Planning for Health Care Reform – Basics of the Affordable Care Act

Planning for Health Care Reform – Basics of the Affordable Care Act

Breanna Hellenbrand, Account ExecutiveMarch 12, 2013

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Topics for Today• Current Issues for 2014• New Fees• New Taxes• 2014!! Mandate, Shared Responsibility and Exchanges

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New Fees• Patient-Centered Outcomes Research Trust Fund regulations

issued early April 2012– Effective for policy or plan years that end on or after October 31, 2012

and continue until 2019– Imposes $1 (later $2) fee per covered life under plan– Usually paid by issuers and employers on the quarterly tax excise tax

return – due annually July 31

• Reinsurance regulations published late March 2012– Impose fee on insurers and TPAs (2014)– Fees will help stabilize premiums for coverage in the individual market

during the first 3 years of exchange operation– Required contributions will be $5.25 per covered life monthly

($63 annually for the first year)

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2014 and Beyond….• Individual Mandate• Automatic Enrollment

– No further guidance

• Exchanges• Employer Shared Responsibility

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The Future: 2014• 2014 – Individual Mandate

– Individuals required to maintain “minimum essential coverage” or pay a penalty. “Minimum essential coverage” would include enrollment in an employer sponsored plan.

– Penalty starts at $95 and increases each year up to $695 in 2016

– US Supreme Court upheld the mandate as constitutional on June 28,2012

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The Future: 2014• 2014 – Automatic Enrollment

– Employers with more than 200 employees must automatically enroll all full-time employees (30+ hours per week) as soon as they are eligible for coverage

– Regulations not issued to date

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The Future: 2014• 2014 – Employer Penalties

– PPACA does not mandate an employer to offer health insurance to employees

– Penalties may apply to an employer with at least 50 full-time equivalents (FTEs):• Full-time employees (30+ hours per week)• Part-time employees (total monthly hours divided by 120)• Excluding full-time seasonal employees who work less than 120 days during

the year

– Employer is required to provide affordable minimum essential coverage to all full-time employees or else employer will be assessed a penalty

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The Future: 2014• 2014 – Employer Penalties Apply if:

– No coverage offered to full-time employees and at least one full-time employee receives subsidized coverage in an Exchange.

– Coverage offered to full time employees but at least one full-time employee receives subsidized coverage in an Exchange. Employer’s coverage must be of minimum value (60% of costs) and employee’s share of premium must not exceed 9.5% of his/her W2 wages.

– Subsidized coverage: A full-time employee would receive subsidized coverage in an Exchange if his/her required contribution toward an employer plan exceeds 9.5% of his/her household income or employer pays less than 60% of covered health care expenses. Cost sharing subsidies are also available to individuals/families who earn between 100%-400% of the federal poverty level.

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The Future: 2014• 2014 – Employer Penalties and Amounts

– No coverage offered: $2,000 per number of full-time employees minus 30 (monthly assessment)

– Coverage offered: $3,000 per each full-time employee for whom coverage is not affordable or of minimum value OR $2,000 per total number of full-time employees minus 30, whichever is less

• Affordable: determine applicability of penalty based on employee’s own W-2 income in relation to the lowest cost single premium. If employee portion does not exceed 9.5% of the W-2 wages, the coverage is affordable for that employee.

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The Future: 2014• 2014 – Employer Penalties – Counting Employees

– On-going employees: employees who have been employed by the employer for at least one complete standard measurement period. • Full-time status is determined by looking back at a defined period of time from

3-12 consecutive calendar months (standard measurement period).• Employers can choose the months the standard measurement period starts

and ends but must be consistent with all employees in same category.– Collectively bargained vs. non-collectively bargained– Salaried and hourly– Employees of different entities– Employees located in different states

• If employee works 30+ hours per week during the measurement period, the employee is considered full time during a stability period.

• Stability period is at least 6 months and cannot be shorter than the measurement period.

• If employee did not work 30+ hours during measurement period, employer can treat that employee as not full-time during stability period.

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The Future: 2014• 2014 – Employer Penalties – Counting Employees

– On-going employees: administrative safe harbor• Employers may need time between the standard measurement period and the

stability period for administrative issues. • Standard measurement period may end before the associated stability period

begins. • The administrative period in between may not reduce or lengthen either the

stability period or measurement period. This period may last up to 90 days.– New employees expected to work full-time• Employer not subject to a penalty for not offering coverage to a new full-time

employee during the first three calendar months of employment.• The rule applies when an employee is reasonably expected to work full-time at

the start date and the employer sponsors a group health plan and offers coverage to the employee at or before the end of the first three calendar months of employment.

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The Future: 2014• 2014 – Employer Penalties – Counting Employees

– New variable hour or seasonal employees – safe harbor• New employee = variable hour employee if at date of hire it cannot be

determined that the employee will be averaging 30+ hours per week.• Employers allowed to use good faith reasonable interpretation of the term

“seasonal employee”.• If employer would offer coverage to an employee only if he/she is full-time

status, employer may use an initial measurement period lasting between 3–12 months to determine if such an employee is full-time.

• Employers should measure the hours of service completed by the employee during the initial measurement period and determine if the employee averages 30+ hours per week. During this time the employer is not subject to penalties on these employees.

• IF the employee is full-time during the initial measurement period, the stability period must be at least 6 consecutive calendar months that is no shorter in duration that the initial measurement period.

• If not full-time, does not have to be treated as such during stability period.

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The Future: 2014• 2014 – Employer Penalties – Additional Guidance

– Measurement period relief• If an employer wishes to apply a 12 month measurement and 12 month

stability period, for the first year the employer can adopt a shorter measurement period, but keep the longer stability period. To rely on this transition rule, the transition measurement period must:– Be at least 6 months long– Begin no later than July 31, 2013– End no earlier than 90 days before the first day of the plan year beginning on or after

January 1, 2014.– Large employer determination relief• For employers who are close to 50 FTEs, the regulations provide that the

employer has the option of determining its large employer status with respect to a period of six consecutive calendar months in 2013, rather than the entire year.

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The Future: 2014• 2014 – Employer Penalties – Additional Guidance

– Teachers and employees on unpaid leave• Employers may ignore the period of unpaid leave when averaging hours or

provide a “credit” for hours worked during that time even though no hours were worked.

• When educational institutions have an “employer break period” lasting at least 4 consecutive weeks, that period is ignored when determining an employee’s hours of service.

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The Future: 2014• 2014 – Employer Penalties

– “Not clarified:• How to determine “minimum value”• How rules apply to “successor employers”• Definition of “seasonal employee”• How hours of service are calculated for certain industries (airline pilots and

adjunct professors)

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The Future: 2014• 2014 – American Health Benefit Exchanges

– Not available to employers with over 100 employees until 2017.

– No decision to date regarding participation of employers with 50-100 employees; most likely will be available only to employers with 50 or less employees.

– Wisconsin – waited until after the election. On November 16, 2012 Governor Walker announced that Wisconsin would not establish an exchange but rather allow the federal government to establish an exchange… this leads to great uncertainly about the future of Exchanges in Wisconsin and elsewhere… stay tuned.

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The Future: 2014• 2014 – Section 105(h) Non-discrimination testing for

non-grandfathered fully insured plans

• Different coverage or contribution structures for highly-compensated employees most likely will not pass the testing

• Notice 2011-1 issued on 12/23/10 states that compliance with these rules will not be required until regulations or guidance are issued. No guidance to date, but expected in 2014.

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QUESTIONS?