PPACA, Preparing for 2014

HR Essentials

Employer Shared Responsibility

Effective 1/1/14Employer must count all full time

employees and part time employees on a full time equivalent basis, in determining if they have 50 or more employees.

Employer Shared Responsibility

Full time=30 or more hours per week, per month or 130 hours of service per calendar month (must count each hour for which an employee is paid or entitled to payment for work, vacation, etc.)

Seasonal workers are not counted.Penalties assessed for “no coverage” or

coverage that is “not affordable” or does not provide “minimum value.”

Employer Shared Responsibility

Determining large employer status:For each calendar month of the preceding

calendar year, employers must:◦Count the # of FT employees who work an

average of 30 hours per week per month.◦Calculate the # of FT equivalents by adding the

# of hours worked by non-FT employees and divide by 120.

◦Add the number of FT and FT equivalents for each of the 12 months of the preceding year.

◦Add the monthly totals and divide by 12. If the average is over 50, you are a large employer.

Employer Shared Responsibility

Transition relief for smaller employers:◦Employers can determine whether they are

large or not based on the period of 6 consecutive months during 2013 instead of 12 months.

◦This is only allowable for 2014 calculations.◦The 6 month period must be no less than 6

months and end no sooner than 90 days before the start of the plan year beginning 1/1/14.

Employer Shared Responsibility

The Penalties:◦Sledge Hammer Penalties.

If a large employer does not offer coverage to 95% of the FT employees and their dependents and at least 1 FT employee receives a premium tax credit or cost sharing reduction.

The penalty is $2000 x the # of FT, minus the first 30 employees.

This is not deductible as a business expense.

Employer Shared Responsibility

The Penalties:◦Tack Hammer Penalties:

If a large employer offers coverage to their FT employees and their dependents but the coverage is not “affordable” or it does not provide “minimum value.”

The penalty is the lesser of $3000 x the # of FT employees receiving a premium tax credit or $2000 x the total number of FT employees.

Employer Shared Responsibility

“Not Affordable”◦Employees share of the self-only premium for

the employer’s lowest cost plan that provides minimum value cannot exceed 9.5% of the household income or the employee may be eligible for a premium tax credit to purchase coverage through the exchange.

◦Safe Harbors: W-2 harbor. 9.5% of Box 1 of W-2 Rate of pay harbor. 9.5% of employee’s hourly

rate of pay x 130 hours. Federal Poverty Level harbor. 9.5% of the FPL for 1

person.

Employer Shared Responsibility

“Minimum Value”◦A plan fails to provide minimum value if the

plan’s share of the total allowed costs of benefits is less than 60% of such costs (% of medical expenses-deductibles, coinsurance, copays, etc.) MV Calculator. Allows employers to input cost

sharing features. www.cms.gov/resources/files/mv-calculator-final-2-20-2013.xlsm

Safe Harbor Checklist. Provides a checklist to review. Actuarial Certification. To get a decisive conclusion

that the plan meets MV standards.

Employer Shared Responsibility

Transition relief for tax penalty:◦The regulations provide transition relief for

large employers that maintain a non-calendar year plan as of 12/27/12.

◦The employer is not subject to the penalty provided they are offered affordable, MV coverage on the first day of the 2014 plan year if the plan: Was offered to at least 1/3 of all employees (FT

and PT) at the most recent open enrollment prior to 12/27/12.

Covered ¼ of all employees as of 12/27/12.

The Individual Mandate

As of 1/1/14, the individual mandate requires most individuals to have minimum essential coverage or pay a penalty which is called the “shared responsibility payment.”

What qualifies as minimum essential coverage?

Minimum Essential Coverage

An employer group health planAn individual health insurance planA government plan like Medicare,

Children’s Health Insurance Program (CHIP) or TRICARE.

Student health coverageMedicare Advantage PlanState high risk pool coverage

Individual Mandate

Penalties will be assessed when individuals file their 2014 taxes in 2015.

2014: greater of $95 per adult and $47.50 per child under 18 (maximum of $285 per family) or 1% of the income over the tax filing threshold.

2015: greater of $325 per adult and $162.50 per child under 18 (max of $975 per family) or 2% of the income.

2016: greater of $695 per adult and $347.50 per child (max of $2085 per family) or 2.5% of the income.

2017 and later: increase based on COL.

Individual Mandate

Individuals who do not meet the following criteria will not pay a penalty if they do not have minimum essential coverage:◦ Individuals who cannot afford coverage: more than 8% of

annual household income.◦ Taxpayers with income below the tax filing threshold.◦ Individuals who qualify for hardship exemption:

State did not choose to expand Medicare (14 have opted out) Personal or financial hardship

◦ Individuals who have a gap of less than 3 consecutive months in a calendar year.

◦ Non US citizens, individuals in prison, Members of Native American Tribes.

Exchanges

Exchange Basics

The law requires the creation of the American Health Benefit Exchange for individuals and the Small Business Health Options Programs (SHOP) Exchange for small employers up to 50 lives.◦ In 2016, SHOP Exchanges must increase small

group to 100 employees◦States can choose to expand their SHOP

Exchanges to serve groups larger than 100 in 2017Insurance coverage can be purchased

beginning in October 2013 and will be effective January 1, 2014.

Exchange Basics

An Exchange is an organized “marketplace” designed to help people shop for and enroll in health insurance coverage.

Individuals, families and small businesses will be able to use the Exchange to help compare commercial insurance options, calculate costs and select coverage online, in person, on the phone or by mail.

The Exchange will help people to check their eligibility for health care programs like Medicaid and sign up for these programs if they are eligible.

The Exchange will also be able to tell what type of financial assistance is available to applicants to help them afford health insurance.

Exchange Basics

State based health insurance exchanges are not optional. HHS is calling them “Marketplaces” instead of Exchanges because there is no Spanish word for Exchanges that translates accurately.◦If a state doesn’t create one, the federal

government till step in and operate the exchange for the state.

◦19 states, including NYS have been approved to operate their own Exchange.

Exchange Subsidy Basics

Subsidized coverage will be available for individuals purchasing coverage through the exchange.

Low income people who are part of an employer group that buys coverage through a SHOP exchange are not eligible for the personal premium tax credit.

Only subsidies that will be distributed through the SHOP exchanges are the small business tax credits.

People with “credible” and “affordable” group coverage cannot leave the group plan and buy subsidized coverage through the individual exchange even if they are low income.

Employer Responsibilities

Employers must provide a notice to current employees and new hire about exchanges and subsidies.◦March 1 deadline has been delayed◦DOL is expected to provide model generic language◦New notification date will probably be late summer

or early fallEmployers will have to help verify coverage.

◦HHS will use data from insurance exchange markets to determine whether people have coverage when the individual mandate takes effect.

SHOP Exchanges

SHOP exchanges will be a new purchasing environment for small employers

Advantages:◦Choice and value: health plans at a variety of

price points.◦Tax benefits: up to 50% of premium

contributions for qualifying employers◦Defined Contribution: employer can set fixed

amount to contribute to employee coverage◦Ease of administration: one monthly premium

invoice

NYS Health Benefit Exchange

April 12, 2012, Governor issues Executive Order to set up the exchange

October 1, 2012, NYS formally submits its plan to HHS

December 14, 2012, HHS provides conditional certification to NYS

NYS has been awarded more than $400 million in grants to fund the start up

NYS Health Benefit Exchange

1/31/13, RFPs to health insurers and dental plans to participate in the Exchange

2/15/13 Letter of Interest due4/30/13 due date for network, rates, etc.,

submission from insurers7/15/13 anticipated selection of insurersBrokers and “Navigators” will assist in

placing coverage.

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