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-1- ACA 2015: Ready, Set, Comply
Bottom Line Driven Health Benefits Planning
ACA: Creating a Safe Harbor Medical Plan to Immunize Your Plan From Penalties
Jeffery A. Schultz Phone: 262.207.1999 ext. 112
Email: [email protected] Vice President, BeneCo of Wisconsin
Innovation. Dedication. Knowledge. Purpose. Integrity. Vision. Talent. Results.
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Who We Are
BeneCo of Wisconsin, Inc.:
A member of The Benefit Companies, a privately held company.
Have been providing insurance and employee benefits consulting since 1971.
A full service benefits firm serving over 1,200 companies and organizations ranging from 10 to 50,000 employees.
Headquartered in Brookfield, WI with additional Wisconsin offices in Green Bay, and Plymouth.
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Jeff Schultz Vice President BeneCo of Wisconsin 262-207-1999 ext 112 [email protected]
Justin Andaloro Manager of Marketing & Communications BeneCo of Wisconsin 262-207-1999 ext 114 [email protected]
To Register for upcoming webinars: http://www.benefitsinc.com/beneco-wisconsin/aca-webinars/
Who We Are
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Today’s Topics
What it means to be affordable
Implications for not being affordable
Measuring Affordability
Strategies to become Affordable
Implementing a Safe Harbor Plan
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Ground rules
Some questions may fall under
Haven't read
Haven't heard
Guidance not released
Just don’t know…
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Common Affordability Challenges
Wellness premium differentials
Low paid work force with high premium costs
The loss of premium share in lowering employee premiums under the thresholds
Potential increase in plan participation if you lower the premium to be “affordable”
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Employer Affordability
What is Affordable
An employer must offer a plan that meets minimum value where the employee’s single only contribution does not exceed 9.5% of that employee’s household income
Affordability originally intended to be measured on household income.
Safe harbors were provided to measure on an employee only level
Federal Poverty Line Safe Harbor
W-2 Wages Safe Harbor
Rate of pay Safe Harbor
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Which premium to use to determine affordability
Premium is measured at 9.5% of income for SINGLE coverage
Measured on the lowest cost single plan that meets minimum actuarial value.
Assumes that employees do not achieve the wellness requirements, regardless of their achievement status.
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Which Premium to Determine Affordability?
Monthly Premiums
HSA Plan COBRA Rates Non-Participant Wellness
Participant Wellness Achiever 30% Penalty
Score Score
0-71 71-100 Employee $600 $300 $180 $120
Employee + Spouse $1,050 $525 $315 $210 Employee + Child(ren) $900 $450 $270 $180
Family $1,300 $650 $390 $260
PPO Plan COBRA Rates Non-Participant Wellness
Participant Wellness Achiever 30% Penalty
Score Score
0-71 71-100 Employee $750 $375 $225 $150
Employee + Spouse $1,313 $534 $394 $140 Employee + Child(ren) $1,125 $458 $338 $120
Family $1,625 $658 $488 $170
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The Safe Harbors
Affordability originally intended to be measured on household income.
Safe harbors were provided to measure on an employee only level
Federal Poverty Line Safe Harbor
W-2 Wages Safe Harbor
Rate of pay Safe Harbor
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Federal Poverty Line Safe Harbor
2015 FPL is $11,770 for a single
Assume all employees earn 100% of poverty level
Calculate contribution against the $11,770 FPL
Employers can set their premium at $93.17 regardless of employee’s income and be considered affordable.
$11,770 X 9.5% =$1118.15 or $93.17 Per Month Employee Premium is $300 per month. FAIL
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W-2 Wages Safe Harbor
Uses the employee’s W-2 income (box1) for the current year.
Does not include pre-tax contributions for 401(k) or cafeteria plans.
Employee earning $30,000 has $3600 of pretax contributions. W-2 Box 1 = $30,000-$3,600 = $26,400
$26,400 X 9.5% =$2,508 or $209.00 Per Month Employee Premium is $300 per month. FAIL
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Rate of Pay Safe Harbor
Allows plan sponsors to measure using an employee’s rate of pay wages.
Hourly Employee measured using 130 hours per month (Even if working 170) and hourly rate. For an hourly employee @ $8.25 per hour
Salaried Employee: Use annual wages and divide by 12.
For an employee earning $30,000 per year
$8.25 X 130 =$1,072 X 9.5% = $101.89 Employee Premium is $300 per month. FAIL
$30,000 / 12 = $2,500 X 9.5% = $237.50 Employee Premium is $300 per month. FAIL
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Employer Affordability
Penalties for not being affordable:
Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000 x FTEs (less 30 FTEs)
Example: Employer has 200 employees. The plan is unaffordable for 40 employees. 20 of them go to the exchange and receive a subsidy (premium tax credit).
The employer will pay $60,000 in non-tax deducible penalties under 4980h(b).
20 subsidies X $3,000 Penalty = $60,000
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Strategies to Consider if Unaffordable
Roll the dice
Lower your current premium to be affordable for your lowest paid employee that works 30 hours per week
Provide pay increases to the lowest paid employees to create affordability
Lower, change or eliminate wellness incentives
Shift premium costs from single to family plan
Offer an additional plan option that meets ACA requirements.
There is no right answer. Strategy is impacted entirely by employee make-up and culture and philosophy.
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Information You May Need To Make A Decision
Lowest hourly rate; ie $8.25 per hour
Lowest monthly salary rate; ie $2,000 per month
Your breakeven affordability amount; ie $101.89
Which affordability safe harbor you will use
The number of employees that are unaffordable
The propensity for your employees to go get subsidies
The make up of your population? Tipped employees, commissioned, Hourly, Salaried?
Your corporate philosophy on paying penalties
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Roll the Dice
Those employers that have a handful of employees for which their benefits are unaffordable, may consider rolling the dice on penalties.
Considerations:
How many employees are unaffordable?
What is the propensity for my employees to get subsidies?
What is my corporate philosophy on paying penalties
If wellness is the only reason for unaffordability, are the premium incentive high enough to keep the engaged members on the plan.
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Lower the Premium To Be Affordable
Some employers may only be slightly unaffordable for their lowest paid employees.
Need to do the math.
Affordable Premium
For Lowest Paid Employer Single
Premium Premium
Difference # of Single
Plans Cost to be
Affordable # of Penalty Equivalents
Scenario #1 $101.89 $105.00 $3.11 200 $7,464
2
Scenario #2 $101.89 $125.00 $23.11 200 $55,464
18
Scenario #3 $101.89 $300.00 $198.11 200 $475,464
158
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Provide Pay Increases to Lowest Paid Employees
Some employers may only be slightly unaffordable for their lowest paid employees.
Need to do the math.
Rate of Pay # of Employees / Rate Affordability
Breakeven Provide pay Increase to:
Cost to be Affordable
# of Penalty Equivalents
$8.25 3 $10.25 $10.25 $9,360 3
$10.00 22 $10.25 $10.25 $8,580 3
$12.00 8 $10.25 - - -
Salaried 138 $10.25 - - -
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Lower, Change or Eliminate Wellness Incentives
Example: This employer offers an affordable plan for employees making over $9.47 per hour without wellness incentives.
Monthly Premiums
HSA Plan Non-Participant
Wellness Participant
Employee $300 $117
Employee + Spouse $525 $205
Employee + Child(ren) $450 $176
Family $650 $254
Affordable for an employee @ $9.47 per hour
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Shift Premium Costs from Single to Family
Monthly Premiums
Current COBRA Rates Employee % Employee Premium # Enrolled Employer Spend
Employee $600 20.0% $120 88 $42,240
Employee + Spouse $1,050 20.0% $210 21 $17,640
Employee + Child(ren) $900 20.0% $180 9 $6,480
Family $1,300 20.0% $260 82 $85,280
$151,640
Adjusted COBRA Rates Employee % Employee Premium # Enrolled Employer Spend
Employee $600 16.5% $99 88 $44,088
Employee + Spouse $1,050 21.4% $224 21 $17,342
Employee + Child(ren) $900 21.4% $192 9 $6,371
Family $1,300 21.4% $278 82 $83,840
$151,641
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Offer an Additional Plan Design “Safe Harbor Plan”
The intention of this plan would be to meet both affordability requirements.
Typical plan features:
Only offered to singles and dependent children at COBRA rates. No Spouses
No wellness incentives or disincentives
Typically plan design is far less attractive than traditional plan offerings.
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Two Medical Plan Options Plan Option 1 Plan Option 2 In-Network Benefits Shown PPO Plan Safe Harbor Plan
Individual Medical Deductible $1,500 $4,000
Family Medical Deductible $3,000 $8,000
Co-Insurance % (Plan/Member) 80% / 20% 80% / 20%
Single Medical Out-of Pocket Limit $3,000 $6,350
Family Medical Out-of Pocket Limit $6,000 $12,700
RX Plan Summary
Tier 1 $7 Deductible /Coinsurance
Tier 2 30% with $30 Min, $75 Max Deductible /Coinsurance
Tier 3 45% with $45 Min, $100 Max Deductible /Coinsurance
Wellness Incentives Wellness Incentives Available No Wellness Incentives Available
Eligibility Employee, Spouse & Child Dependents Employee & Child Dependents Only
“Safe Harbor Plan” Plan Design
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Making the Plan Affordable
Options:
Federal Poverty Level Safe Harbor
Level set at lowest wage that works 30 hours per week or more. Ie, $8.25
9.4% of rate of pay income
9.4% of box 1 W-2 Earnings
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Why 9.4% of Rate of Pay Income?
By charging 9.4% of income, the plan would maximize the premium dollars from the employees while remaining affordable and encouraging fewer employees to elect this plan.
Lowest Premium to be Affordable $101.88
Average 9.4% of all Singles Ees $152.39
Average 9.4% Premium of likely Ees $122.21
FPL Safe Harbor $93.17
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How is 9.4% of Rate of Pay Income Calculated?
Example for Hourly earning $8.25 per hour using the Rate of Pay Safe Harbor:
$8.25 X 130 Hours = $1,072.50 Monthly Earnings 9.4% X $1,072.50 = $100.80
This hourly employee would pay $100.80 for their monthly premium.
Example for a Salaried Employee earning $30,000 per year or $2,500 per month $2,500 X 9.4% = $235 This salaried employee would pay $235 per month for their monthly premium.
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Making the Plan Affordable
Monthly Premiums
HSA Plan Non-Participant Wellness
Participant
Wellness Achiever 30% Penalty
Score Score
0-71 71-100
Employee $300 $180 $120
Employee + Spouse $525 $315 $210
Employee + Child(ren) $450 $270 $180
Family $650 $390 $260
Safe Harbor Plan Non-Participant Wellness
Participant
Wellness Achiever
Score Score
0-71 71-100
Employee 9.4% of Wages
Employee + Spouse N/A
Employee + Child(ren) 9.4% of Wages + $335
Family N/A
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Who is likely to consider this plan election?
Rate of Pay Monthly Rate of Pay
Income Safe Harbor Plan
Premium HSA Plan Wellness Non-
Participant HSA Plan Wellness
Participant HSA Plan Wellness
Achiever
$8.25 $1,073 $100.82 $300.00 $180.00 $120.00 $8.50 $1,105 $103.87 $300.00 $180.00 $120.00 $9.00 $1,170 $109.98 $300.00 $180.00 $120.00
$10.00 $1,300 $122.20 $300.00 $180.00 $120.00 $11.00 $1,430 $134.42 $300.00 $180.00 $120.00 $12.00 $1,560 $146.64 $300.00 $180.00 $120.00 $13.00 $1,690 $158.86 $300.00 $180.00 $120.00 $14.00 $1,820 $171.08 $300.00 $180.00 $120.00 $15.00 $1,950 $183.30 $300.00 $180.00 $120.00 $16.00 $2,080 $195.52 $300.00 $180.00 $120.00 $17.00 $2,210 $207.74 $300.00 $180.00 $120.00 $18.00 $2,340 $219.96 $300.00 $180.00 $120.00 $19.00 $2,470 $232.18 $300.00 $180.00 $120.00 $20.00 $2,600 $244.40 $300.00 $180.00 $120.00 $21.00 $2,730 $256.62 $300.00 $180.00 $120.00 $22.00 $2,860 $268.84 $300.00 $180.00 $120.00 $23.00 $2,990 $281.06 $300.00 $180.00 $120.00 $24.00 $3,120 $293.28 $300.00 $180.00 $120.00 $25.00 $3,250 $305.50 $300.00 $180.00 $120.00
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Plan Sponsor Considerations for Safe Harbor Plan
How many eligibles are not electing coverage today?
How many may plan participants and non-plan participants elect Safe Harbor Plan?
What does that mean in terms of lost premium dollars?
Is that still less than paying penalties?
How much differential can you create in plan design offerings?
How will you communicate with employee population?
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Educate leadership on ACA challenges
Get leadership on the same page
Develop objectives
Set 3-5 year strategy
Leverage ACA to your advantage
Execute
Measure and manage
What do we do now?
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Pulling it all together creating a long term plan ABC Co Health Insurance Pro forma March 2014
2013 2014 2015 2016 2017 2018 Plan Design
Ded 1000/3000 1250/3750 1250/3750 1500/4500 1500/4500 2000/6000 Coins 90/70 90/70 90/70 90/70 90/70 90/70 OOP 2000/6000 2500/7500 2500/7500 3000/9000 3000/9000 4000/12000
Estimated Actuarial Value
84% 80% 80% 80% 80% 75% Employee Contributions
15% 15% 20% 23% 25% 25%
Wellness Incentives 5% 10% 10% 10% 10% 10%
Cost Total cost $3,080,250 $3,385,760 $3,588,906 $3,876,019 $4,186,100 $4,437,266
Employer Cost $3,080,250 $3,047,184 $3,230,015 $3,294,616 $3,558,185 $3,549,813 % Change -1.1% 6.0% 2.0% 8.0% -0.2%
Employee Cost $0 $338,576 $358,891 $581,403 $627,915 $887,453
% Change 6.0% 62.0% 8.0% 41.3% Number of covered employees 452 452 452 452 452 452 Cost per employee per year $6,845 $7,491 $7,940 $8,575 $9,261 $9,817
% Change 9.4% 6.0% 8.0% 8.0% 6.0% COBRA Rates Monthly
8%/6% Single $401 $425 $451 $487 $526 $557 Family $1,040 $1,102 $1,169 $1,262 $1,363 $1,445
Annualized
Single $4,812 $5,101 $5,407 $5,839 $6,306 $6,685 Family $12,480 $13,229 $14,023 $15,144 $16,356 $17,337
Cadillac Tax
Threshold Single $10,200 Family $27,500
Excise tax $0 $0 $0 $0 $0 $0
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Noise around repeal, replace, defund, etc.
King vs. Burwell
Numerous legal challenges
Bills on 30 hour rule
Subsides for federal exchange purchase
Budget issues
Full speed ahead
Time to comply
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We are grateful AM 620 WTMJ has asked BeneCo to host a radio series to educate listeners on how best to tackle the ins and outs of the Affordable Care Act (ACA). Focused primarily on educating: Business Owners, CEO's, CFO's and HR professionals; we will help them determine if ACA is a "Top 3" or "Top 30" business priority. Tune in to hear us discuss critical ACA challenges to business. Last WTMJ episode aired Saturday March 7th. For that podcast or others: http://www.benefitsinc.com/beneco-wisconsin/podcast-request/
BeneCo’s Radio Series
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To Register: http://www.benefitsinc.com/beneco-wisconsin/aca-webinars/
Topic Date Time
Strategic Rx Spend Management 7/15/2015 10:30-11:30
When Does it Make Sense For My Plan to Pay Penalties? 8/12/2015 10:30-11:30
Anthem CEO Larry Schrieber: TBD 9/23/2015 10:00-11:00
Wellness with Results, Simplified / Guest: Wisconsin Athletic Club 10/21/2015 10:00-11:00
BeneCo’s Webinars
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Archived Webinars
Website: http://www.benefitsinc.com/beneco-wisconsin/beneco-archived-webinars/
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Short videos on benefits topics of the week.
Delivered once per week Examples:
Wellness and the EEOC What to do about Seasonal
Employees? Private Exchanges Stoploss Contracts and Coverage
under the Stability Period
Check out our website for the most recent and archived versions http://www.benefitsinc.com/beneco-wisconsin/aca-strategy-minutes/
BeneCo’s Strategy Minutes
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ACA Impact Study
ACA Impact Study How will ACA impact my organization? What do I need to plan for?
Free initial consultation Fee for service basis based on plan complexity ACA Sustainability Analysis How do I create a long term sustainable ACA cost strategy and
still comply? Fee for service basis based on plan complexity
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Ask us about Haiti…
The work: Orphan care and sponsorship, tent city refugee relocation and community development, microenterprise other ministry opportunities
To get more info or engage in some way, drip us an email, or to get a glimpse of the work got to www.newlife4kids.org or www.missiondiscovery.org
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Jeff Schultz Vice President BeneCo of Wisconsin 262-207-1999 ext 112 [email protected]
Justin Andaloro Manager of Marketing & Communications BeneCo of Wisconsin 262-207-1999 ext 114 [email protected]
For Follow up Information or Questions
To Register for upcoming webinars: http://www.benefitsinc.com/beneco-wisconsin/aca-webinars/
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Questions?