plan amendment required by 12/31/14

Mass marketing begins for California Exchange (1/1/13)

Value of coverage reported on Form W-2 (1/31/13)

Notice of Exchange (3/31/13)

.9% Medicare payroll tax increase for high earners

3.8 % Medicare contribution tax on unearned income

Open enrollment for California Exchange begins October 1

Individual Mandate

Exchange coverage effective Jan 1

Premium subsidies for Exchange coverage available to low paid

Coverage for all adult children regardless of other coverage (PY 1/1/14) Amendment

New Definition of FTE

90-day waiting period

Clinical Trial coverage (NGF)(PY 1/1/14) Amendment

Automatic Enrollment

Employer reporting to IRS about employee coverage

Tax penalties assessed on employees who did not have Minimum Essential Coverage in 2014

• 2018: Cadillac Tax

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2013 HR Checklist Regarding Employees Preparation: Anticipating Employee Behavior

Mass marketing campaign by California Exchange – Questions?

Value of coverage on IRS Form W-2 – Questions? Notice of Exchange – Questions? Collective bargaining considerations –

Education/Schedule Planning Individual mandate - Questions Government subsidies for Exchange coverage -

Questions Adverse selection - Planning .9% Medicare Payroll Tax on High Earners –

Communications Open enrollment for the California Exchange –

Request for plan info Full-Time Employee - Questions How to responding to employee questions Develop communications strategy

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2014 and Group Insurance

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Individual Mandate Exchange health plans become effective

• Exchange coverage issued on a guaranteed issue basis with no medical underwriting

• Premium subsidies and cost sharing reductions for low-paid individuals who purchase Exchange coverage

New definition of full-time employee Potential tax penalties for employers who for

full-time employees:• Provide no coverage,• Provide unaffordable coverage, or• Provide coverage that provides less than

minimum value

Exchange and Tax Impacts 2014

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Works, on average, 30 hours per week (130 hours/month)• May use hourly equivalents for salaried

individuals• FTE under ACA is only for group health

coverage▫ Doesn’t affect other work rules or overtime▫ Revisit collective bargaining agreement

definition• Month-by-month calculation

▫ Tracked monthly▫ Part-time employee in one month may be a full-

time employee in another month▫ FTE Look-Back/Stability Safe-Harbor is available

New Definition of Full-time Employee

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Why is this important?• Employers are encouraged to provide

affordable medical coverage of minimum value to FTEs

• Employer tax penalties are based on a number of FTEs▫ $2000 x number of FTEs for failing to offer

coverage▫ Lesser of (i) $3000 x number of FTEs offered

coverage who instead gets a premium credit to purchase on the Exchange, or (ii) $2,000 x FTEs in excess of 30

• Certain Lower-Paid FTEs are eligible for government subsidies (triggering employer tax penalties for employers with at least 50 FTEs)

New Definition of Full-time Employee

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ACA Full-Time Employee

• No penalty tax is imposed on employers who do not provide group medical coverage, or affordable coverage or coverage of a minimum value to:– Part-Time Employees– Independent Contractors– Leased Employees– Seasonal (Temporary) Employees: (New

rules regarding these employees)– Newly Hired Full-Time Employees during up

to a 90-day waiting period (New rules regarding these employees)

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“Unaffordable” is based on the cost (to the employee) of the employer’s lowest cost single only coverage as a percentage of an employee’s household income• If the employee’s cost is more than 9.5% of

the employee’s household income, coverage is “unaffordable”

• How is an employer to estimate an employee’s household income?

• Affordability Safe-Harbor

Employer Tax Penalties

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Realign workforce using ACA definition of FTE

Articulate a benefits philosophy (i.e. what are you trying to accomplish with your health benefits?)

Begin preliminary workforce analysis using ACA definition of FTE

Estimate potential tax exposure, if any Continual realignment of workforce benefits

to benefits philosophy to FTE workforce Consider realignment of workforce benefits

to benefits philosophy to PTE workforce

2014– Group Insurance Strategy

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Employer cost of medical coverage for the low-paid FTEs may be significantly greater than the tax penalty

Employee cost of medical coverage on the Exchange may be significantly less than employer coverage when subsidies are available

Decision: eliminate the possibility of government subsidies (and employer tax penalties); embrace them; ignore them; or something else? Depends upon your benefits philosophy, collective bargaining

2014– Group Insurance Strategy

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Evaluate impact of the Exchange • Could it change employee behavior?• Employment practices (e.g. cash-in-lieu)

relative to the Exchange• What behaviors do you want to

promote/discourage?• Does the Exchange present an opportunity?• Would it impact retention of different types of

employee?• Would employees near Medicare retirement

age leave the workforce?

2014– Group Insurance Strategy

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Give yourself an opener, to be able to adjust to the final guidelines – Flexibility is important

Definition of FTE and PTE in CBA/MOU Coverage for Part-Time Employees Opportunities for subsidy-eligible

employees Medicare retirees Early retirees

2014– Collective Bargaining

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California Health Benefits Exchange

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California Health Benefit Exchange• Has divided California into geographic regions

and sub-regions• It has defined “plan” as consisting of Bronze,

Silver, Gold and Platinum (“full metal tier”) levels of benefits including a catastrophic plan within a geographic region

• A health insurance carrier can bid up to three plans for each geographic location– RFPs issued at end of September– Plans selected early 2013

• Recently received a $195 million grant, a portion of which is for marketing and outreach

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California Health Benefit Exchange• Exchange is very concerned about:

– Impact of adverse selection on it– Must be self-sustaining by January 1, 2015– Pricing– Marketing and outreach

• The California Healthcare Eligibility, Enrollment and Retention System (CalHEERS)

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Wrap Up

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Commentary

• Health Care Reform is now part of the California landscape and is not going away in California, regardless of the outcome of the elections

• Divide into three broad categoriesComplianceEmployeesWorkforce Strategy

• Strategic planning should not be delayed

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Keenan & Associates is an insurance brokerage and consulting firm. It is not a law firm or an accounting firm. We do not give legal advice or tax advice and neither this presentation, the answers provided during the Question and Answer period, nor the documents accompanying this presentation constitutes or should be construed as legal or tax advice. You are advised to follow up with your own legal counsel and/or tax advisor to discuss how this information affects you.

Thank You . . .