health reform update: large employers

Edwards & Sherlock - Large Employer Presentation 06.13.2013

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Health Reform Update:

Large Employers

Presented by:Presented by:Presented by:Presented by:

Eric Johnson | Eric Johnson | Eric Johnson | Eric Johnson | 817-366-7536 | [email protected]

Copy of Presentation: http://comedyce.com/edwardsandsherlock

Have you ever…


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Source: http://www.benefitspro.com/2013/04/10/where-in-the-world-is-kathleen-sebelius

I just see a huge train

wreck coming down.

Senator Max Baucus

Chairman, Senate Finance Committee,

Key Architect of Health Reform

Legislation

What will the public think?

Source: http://www.benefitspro.com/2013/04/30/nearly-half-of-americans-dont-know-ppaca-is-law

What will the public think? Who are these people?


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Size Matters! It’s all relative

Sometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be

bigbigbigbigSometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be Sometimes it’s good to be

smallsmallsmallsmall

Good BadBadBadBad

Large Group

Counting Lessons 4 Different Definitions

Small Group

Tax Credit

Large Group

Mandate

Minimum Medical

Loss Ratio (MLR)

Small Group Market Rules

Market Rules


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Small EmployersSmall Employers – Big Impact Market Segment Determines:

•Benefits that must be offered

•Rating rules

•Premiums

HHS Dictionary

Small Group =

2222----50505050“employees”

Who counts as an “employee”? We don’t know yet…

• Texas that would defines “small group” as 2-50 employees for

the next two years.

• In 2016, the default definition of small group is 1-100

employees, so employers with 51-100 employees will have to

comply with the small group market rules.

• But what’s an employee? We don’t know yet.

• HHS says that they’ll issue future guidance to tell us how to

determine employer status (large or small) for market rules

purposes.

• HIPAA guidance suggests that carriers will continue to base the

count on “eligible” employees who do not have other coverage.

Some win…

Some lose…

Rate Compression


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Higher Premiums for Some Groups

3 Reasons:3 Reasons:3 Reasons:3 Reasons:

• Essential Benefits

• Cost Sharing Limits

• Modified Adjusted Community Rating Essential Benefits = Mandates

Source: http://www.tdi.texas.gov/hmo/documents/lhmanben.pdf

Small Group Mandates in Texas

• Ambulatory patient services

• Emergency services

• Hospitalization

• Maternity & newborn care

• Mental health & substance abuse

• Prescription drugs

• Rehabilitative services

• Laboratory services

• Preventive Services

• Pediatric dental & vision care

Mandates Required by the ACA

90% 80% 70% 60%

Actuarial Value

Source: http://www.kff.org/healthreform/upload/8303.pdf

Tied to HSA max

Single: $6,350

Family: 12,700

Out of Pocket Limit


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Deductible Limit

• $2,000 single coverage

• $4,000 family coverage

Small Group Rating Process (TX)

1.1.1.1. Actuaries Actuaries Actuaries Actuaries rate based on case characteristicsrate based on case characteristicsrate based on case characteristicsrate based on case characteristics

� Group size (20% variation allowed)

� Industry (15% variation allowed)

� Age mix of group

� Gender mix of group

� Location

2.2.2.2. Underwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristics

� Medical conditions

� Longevity with carrier

� Other risk characteristics

� “Rate up” of 67% allowed year one and 15% at renewal time

NoteNoteNoteNote: These rules do not currently apply to the individual market in Texas: These rules do not currently apply to the individual market in Texas: These rules do not currently apply to the individual market in Texas: These rules do not currently apply to the individual market in Texas....

The Rules are Changing

1.1.1.1. Actuaries Actuaries Actuaries Actuaries rate based on case characteristicsrate based on case characteristicsrate based on case characteristicsrate based on case characteristics

� Group size (20% variation allowed)

� Industry (15% variation allowed)

� Age mix of group

� Gender mix of group

� Location

2.2.2.2. Underwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristicsUnderwriters rate based on risk characteristics

� Medical conditions

� Longevity with carrier

� Other risk characteristics

� “Rate up” of 67% allowed year one and 15% at renewal time

Note: These rules will apply to plans in the small group and individual Note: These rules will apply to plans in the small group and individual Note: These rules will apply to plans in the small group and individual Note: These rules will apply to plans in the small group and individual

marketsmarketsmarketsmarkets....

3 to 1 basis

New “Modified Adjusted Community Rating” Rules

lifestyle choices

Age: 3 to 1 Tobacco Use: 1.5 to 1 Family Status

Geographic Regions

Wellness Programs:Up to 50%

Not Gender or Medical

Premium Variations Allowed For:

Normal Trend: 12%

Premium Taxes: 3-5%

Product Increases: 3-4%

Factor 2013 2014

Industry 1.0 to 1.15 1.03

Group Size 1.0 to 1.20 1.04

Age 1.0 to 6.0 1.75 to 5.25

Medical 1.0 to 1.67 1.33

Gender Factored with age No longer a factor

* For illustration only – no carriers surveyed

Add it up…

-23% 14% 32% 100%

-10% 17% 37%

-23% 20% 39%

-5% 20% 39%

-28% 20% 40%

-1% 21% 40%

24%

Average = 18.65%

How High?


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Source: http://cciio.cms.gov/resources/files/market-reforms-guidance-2-25-2013.pdf

Standard CMS Rating Curve MemberMemberMemberMember----level rating requiredlevel rating requiredlevel rating requiredlevel rating required

The biggest problem with rating for tobacco use has to do with its

impact on a carrier’s ability to composite rate. HHS says:

for purposes of family coverage, any rating variation for age and

tobacco use must be applied based on the portion of the premium

attributable to each family member.

As HHS explains, “the law compels per-member rating because the

age and tobacco use factors must be attributable to individuals.”

This will create a mess in the small group market.

Less Impact for Large Employers

Small Group Market

In Texas, a bill was passed making small group 2-50 eligible

employees for the next 2 years. These groups:

• Must cover all “essential benefits”

• Have a $2,000 deductible limit

• Must comply with “modified adjusted community rating” rules

• May have “member level rating”

2-50

So…

Because the new mandated benefits (dental & vision for kids) and general

essential benefits requirements, cost-sharing limitations (specifically, the

maximum deductible), and weird modified adjusted community rating rules are

likely to have a severe negative impact on small group rates, employers actually

want to be large groups for the “market rules” definition.

Ironic, huh?

Little

Big

Eventually the cat runs out of lives…


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Employer Mandate

Employer Shared Responsibility Large Employers

IRS Dictionary

“Full-Time

Equivalents”

30

Full-Time Equivalent Employees

• Solely for purposes of determining whether an employer is an applicable large

employer for the current calendar year, section 4980H(c)(2)(E) provides that the

employer must calculate the number of full-time equivalent employees (FTEs) it

employed during the preceding calendar year and count each FTE as one full-time

employee for that year.

• The proposed regulations apply this provision using the calculation method for FTEs

that was included in Notice 2011–36. Under that method, all employees (including

seasonal workers) who were not fulltime employees for any month in the preceding

calendar year are included in calculating the employer’s FTEs for that month by (1)

calculating the aggregate number of hours of service (but not more than 120 hours of

service for any employee) for all employees who were not employed on average at

least 30 hours of service per week for that month, and (2) dividing the total hours of

service in step (1) by 120. This is the number of FTEs for the calendar month.

• In determining the number of FTEs for each calendar month, fractions are taken into

account. For example, if for a calendar month employees who were not employed on

average at least 30 hours of service per week have 1,260 hours of service in the

aggregate, there would be 10.5 FTEs for that month.

Source: Federal Register, 26 CFR Parts 1, 54, and 301, Shared Responsibility for Employers Regarding Health Coverage; Proposed Rule

Defining FTEs

To determine the number of FTEs, the proposed regulations direct

employers to use the calculation IRS provided in Notice 2011-36

(86 PBD, 5/4/11; 38 BPR 905, 5/10/11). To calculate the number

of FTEs for a given month under that method, the regulations said,

“all employees (including seasonal workers) who were not full-time

employees for any month in the preceding calendar year are

included in calculating the employer’s FTEs for that month by (1)

calculating the aggregate number of hours of service (but not more

than 120 hours of service for any employee) for all employees who

were not employed on average at least 30 hours of service per

week for that month, and (2) dividing the total hours of service in

step (1) by 120.”

Source: http://about.bloomberglaw.com/law-reports/irs-releases-proposed-aca-regulations-on-employer-%E2%80%98shared-responsibility/


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Defining FTEs

For employees who are paid on an hourly basis, the proposed

regulations require employers to “calculate actual hours of service

from records of hours worked and hours for which payment is

made or due for vacation, holiday, illness, incapacity (including

disability), layoff, jury duty, military duty or leave of absence.”


Defining FTEs

The proposed regulations provide three methods of calculating

hours for employees not paid on an hourly basis: using the same

method as for hourly employees; using a days-worked equivalency

method, whereby each employee would be credited with eight

hours of service for each day the employee worked; or using a

weeks-worked equivalency, whereby each employee would be

credited 40 hours of service for each week the employee worked.

Employers “need not use the same method for all non-hourly

employees. Rather, an employer may apply different methods for

different classifications of non-hourly employees, so long as the

classifications are reasonable and consistently applied,” the

proposed regulations said.


Defining FTEs

“However, consistent with Notice 2011-36, these proposed

regulations prohibit the use of the days-worked or weeks-worked

equivalency method if the result would be to substantially

understate an employee’s hours of service in a manner that would

cause that employee not to be treated as a full-time employee,”

IRS said in the proposed regulations.

“The proposed regulations are consistent with IRS notices that

have previously been issued and describe approaches that can be

used for various circumstances, such as for employees who work

variable hour schedules, seasonal employees, and teachers who

have time off between school years,” IRS said in a fact sheet about

the employer shared responsibility provisions.


Full Time = 30+ Hours

Part Time = % of Full-Time

Transition rule

In determining large employer status for 2014, an employer may

use a period of at least six consecutive calendar months in 2013

rather than the entire calendar year as otherwise required.

No Coverage for Part-Timers

While part-timers and seasonal employees are counted in

determining full-time equivalents, there is no requirement to offer

them coverage and no penalties if you don’t.


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Full-Time Employee Defined

“Full-time employee” for this purpose is defined as an employee

who works an average of 30 or more hours per week with 130

hours per month treated as equivalent to 30 hours per week.

Cap A Penalties

• Employers with 50 or more full-time equivalent (FTE) employees

are required to offer coverage to their full-time employees (those

who work 30+ hours per week).

• Applicable large employers that do not offer coverage must pay

a penalty of $2,000 per full-time employee with the first 30

excluded if even one employee accesses a subsidy through the

individual exchange.

• The penalty is not tax-deductible.

Example100 full-time employees, no coverage offered

Penalty is (100-30) x $2,000 = $140k

Cap B Penalties

• Employers with 50 or more full-time equivalent (FTE) employees

that do offer coverage pay a $3,000 penalty, but only on those

employees who access a subsidy. This can happen if:

• Coverage does not meet the 60% actuarial value requirement and is not

grandfathered.

• Coverage is unaffordable (employee’s share for EO premium exceeds

9.5% of household income).

• The penalty is not tax-deductible.

Example100 full-time employees, 5 access subsidy

Penalty is 5 x $3,000 = $15k

Making an Employer Shared

Responsibility Payment

16. How will an employer know that it owes an Employer Shared

Responsibility payment?

The IRS will contact employers to inform them of their potential

liability and provide them an opportunity to respond before any

liability is assessed or notice and demand for payment is made.

The contact for a given calendar year will not occur until after

employees’ individual tax returns are due for that year claiming

premium tax credits and after the due date for employers that

meet the 50 full-time employee (plus full-time equivalents)

threshold to file the information returns identifying their full-time

employees and describing the coverage that was offered (if any).

Source: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act

Certification Of Payment of Subsidy

Under section 4980H, an applicable large employer member is subject to an assessable

payment if at least one full-time employee of that member has been certified to the

member under section 1411 of the Affordable Care Act as having enrolled in a qualified

health plan with respect to which a premium tax credit is allowed or paid. Section 1411(a)

of the Affordable Care Act gives the Secretary of Health and Human Services the authority

to determine whether individuals are eligible to enroll in qualified health plans through

the Exchange and whether they are eligible for a premium tax credit. It is anticipated that,

in upcoming regulations to be proposed under section 1411(a) of the Affordable Care Act,

the Department of Health and Human Services (HHS) will establish a process under which

employees who have enrolled for a month in a qualified health plan with respect to which

an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect

to the employee will be certified to the employer and that, pursuant to the proposed

regulations, the certification to the employer will consist of methods adopted by the IRS to

provide this information to an employer as part of its determination of liability under

section 4980H. Existing HHS regulations also provide for a separate process for

notification of employers.


Making an Employer Shared

Responsibility Payment

17. How will an employer make an Employer Shared Responsibility

payment?

If it is determined that an employer is liable for an Employer

Shared Responsibility payment after the employer has responded

to the initial IRS contact, the IRS will send a notice and demand for

payment. That notice will instruct the employer on how to make the

payment. Employers will not be required to include the Employer

Shared Responsibility payment on any tax return that they file.



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How do we get out of this?

“But I don’t know my employees’

household income.”

Safe Harbor Rules

The IRS realizes that employers do not know the employee’s

household income, so there are three safe harbors that will allow

an employer to avoid a penalty:

• W-2

• Rate of Pay

• FPL

W-2 Safe Harbor

Source: http://www.shrm.org/legalissues/federalresources/pages/affordability-safe-harbors.aspx

Rate of Pay Safe Harbor


Federal Poverty Line Safe Harbor



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How does this affect carve-outs?

Carve Outs

Under what circumstances will an employer owe an Employer Shared Responsibility Under what circumstances will an employer owe an Employer Shared Responsibility Under what circumstances will an employer owe an Employer Shared Responsibility Under what circumstances will an employer owe an Employer Shared Responsibility

payment?payment?payment?payment?

In 2014, if an employer meets the 50 full-time employee threshold, the employer

generally will be liable for an Employer Shared Responsibility payment only if:

(a) The employer does not offer health coverage or offers coverage to less than 95% of its less than 95% of its less than 95% of its less than 95% of its

fullfullfullfull----time employeestime employeestime employeestime employees, and at least one of the full-time employees receives a premium tax

credit to help pay for coverage on an Exchange; OR

(b) The employer offers health coverage to at least 95% of its full-time employees, but at

least one full-time employee receives a premium tax credit to help pay for coverage on an

Exchange, which may occur because the employer did not offer coverage to that

employee or because the coverage the employer offered that employee was either

unaffordable to the employee (see question 11, below) or did not provide minimum value

(see question 12, below).

After 2014, the rule in paragraph (a) applies to employers that do not offer health

coverage or that offer coverage to less than 95% of their full time employees and the

dependents of those employees.


So…

It appears that carve-outs are going away in 2014.

Do I have to be compliant January 1st?

Transition Relief

I understand that the Employer Shared Responsibility provisions do not go into I understand that the Employer Shared Responsibility provisions do not go into I understand that the Employer Shared Responsibility provisions do not go into I understand that the Employer Shared Responsibility provisions do not go into

effect until 2014. However, the health plan that I offer to my employees runs on effect until 2014. However, the health plan that I offer to my employees runs on effect until 2014. However, the health plan that I offer to my employees runs on effect until 2014. However, the health plan that I offer to my employees runs on

a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make

sure my plan complies with these new requirements in 2013 when the next sure my plan complies with these new requirements in 2013 when the next sure my plan complies with these new requirements in 2013 when the next sure my plan complies with these new requirements in 2013 when the next

fiscal plan year starts?fiscal plan year starts?fiscal plan year starts?fiscal plan year starts?


Transition Relief

For an employer that as of December 27, 2012, already offers health coverage

through a plan that operates on a fiscal year (a fiscal year plan), transition relief

is available. First, for any employees who are eligible to participate in the plan

under its terms as of December 27, 2012 (whether or not they take the

coverage), the employer will not be subject to a potential payment until the first

day of the fiscal plan year starting in 2014.

Second, if (a) the fiscal year plan (including any other fiscal year plans that have

the same plan year) was offered to at least one third of the employer’s

employees (full-time and part-time) at the most recent open season or (b) the

fiscal year plan covered at least one quarter of the employer’s employees, then

the employer also will not be subject to the Employer Shared Responsibility

payment with respect to any of its full-time employees until the first day of the

fiscal plan year starting in 2014, provided that those full-time employees are

offered affordable coverage that provides minimum value no later than that first

day.



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Transition Relief

So, for example, if during the most recent open season preceding December 27,

2012, an employer offered coverage under a fiscal year plan with a plan year

starting on July 1, 2013 to at least one third of its employees (meeting the

threshold for the additional relief), the employer could avoid liability for a

payment if, by July 1, 2014, it expanded the plan to offer coverage satisfying the

Employer Shared Responsibility provisions to the full-time employees who had

not been offered coverage.

For purposes of determining whether the plan covers at least one quarter of the

employer’s employees, an employer may look at any day between October 31,

2012 and December 27, 2012.


Summarized (in English)

• Coverage in effect 12/27/2012, no change in renewal date

• Plan offered to at least 1/3 of all employees (full and part time)

or covered at least 1/4 of all employees (full and part time) at

renewal date in 2013

• Can wait until renewal date in 2014 to comply – no penalty will

be assessed

Carve Out Example

• 100 total employees, 40 in the covered class – ok,

can wait until renewal date in 2014 to offer to all full-

time employees

• 200 total employees, 20 in covered class – does not

satisfy requirements of transition rule, must be in

compliance January 1, 2014

Yes

No

Not Just Carve Outs

Most fiscal year plans will be able to qualify for this transition rule.

Employers that have a disproportionately low number of eligible

employees, however, may not.

Also note that even if coverage is not provided until the fiscal year

begins, the employer must report whether employees have been

offered affordable minimum value coverage for the entire 2014

calendar year.

Source: http://www.mondaq.com/unitedstates/x/234970/employee+rights+labour+relations/IRS+Proposed+Regulations+Provide+Additional+Guidance+For+Compliance+With+The+Employer+Shared+Responsibility+Rules

Transition Relief

19. Is transition relief available to help employers that are close to

the 50 full-time employee threshold determine their options for

2014?

Yes. Rather than being required to use the full twelve months of

2013 to measure whether it has 50 full-time employees (or an

equivalent number of part-time and full-time employees), an

employer may measure using any six-consecutive-month period in

2013. So, for example, an employer could use the period from Jan.

1, 2013, through June 30, 2013, and then have six months to

analyze the results, determine whether it needs to offer a plan,

and, if so, choose and establish a plan.


What about common ownership?


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Common Ownership – PPACA

PPACA Section 1513

Rules for Determining Employer SizeRules for Determining Employer SizeRules for Determining Employer SizeRules for Determining Employer Size

Application of Aggregation Rule for Employers – All persons treated

as a single employer under subsection (b), (c), (m), or (o), of section

414 of the Internal Revenue Code of 1986 shall be treated as 1

employer.

Section 414, Subsection (b)

(b) Employees of controlled group of corporations Employees of controlled group of corporations Employees of controlled group of corporations Employees of controlled group of corporations

For purposes of sections 401, 408 (k), 408 (p), 410, 411, 415,

and 416, all employees of all corporations which are members of a

controlled group of corporations (within the meaning of section

1563 (a), determined without regard to section 1563 (a)(4) and

(e)(3)(C)) shall be treated as employed by a single employer. With

respect to a plan adopted by more than one such corporation, the

applicable limitations provided by section 404 (a) shall be

determined as if all such employers were a single employer, and

allocated to each employer in accordance with regulations

prescribed by the Secretary.

Section 414, Subsection (c)

(c) Employees of partnerships, proprietorships, etc., which are Employees of partnerships, proprietorships, etc., which are Employees of partnerships, proprietorships, etc., which are Employees of partnerships, proprietorships, etc., which are

under common control under common control under common control under common control

For purposes of sections 401, 408 (k), 408 (p), 410, 411, 415,

and 416, under regulations prescribed by the Secretary, all

employees of trades or businesses (whether or not incorporated)

which are under common control shall be treated as employed by a

single employer. The regulations prescribed under this subsection

shall be based on principles similar to the principles which apply in

the case of subsection (b).

Section 414, Subsection (m)

(m) Employees of an affiliated service group Employees of an affiliated service group Employees of an affiliated service group Employees of an affiliated service group

(1) In general In general In general In general For purposes of the employee benefit requirements listed in paragraph (4), except to the extent

otherwise provided in regulations, all employees of the members of an affiliated service group shall be treated

as employed by a single employer.

(2) Affiliated service group Affiliated service group Affiliated service group Affiliated service group For purposes of this subsection, the term “affiliated service group” means a group

consisting of a service organization (hereinafter in this paragraph referred to as the “first organization”) and

one or more of the following:

� (A) any service organization which—

• (i) is a shareholder or partner in the first organization, and

• (ii) regularly performs services for the first organization or is regularly associated with the first

organization in performing services for third persons, and

� (B) any other organization if—

• (i) a significant portion of the business of such organization is the performance of services (for the

first organization, for organizations described in subparagraph (A), or for both) of a type historically

performed in such service field by employees, and

• (ii) 10 percent or more of the interests in such organization is held by persons who are highly

compensated employees (within the meaning of section 414(q)) of the first organization or an

organization described in subparagraph (A).

(3) Service organizations Service organizations Service organizations Service organizations For purposes of this subsection, the term “service organization” means an organization

the principal business of which is the performance of services.

Section 414, Subsection (m)

(4) Employee benefit requirements Employee benefit requirements Employee benefit requirements Employee benefit requirements For purposes of this subsection, the employee benefit requirements listed in

this paragraph are—

� (A) paragraphs (3), (4), (7), (16), (17), and (26) of section 401 (a), and

� (B) sections 408 (k), 408 (p), 410, 411, 415, and 416.

(5) Certain organizations performing management functions Certain organizations performing management functions Certain organizations performing management functions Certain organizations performing management functions For purposes of this subsection, the term “affiliated

service group” also includes a group consisting of—

� (A) an organization the principal business of which is performing, on a regular and continuing basis,

management functions for 1 organization (or for 1 organization and other organizations related to such 1

organization), and

� (B) the organization (and related organizations) for which such functions are so performed by the

organization described in subparagraph (A).

� For purposes of this paragraph, the term “related organizations” has the same meaning as the term

“related persons” when used in section 144 (a)(3).

(6) Other definitions Other definitions Other definitions Other definitions For purposes of this subsection—

� (A) Organization defined Organization defined Organization defined Organization defined The term “organization” means a corporation, partnership, or other organization.

� (B) Ownership Ownership Ownership Ownership In determining ownership, the principles of section 318 (a) shall apply.

Section 414, Subsection (o)

(o) Regulations Regulations Regulations Regulations

The Secretary shall prescribe such regulations (which may provide rules in

addition to the rules contained in subsections (m) and (n)) as may be necessary

to prevent the avoidance of any employee benefit requirement listed in

subsection (m)(4) or (n)(3) or any requirement under section 457 through the

use of—

(1) separate organizations,

(2) employee leasing, or

(3) other arrangements.

The regulations prescribed under subsection (n) shall include provisions to

minimize the recordkeeping requirements of subsection (n) in the case of an

employer which has no top-heavy plans (within the meaning of section 416 (g))

and which uses the services of persons (other than employees) for an

insignificant percentage of the employer’s total workload.


15

Common Ownership – IRS FAQs

If two or more companies have a common owner or are otherwise related, are they If two or more companies have a common owner or are otherwise related, are they If two or more companies have a common owner or are otherwise related, are they If two or more companies have a common owner or are otherwise related, are they

combined for purposes of determining whether they employ enough employees to be combined for purposes of determining whether they employ enough employees to be combined for purposes of determining whether they employ enough employees to be combined for purposes of determining whether they employ enough employees to be

subject to the Employer Shared Responsibility provisions?subject to the Employer Shared Responsibility provisions?subject to the Employer Shared Responsibility provisions?subject to the Employer Shared Responsibility provisions?

Yes, consistent with longstanding standards that apply for other tax and employee benefit

purposes, companies that have a common owner or are otherwise related generally are

combined together for purposes of determining whether or not they employ at least 50

full-time employees (or an equivalent combination of full-time and part-time employees).

If the combined total meets the threshold, then each separate company is subject to the

Employer Shared Responsibility provisions, even those companies that individually do not

employ enough employees to meet the threshold. (The rules for combining related

employers do not apply for purposes of determining whether an employer owes an

Employer Shared Responsibility payment or the amount of any payment). The proposed

regulations provide information on the rules for determining whether companies are

related and how they are applied for purposes of the Employer Shared Responsibility

provisions.


Common Ownership – Proposed Rules

No Aggregation in Determining Liability of An Applicable Large No Aggregation in Determining Liability of An Applicable Large No Aggregation in Determining Liability of An Applicable Large No Aggregation in Determining Liability of An Applicable Large

Employer MemberEmployer MemberEmployer MemberEmployer Member

The proposed regulations address the application of section 4980H to an

applicable large employer member. As noted in section I.A.2. of this preamble,

under section 4980H(c)(2), the determination of applicable large employer

status is made on a controlled group basis applying the aggregation rules under

section 414(b), (c), (m), and (o). Section 4980H(c)(2)(D) provides that, in

calculating the liability under section 4980H(a), the applicable large employer,

as determined applying these same aggregation rules, is permitted one

reduction of 30 full-time employees, and that the reduction must be allocated

ratably among the members of the applicable large employer based on each

member’s number of full-time employees.



The proposed regulations provide that, although applicable large

employer status and the 30-employee reduction is determined on

an aggregated basis, the determination of whether an employer is

subject to an assessable payment and the amount of any such

payment is determined on a member-by-member basis. Therefore,

the liability for, and the amount of, any assessable payment under

section 4980H is computed and assessed separately for each

applicable large employer member, taking into account that

member’s offer of coverage (or lack thereof) and based on that

member’s number of full-time employees.



For example, if a parent corporation owns 100 percent of all

classes of stock of 20 subsidiary corporations, and the controlled

group is an applicable large employer, each of the 21 members of

this controlled group (the parent corporation plus 20 subsidiary

corporations) is considered separately in computing and assessing

a section 4980H payment. In addition, each of the 21 group

members is liable only for its separate section 4980H assessable

payment.


Can I re-classify my employees as 1099 or

temporary?

Staffing Companies

• The Treasury Department and the IRS recognize that the application of

section 4980H may be particularly challenging for temporary staffing

agencies because of the distinctive nature of their employees’ work

schedules. In particular, several commenters discussed the challenges

involved in applying the look-back measurement method to employees of

temporary staffing agencies.

• Seeking comments (due March 18th)

• Do not want employees jumping in-between group coverage and subsidized

individual plans in the exchange.

• Will not allow employers to fire employees and re-hire them from one or more

staffing companies.



16

Anti-Abuse Rules

The Treasury Department and the IRS are aware of various structures being

considered under which employers might use temporary staffing agencies (or

other staffing agencies) purporting to be the common law employer to evade

application of section 4980H.


Anti-Abuse Rules

In one structure, the employer (referred to in this section as the “client”) would

purport to employ its employees for only part of a week, such as 20 hours, and

then to hire those same individuals through a temporary staffing agency (or

other staffing agency) for the remaining hours of the week, thereby resulting in

neither the “client” employer nor the temporary staffing agency or other staffing

agency appearing to employ the individual as a full-time employee. In another

structure, one temporary staffing agency (or other staffing agency) would purport

to employ an individual and supply the individual as a worker to a client for only

part of a week, such as 20 hours, while a second temporary staffing agency or

other staffing agency would purport to employ the same individual and supply

that individual as a worker to the same client for the remainder of the week,

thereby resulting in neither the temporary staffing agencies or the other staffing

agencies, nor the client, appearing to employ the individual as a full-time

employee.


Anti-Abuse Rules

The Treasury Department and the IRS anticipate that only in rare circumstances,

if ever, would the “client” under these fact patterns not employ the individual

under the common law standard as a full-time employee. Rather, the Treasury

Department and the IRS believe that the primary purpose of using such an

arrangement would be to avoid the application of section 4980H.


Anti-Abuse Rules

It is anticipated that the final regulations will contain an anti-abuse rule to

address the situations described in this section of the preamble. Under that

anticipated rule, if an individual performs services as an employee of an

employer, and also performs the same or similar services for that employer in

the individual’s purported employment at a temporary staffing agency or other

staffing agency of which the employer is a client, then all the hours of service are

attributed to the employer for purposes of applying section 4980H. Similarly, to

the extent an individual performs the same or similar services for the same

client of two or more temporary staffing agencies or other staffing agencies, it is

anticipated that all hours of service for that client are attributed to the client, if

the client is the common law employer, or, if not, one of the temporary staffing

agencies (or other staffing agencies) that purports to employ the individual with

respect to services performed for that client.


1099 Contract Workers

•As with staffing companies,

it’s possible that a 1099 worker

could be treated as a

company’s “common law”

employee

•Factors determining

classification include exclusive

work agreements, use of tools,

control of schedule, etc.

What if my employees only work part of the

year?


17

Seasonal Workers

• Section 4980H(c)(2)(B)(ii) provides that if an employer’s workforce exceeds

50 full-time employees for 120 days or fewer during a calendar year, and the

employees in excess of 50 who were employed during that period of no more

than 120 days were seasonal workers, the employer is not an applicable

large employer.

• In addition, the 120-day period referred to in section 4980H(c)(2)(B)(ii) is

relevant only for applying the seasonal worker exception for determining

status as an applicable large employer, and is not relevant for determining

whether an employee is a seasonal employee for purposes of the look-back

measurement method (meaning that an employee who provides services for

more than 120 days per year may nonetheless qualify as a seasonal

employee).


Seasonal Employee Defined

§ 4980H(c)(2)(B)(ii) provides that, for this purpose, seasonal worker

means a worker who performs labor or services on a seasonal basis,

as defined by the Secretary of Labor, including (but not limited to)

workers covered by 29 CFR 500.20(s)(1) and retail workers employed

exclusively during holiday seasons. The statute does not address how

the term “seasonal employee” might be defined for purposes other

than the determination of applicable large employer status, such as

the determination of whether a new employee of an applicable large

employer is reasonably expected to work full time for purposes of

determining the amount of any assessable payment under § 4980H.

Through at least 2014, employers are permitted to use a reasonable, Through at least 2014, employers are permitted to use a reasonable, Through at least 2014, employers are permitted to use a reasonable, Through at least 2014, employers are permitted to use a reasonable,

good faith interpretation of the term “seasonal employee” for good faith interpretation of the term “seasonal employee” for good faith interpretation of the term “seasonal employee” for good faith interpretation of the term “seasonal employee” for

purposes of this notice.purposes of this notice.purposes of this notice.purposes of this notice.

Source: http://www.irs.gov/pub/irs-drop/n-12-58.pdf

My employees work variable hours. How do I determine if someone’s

really full time?

Variable Hour Employees

•Optional look back period

•Up to 12 months

•Determined by employer

•Average number of hours an

employee works during look-

back period determines status

(FT or PT) during the

stabilization period

•Stabilization period must be at

least as long as the look-back

Safe Harbor Rules

The IRS allows employers to use an optional “look back period” to

determine whether employees are full-or part-time.

• Ongoing employees

• New employees

• Seasonal employees

Guidance was issued in Notice 2012-58

http://www.irs.gov/pub/irs-drop/n-12-58.pdf

Purpose and Overview

This notice describes safe harbor methods that employers may use

(but are not required to use) to determine which employees are

treated as full-time employees for purposes of the shared employer

responsibility provisions of § 4980H of the Internal Revenue Code

(Code).

This guidance is intended to encourage employers to continue

providing and potentially to expand group health plan coverage for

their employees by permitting employers to adopt reasonable

procedures to determine which employees are full-time employees

without becoming liable for a payment under § 4980H, to protect

employees from unnecessary cost, confusion, and disruption of

coverage, and to minimize administrative burdens on the

Affordable Insurance Exchanges (Exchanges).


18

Still no final answers…

Shared Responsibility: Proposed Rules


The IRS has closed the loopholes

Strategies

Move renewal date to 12/1

The transition rule says a group

must keep the effective date it

had 12/27/2012.

Move employees to part-time

Be careful – it may violate labor

laws.


19

How cutting employee hours due to

health reform may infringe federal law

Countless employers and their advisers are considering a health

care reform strategy of cutting employees' weekly hours to less

than 30 hours to try to avoid dealing with coverage requirements

under the Affordable Care Act. At first blush, this approach seems

to provide cover from a variety of costs associated with the ACA by

getting employees off the health plan eligibility list.

However, a potential problem exists with this strategy and it is

found in the backwaters of ERISA Section 510 which refers back to

ERISA Section 502. This could be fodder for attorneys depending

on the motive of the employer in taking employees part time.

Source: http://eba.benefitnews.com/news/how-cutting-employee-hours-due-to-health-reform-may-infringe-federal-law-2733435-1.html



The poignant part of ERISA Section 510 states: "It shall be unlawful

for any person to discharge, fine, suspend, expel, discipline or

discriminate against a participant or beneficiary for exercising any

right to which he is entitled under the provisions of an employee

benefit plan ... or for the purpose of interfering with the attainment

of any right to which such participant may become entitled under

the plan ... "

A plan participant in an ERISA plan (health plans are ERISA plans)

has a legal right to participate in the plan without undo

interference.




For sure, employers can - and do - cut employees' hours for

reasons of legitimate business necessity. Sometimes a cut in hours

relegates a benefit plan participant to ineligibility to participate in

the plan under the terms of the plan's eligibility requirements.

Now, let us look at the single motive that some employers are

considering to avoid offering health benefits under the terms of the

ACA. This is key to a potential ERISA Section 510 claim against an

employer.




If the single motive for cutting employees hours is to avoid the

purposes of the ACA, to me, that sounds like a subterfuge that

interferes with a plan participant's rights to their health plan. That

is one of the very prohibitions that ERISA Section 510 was written

to prevent.

The bottom line is that you and your employer client may be on

shaky ground using the cut-in-hours strategy to knock plan

participants off the health plan eligibility list and avoid further

provision of health benefits to otherwise qualified plan

participants.


Penalties

Penalties always get attention. A violation of the employee's rights

to participate in their plan or retaliation of the sort that results in a

loss of group health plan coverage for reasons already discussed

can be prohibitively expensive for the employer.

First, a plan participant may start a civil action to address loss of

ERISA rights or retaliation for seeking to exercise rights under the

plan. Second, the DOL can assess fines for each violation against

the fiduciaries of the plan.

When all is said and done, messing with employees' rights to a

health plan is tricky and potentially an expensive proposition.


Offer a skinny plan

In theory this can work, but be

careful.


20

Employers Eye Bare-Bones Health Plans

Under New Law

Employers are increasingly recognizing they may be able to avoid

certain penalties under the federal health law by offering very

limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers—bucking a commonly held

expectation that the law would broadly enrich benefits—are

pitching these low-benefit plans around the country. They cover

minimal requirements such as preventive services, but often little

more. Some of the plans wouldn't cover surgery, X-rays or prenatal

care at all. Others will be paired with limited packages to cover

additional services, for instance, $100 a day for a hospital visit.

Source: http://online.wsj.com/article/SB10001424127887324787004578493274030598186.html


Under New Law

Federal officials say this type of plan, in concept, would appear to

qualify as acceptable minimum coverage under the law, and let

most employers avoid an across-the-workforce $2,000-per-worker

penalty for firms that offer nothing. Employers could still face other

penalties they anticipate would be far less costly.



Under New Law

Pan-American Life Insurance Group Inc. has promoted a package

including bare-bones plans, according to brokers in California,

Kansas and other states and company documents. Carlo

Mulvenna, an executive at New Orleans-based Pan-American,

confirmed the firm is developing these types of products, and said

it would adjust them as regulators clarify the law.



Under New Law

The idea that such plans would be allowable under the law has

emerged only recently. Some benefits advisers still feel they could

face regulatory uncertainty. The law requires employers with 50 or

more workers to offer coverage to their workers or pay a penalty.

Many employers and benefits experts have understood the rules to

require robust insurance, covering a list of "essential" benefits such

as mental-health services and a high percentage of workers' overall

costs. Many employers, particularly in low-wage industries, worry

about whether they—or their workers—can afford it.



Under New Law

But a close reading of the rules makes it clear that those mandates

affect only plans sponsored by insurers that are sold to small

businesses and individuals, federal officials confirm. That affects

only about 30 million of the more than 160 million people with

private insurance, including 19 million people covered by

employers, according to a Citigroup Inc. C +0.04% report. Larger

employers, generally with more than 50 workers, need cover only

preventive services, without a lifetime or annual dollar-value limit,

in order to avoid the across-the-workforce penalty.



Under New Law

Such policies would generally cost far less to provide than paying

the penalty or providing more comprehensive benefits, say benefit-

services firms. Some low-benefit plans would cost employers

between $40 and $100 monthly per employee, according to

benefit firms' estimates.



21


Under New Law

Administration officials confirmed in interviews that the skinny

plans, in concept, would be sufficient to avoid the across-the-

workforce penalty. Several expressed surprise that employers

would consider the approach.

"We wouldn't have anticipated that there'd be demand for these

types of band-aid plans in 2014," said Robert Kocher, a former

White House health adviser who helped shepherd the law. "Our

expectation was that employers would offer high quality insurance."

Part of the problem: lawmakers left vague the definition of

employer-sponsored coverage, opening the door to unexpected

interpretations, say people involved in drafting the law.



Under New Law

Limited plans may not appeal to all workers, and while employers

would avoid the broader $2,000-per-worker penalty for all

employees not offered coverage, they could still face a $3,000

individual fee for any employee who opts out and gets a subsidized

policy on the exchanges.

But the approach could appeal to companies with a lot of low-wage

workers such as retailers and restaurant operators, who are willing

to bet that those fees would add up slowly because even with

subsidies, many workers won't want to pay the cost of the richer

exchange coverage.



Under New Law

A full-time worker earning $9 an hour would have to pay as much

as $70 a month for a midlevel exchange plan, even with the

subsidies, according to Kaiser. At $12 an hour, the workers' share

of the premium would rise to as much as $140 a month.



Under New Law

San Antonio-based Bill Miller Bar-B-Q, a 4,200-worker chain, will

replace its own mini-med with a new, skinny plan in July and will

aim to price the plan at less than $50 a month, about the same as

the current policy, said Barbara Newman, the chain's controller.

The new plan will have no dollar limits on benefits, but will cover

only preventive services, six annual doctors' visits and generic

drugs. X-rays and tests at a local urgent care chain will also be

covered. It wouldn't cover surgeries or hospital stays.



Under New Law

Because the coverage is limited, workers who need richer benefits

can still go to the exchanges, where plans would likely be cheaper

than a more robust plan Bill Miller has historically offered to

management and that costs more than $200 per month. The chain

plans to pay the $3,000 penalty for each worker who gets an

exchange-plan subsidy.

But, "those are going to be the people who will be ill and need a

more robust plan," and insuring them directly could cost even

more, Ms. Newman said.



Under New Law

Many more workers, she expects, will continue to go without

insurance, despite the exchanges and the limited plan. Currently,

only one-quarter of workers eligible for the mini-med plan take it.

Ms. Newman said, "We really feel like the people who are not

taking it now will not take it then."



22


Under New Law

Tex-Mex restaurant chain El Fenix also said it would offer limited

plans to its 1,200 workers, covering doctors visits, preventive care

and drugs, but not hospital stays or surgery. "What our goal was all

along was to make [offering coverage] financially palatable for the

company as a whole, so we didn't do damage and have to let

people go or slow down our growth," said Brian Livingston, chief

financial officer of Dallas-based Firebird Restaurant Group LLC,

owner of El Fenix.



Under New Law

Some benefits advisers worry that since the idea of the low-benefit

plans is so new, they could yet invite scrutiny from regulators, and

may run afoul of other health law requirements.

John Owens, a broker for the Lewer Agency in Kansas City, Mo.,

said a large Midwestern convenience store chain is considering

signing up for such a policy and is awaiting guidance from

regulators.

"What I'm telling people is, this may work, but you better have a

plan B," said Andrew Ky Haynes, a Kansas City, Mo.-based benefits

lawyer.


Be Careful

The IRS suggested what it sees as a possible problem: A large

employer might offer a low-value health plan, then try to get out of

paying PPACA "no minimum-value health plan" penalties by keeping

employees from applying for the premium assistance tax credit.

If an employer did that, regulators "may treat such arrangements

as impermissible interference with an employee's ability to access

premium tax credits," the IRS said.

Source: http://www.lifehealthpro.com/2013/05/01/irs-drafts-large-group-minimum-value-rules

Proposed Minimum Value Rules

Source: https://www.federalregister.gov/articles/2013/05/03/2013-10463/minimum-value-of-eligible-employer-sponsored-plans-and-other-rules-regarding-the-health-insurance

What about the dependents?

Subsidies


23

PremiumTax Credits

Cost SharingSubsidies

Total Exposure

Financial AssistancePremium Tax Credits

Income Level Premium as a Percent of Income

Up to 133% FPL 2%

133 – 150% FPL 3 – 4%

150 – 200% FPL 4 – 6.3%

200 – 250% FPL 6.3 – 8.05%

250 – 300% FPL 8.05 – 9.5%

300 – 400% FPL 9.5%

Cost Sharing Subsidies

Income Level Reduction in OOP Liability

100 – 200% FPL Reduced by two-thirds

200 – 250% FPL Reduced by 20%

Income Level Actuarial Value

100 – 150% FPL 94%

150 – 200% 87%

200 – 250% FPL 73%

2013 Federal Poverty Guidelines

Household Size 100% 133% 150% 200% 300% 400%

1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960

2 $15,510 $20,628 $23,265 $31,020 $46,530 $62,040

3 $19,530 $25,975 $29,295 $39,060 $58,590 $78,120

4 $23,550 $31,322 $35,325 $47,100 $70,650 $94,200

5 $27,570 $36,668 $41,355 $55,140 $82,710 $110,280

6 $31,590 $42,015 $47,385 $63,180 $94,770 $126,360

7 $35,610 $47,361 $53,415 $71,220 $106,830 $142,440

8 $39,630 $52,708 $59,445 $79,260 $118,890 $158,520

Each extra person $4,020 $5,347 $6,030 $8,040 $12,060 $16,080

48 Contiguous States and DCSource: http://www.familiesusa.org/resources/tools-for-advocates/guides/federal-poverty-guidelines.html

Eligibility Criteria

• In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.In general, household income must be between 100 percent and 400 percent of the Federal Poverty Level.

• Cannot have access to minimum essential coverage, other than individual market coverage:Cannot have access to minimum essential coverage, other than individual market coverage:Cannot have access to minimum essential coverage, other than individual market coverage:Cannot have access to minimum essential coverage, other than individual market coverage:

• Minimum essential coverage is defined as any coverage in the individual, small group or large group markets, Medicare, Medicaid, CHIP, TRICARE, veterans' health care and Peace Corps coverage, and any other coverage the Departments of Health and Human Services and IRS deem minimum essential coverage in future regulations.

• There is an exception to this rule if coverage offered by an employer either does not meet a minimum value test (at least 60 percent actuarial value) or an affordability test (the employee share of the premium for self-only coverage cannot exceed 9.5 percent of household income).

• Credit only applies to coverage months for an individual market QHP purchased through an Affordable Care Act Exchange.

• Married couples must file a joint tax return.Married couples must file a joint tax return.Married couples must file a joint tax return.Married couples must file a joint tax return.

• Those receiving advance premium tax credits are required to file a tax return for the taxable year in which the advanced payment is received.

• Must be a legal resident.

• Cannot be incarcerated.

• An individual cannot be an "applicable taxpayer" if the individual can be claimed as a dependent by another taxpayer

• Taxpayer's share of the premium for the coverage month must be paid in full by the taxpayer's tax filing date.

Source: http://www.bcbsm.com/content/microsites/health-care-reform/en/reform-alerts/irs-issues-final-rule-regarding-premium-tax-credits-for-the-exch.html


24

Can someone eligible for group

coverage qualify for a subsidy?

Only if:Only if:Only if:Only if:

• The group coverage does not meet the “minimum essential

coverage” standards

• Minimum essential coverage = bronze level 60% actuarial

value level, government plan, or grandfathered plan.

• OR the group coverage is deemed “unaffordable”

• “Unaffordable” means that the employee’s cost for single

coverage after the employer contribution would exceed 9.5%

of his household income.

Final Rules – February 1, 2014

• The proposed regulations provided that, for taxable years beginning before

January 1, 2015, an eligible employer-sponsored plan is affordable for

related individuals if the portion of the annual premium the employee must

pay for self-only coverage (the required contribution percentage) does not

exceed 9.5% of the taxpayer’s household income. While several comments

supported this rule, other comments asserted that the affordability of

coverage for related individuals should be based on the portion of the annual

premium the employee must pay for family coverage.

• These final regulations adopt the proposed rule without change. The

language of section 36B, through a cross-reference to section

5000A(e)(1)(B), specifies that the affordability test for related individuals is

based on the cost of self-only coverage.

Source: https://www.federalregister.gov/articles/2013/02/01/2013-02136/health-insurance-premium-tax-credit#print_view

Final Rules – February 1, 2014

• By contrast, section 5000A, which establishes the shared responsibility

payment applicable to individuals for failure to maintain minimum essential

coverage, addresses affordability for employees in section 5000A(e)(1)(B)

and, separately, for related individuals in section 5000A(e)(1)(C).

• Thus, proposed regulations under section 5000A, which the Treasury

Department is releasing concurrently with these final regulations, provide

that, for purposes of applying the affordability exemption from the shared

responsibility payment in the case of related individuals, the required

contribution is based on the premium the employee would pay for employer-

sponsored family coverage.

Source: https://www.federalregister.gov/articles/2013/02/01/2013-02136/health-insurance-premium-tax-credit#print_view

Exclude spouse from eligibility

The shared responsibility rule

doesn’t require the employer to

offer coverage to the spouse

Section 4980H Coverage for Dependents

In response to commenters’ questions regarding who would qualify

as a dependent for coverage under Section 4980H, the proposed

regulations define “dependents” for purposes of Section 4980H as

“an employee’s child (as defined in section 152(f)(1)) who is under

26 years of age.”

“Thus, an offer of coverage to an employee’s spouse is not

required for purposes of section 4980H because section 4980H

refers only to dependents,” the proposed regulations said.


Section 4980H Coverage for Dependents

Because employers that currently do not offer dependent coverage

“will require substantial revisions to their plans and to their

procedures for administration of the plans,” IRS said in the

proposed rule that it will provide transitional relief with respect to

dependent coverage for plan years that begin in 2014.

“Accordingly, any employer that takes steps during its plan year

that begins in 2014 toward satisfying the section 4980H

provisions relating to the offering of coverage to full-time

employees’ dependents will not be liable for any assessable

payment under section 4980H solely on account of a failure to

offer coverage to the dependents for that plan year,” the proposed

rule said.



25

Why your boss is dumping your wife

Source: http://www.marketwatch.com/story/why-your-boss-is-dumping-your-wife-2013-02-22/


By denying coverage to spouses, employers not only save the

annual premiums, but also the new fees that went into effect as

part of the Affordable Care Act. This year, companies have to pay

$1 or $2 “per life” covered on their plans, a sum that jumps to $65

in 2014. And health law guidelines proposed recently mandate

coverage of employees’ dependent children (up to age 26), but

husbands and wives are optional. “The question about whether it’s

obligatory to cover the family of the employee is being thought

through more than ever before,” says Helen Darling, president of

the National Business Group on Health.



While surcharges for spousal coverage are more common, last

year, 6% of large employers excluded spouses, up from 5% in

2010, as did 4% of huge companies with at least 20,000

employees, twice as many as in 2010, according to human

resources firm Mercer. These “spousal carve-outs,” or “working

spouse provisions,” generally prohibit only people who could get

coverage through their own job from enrolling in their spouse’s

plan.



Such exclusions barely existed three years ago, but experts expect

an increasing number of employers to adopt them: “That’s the next

step,” Darling says. HMS, a company that audits plans for

employers, estimates that nearly a third of companies might have

such policies now. Holdouts say they feel under pressure to follow

suit. “We’re the last domino,” says Duke Bennett, mayor of Terre

Haute, Ind., which is instituting a spousal carve-out for the city’s

health plan, effective July 2013, after nearly all major employers in

the area dropped spouses.



But when employers drop spouses, they often lose more than just

the one individual, when couples choose instead to seek coverage

together under the other partner’s employer. Terre Haute, which

pays $6 million annually to insure nearly 1,200 people including

employees and their family members, received more than 20 new

plan members when a local university, bank and county

government stopped insuring spouses, according to Bennett. “We

have a great plan, so they want to be on ours. All we’re trying to do

is level the playing field here,” he says.



While couples generally prefer to be on the same health plan,

companies often find that spouses are more expensive to insure

than their own employees. That’s because, say benefits experts,

covered spouses tend to be women, who as a group not only spend

more on health care, but also have more free time to go to the

doctor if they don’t work. Indeed, JetBlue’s covered spouses cost

50% more than crewmembers themselves, according to the

airline’s online Q&A about its health plan, which this year extended

wellness incentives to spouses for the first time.



26


About a fifth of companies had policies to discourage spouses from

joining their health plan in 2012, according to Mercer, though most

just charged extra—$100 a month, on average—to cover spouses

who could get insurance elsewhere, rather than deny coverage

entirely. Indeed, large firms including generics maker Teva and

supply chain manager Intermec have spousal surcharges costing

$100 a month, or $1,200 annually, while Xerox charges $1,000 for

the year.



But experts say more firms are likely to drop spouses altogether,

whether they work or not—especially when the new federal health-

care exchanges open in 2014, providing an alternative for spouses

left out in the cold. “When there’s a place for people to go,

employers won’t feel as beholden or compelled to cover the

spouse,” says Joan Smyth, an employee benefits consultant with

Mercer.


But will it really be worth it?

Calculating the Subsidy in a Split Household.Calculating the Subsidy in a Split Household.Calculating the Subsidy in a Split Household.Calculating the Subsidy in a Split Household.

QuestionQuestionQuestionQuestion: If only the husband needs coverage in a household of

two. Wife has medicare. How is premium and credits calculated. Is

the price on online tool give for both people in household?

Answer:Answer:Answer:Answer: I’ll use an example to illustrate how the subsidy is

calculated. For example, assume that your family income (2

people) is $37,000 annually). The Covered California Calculator

shows your premium at $236 per month. This is the amount you

would pay, even though your spouse does not need coverage in the

exchange. The federal (tax credit) subsidy would pay the rest of the

total premium.

Source: http://www.cahba.com/advice/2013/04/split_household_premium_calculation.html

Should employers drop coverage

altogether?

Higher paid employees don’t qualify for

$$$

• If you don’t offer coverage, you’re throwing your higher paid

employees to the wolves.

• Individual premiums will increase even more than small group

premiums.

Plus…

• You don’t know household income, so some of your lower paid

employers may not qualify for a subsidy (1 in 6 people who earn

less than $20k per year live in a household that earns over

400% of the FPL).

• If an employee’s spouse works and is eligible for group health

coverage, the family may already be blocked from getting a

subsidy.

• In other words, you may not actually be helping your employee In other words, you may not actually be helping your employee In other words, you may not actually be helping your employee In other words, you may not actually be helping your employee

by not offering coverage.by not offering coverage.by not offering coverage.by not offering coverage.


27

Explain CHIP at enrollment meetings

CHIP eligibility allows for higher

income levels than Medicaid –

a lot of people will qualify

CHIP eligibility criteria

Source: http://www.chipmedicaid.org/en/Can-I-Get-It

2013 Federal Poverty Guidelines

Household Size 100% 133% 150% 200% 300% 400%

1 $11,490 $15,282 $17,235 $22,980 $34,470 $45,960

2 $15,510 $20,628 $23,265 $31,020 $46,530 $62,040

3 $19,530 $25,975 $29,295 $39,060 $58,590 $78,120

4 $23,550 $31,322 $35,325 $47,100 $70,650 $94,200

5 $27,570 $36,668 $41,355 $55,140 $82,710 $110,280

6 $31,590 $42,015 $47,385 $63,180 $94,770 $126,360

7 $35,610 $47,361 $53,415 $71,220 $106,830 $142,440

8 $39,630 $52,708 $59,445 $79,260 $118,890 $158,520

Each extra person $4,020 $5,347 $6,030 $8,040 $12,060 $16,080

48 Contiguous States and DCSource: http://www.familiesusa.org/resources/tools-for-advocates/guides/federal-poverty-guidelines.html

How Much?

My Advice

Be Open Minded

Listen to Listen to Listen to Listen to

your your your your

consultant!consultant!consultant!consultant!


28

Brainstorming Stage Wait and See…

Until the IRS gets around to

issuing the final rules, we’re still

in “wait and see” mode – we

don’t know all the rules yet, so

it’s difficult to advise our clients. Questions?

Thank You!

health reform update: large employers

Documents