Understanding the Affordable Care Act: Should You Pay or Play?

Understanding the Affordable Care Act: Should You Pay or

Play?

Featuring Seyfarth Shaw LLP

©2012 Seyfarth Shaw LLP

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Welcome

Michelle Lanter Smith

Chief Marketing OfficerEPAY Systems, [email protected]

Today’s Host

EPAY Systems -- designed to meet the needs of your complex,

distributed workforce

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• Reduce your labor costs by 5% or more

• Keep you in control and in compliance

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Today’s Discussion

The Affordable Care Act is upon us and there’s a lot to do in order to be ready for January 1, 2014.

Does your company even need to be concerned?

If so, who is eligible for health insurance at your company?

How do you calculate whether it’s better to offer health insurance to your employees or just pay the penalty?

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Our Speaker

Jennifer A. KraftPartner, Seyfarth Shaw LLPEmployee [email protected](312) 460 -5000


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Ask Your Questions

To ask a question, simply type your question in the

“Question” box on the right side of your screen.


Legal Disclaimer

The contents of this presentation should not be construed as legal advice or a legal opinion on any

specific facts or circumstances.

These materials are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal

questions you may have.

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Current Health Care Landscape

Employer-provided coverage

Individual PolicyMedicareMedicaidTRICARE

Uninsured50 million people16% of population

Population = 311 Million


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Exchanges

IndividualMandate

EmployerMandate

GuaranteedIssue/

Community Rating

Medicaid Expansion

Overview of 2014 Health Care System


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Projected Health Care Landscape

Employer-provided coverage

Individual PolicyMedicareMedicaidTRICARE

Uninsured18 million people5% of population

Population = 311 Million


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Medicaid Expansion• Following the Supreme Court decision on the ACA, states may choose whether to expand Medicaid coverage

► Some Republican-led states have expanded

► Arkansas model of using funds to insure Medicaid-type offerings

• Employees with income below the thresholds shown below may not be eligible for Medicaid if their state of residence does not expand coverage

Family Size Federal Poverty Level 133% of FPL

1 $11,490 $15,281

2 15,510 20,628

3 19,530 25,975

4 23,550 31,321

5 27,570 36,668

6 31,630 42,068

• These employees will be more likely to seek coverage:

► Through the exchanges, or

► From their employers


Participating in Medicaid Expansion?

Yes Leaning Yes Leaning No No Undecided

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How Will Individuals Get Health Coverage? – Medicaid Expansion


Health Benefit Exchanges

or“Marketplaces”


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• State-based collection of health insurance offerings (“Qualified health plans”)o Private and non-profit insurerso Essential health benefitso If state did not establish, Federal government stepped in

Illinois has a State-Federal partnership exchange

• 2014o Individuals (with tax credits and cost-sharing subsidies)o Small businesses (100 or less employees)

• 2017o Large employers (more than 100 employees)

Exchanges (Now Called Marketplaces)


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State Decisions on Exchanges

Establishing State Exchanges?

State Exchange State/Federal Partnership Federal Exchange


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Exchanges/Marketplaces

• Each state will have one or two exchanges:o Individual Exchange + Small Business Health Operations

Program Exchange (SHOP Exchange)OR

o Combined exchange for individuals and small businesses

• All individuals can purchase coverage through the exchange, regardless of:

Income level Employment status


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Exchanges / Marketplaces

Family Size2013 FederalPoverty Level 133% of FPL 250% of FPL 400% of FPL

1$11,490 $15,281 $28,725 $45,960

215,510 20,123 $38,775 $62,040

319,530 25,975 $48,825 $78,120

423,550 31,321 $58,875 $94,200

527,570 36,668 $68,925 $110,280

631,590 42,068 $78,975 $126,360


Employer Mandate

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Employer Mandate – Large Employers Only

o Threshold for “Large Employer” = 50 Full-time Equivalent Employees in prior year

o Full-time employees = 30 hours per week, on average

#FULL-TIME EMPLOYEES

Aggregate # hours worked/ month by part-time employees

________ Divided by 120

#Full-time equivalent employees

You must count all employees working for any company within the corporate family (as determined by IRS rules)


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Employer Mandate

• Employer “Shared Responsibility” starting in 2014o If:

Employer has 50 or more full-time equivalent employees Add each month’s calculation up in the prior year and divide

by 12 to get average monthly count, but note 2014 transition relief

o Then: The employer is required to provide affordable “minimum

essential coverage” to all full-time employees and their dependents Dependents does not include spouses

o Or else: The employer will be assessed a penalty if an employee

receives a tax credit or subsidy through an Exchange


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Employer Mandate

• Employer “Shared Responsibility” — Penalties

► Failure to Provide Minimum Essential Coverage (“No Coverage Penalty”)

OR

► Failure to Provide Affordable Coverage (“Inadequate Coverage Penalty”)


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No Coverage Penalty

• Employer Fails to Provide Minimum Essential Coverage o At least one employee receives a tax credit or subsidy

through a state-based exchange All full-time employees = 95% of full-time employees

o Penalty = $2,000 X # of Full-time Employees Subtract first 30 full-time employees when calculating the

penalty

o Assessed employer-by-employer within the controlled group 30 person deduction must be spread ratably among all

employers


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No Coverage Penalty

• Minimum Essential Coverage o Group health plan o That is not excepted benefits

Dental only, vision only

o Could be preventive care only


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No Coverage Penalty

• Exampleo Employer employs 55 full-time equivalent employees, 45 of

which are full-time employees o The employer offers coverage to 35 of its full-time

employees, 77%, but chooses not to offer health insurance coverage to 10 full-time employees

o One of those employees who was not offered coverage purchases individual coverage through Exchange with a tax credit

o The employer will be assessed a penalty of $30,000 (45-30) X $2,000


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Inadequate Coverage Penalty

• Employer offers health insurance coverage, but not affordable coverage that provides minimum value

► Affordable – Cost of coverage no more than 9.5% of household income

► Minimum value – Covers at least 60% of actuarial value of health costs

► Note: No coverage to an employee (where part of the 5% leeway) would equate to coverage not offering minimum value

• Any employee receives a tax credit or subsidy through a state-based exchange


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ADEQUATE HEALTH COVERAGE

AFFORDABLE MINIMUM VALUE

• Employee-only premium cost (regardless of what coverage employee elects) cannot exceed 9.5% of household income. May use:

• W-2 wages

• Rate of Pay (hourly rate for each hourly employee multiplied by 130 hours per month)

• Federal Poverty Line* New guidance suggests may only use reduced premium under Wellness for tobacco cessation programs

• Plan must cover at least 60% of the actuarial value of health costs (medical, hospital, prescription drug, lab, etc.)

• Calculated in one of three ways

• HHS Calculator

• Safe Harbor Checklist

• Actuarial Certification


PENALTY

THE LESSER OF:

$2,000 x (Total No. of Full-Time Employees – 30)

$3,000 x No. of Full-Time Employees who receive a tax credit or subsidy and purchase coverage through an Exchange

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• Exampleo Employer employs 55 full-time equivalent employees, 45 of

which are full-time employees. o Employer offers health insurance to all 45 full-time

employees, but the insurance only covers 50% of costs. o Five employees receive a credit through the exchange. The

employer will be assessed a penalty of $15,000 (5 X $3,000). Note this is less than $2000 x (45 – 30) full-time employees


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• Strategies for Achieving Affordabilityo Set employee-only coverage premium at 9.5% but increase

dependent level costs: Assume an employee has $30,000 a year in household income

Premium is $2,400 for employee-only coverage (8% of household income) and $6,000 for family coverage (20% of household income)

The employer will be deemed to have offered the employee affordable coverage, even if the employee elects family coverage


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• Strategies for Achieving Minimum Valueo Reduce participant cost-sharing

Co-insurance, co-pays, deductibles

Wellness programs that reduce cost-sharing cannot be considered, except for tobacco-cessation programs

o Add benefits Cover additional services

o Add HRA/HSA component With employer contributions


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Full-Time Employee

• What is a Full-Time Employee?o Those who work, on average,

30 hours per week or

130 hours per month

o Full-time status determined on a monthly basis

o Measurement & Stability periods Measurement period (look-back) could range between 3-12 months

Stability period must be at least as long as the look-back period and can be no shorter than 6 months

Administrative Period up to 90 days between the two To determine who will be eligible, notify them and enroll them


Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.

2014 2015

Measurement Period Stability Period Admin

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Measurement and Stability Periods


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• May use different Measurement and Stability Periods for:

Salaried and hourly employees

Employees of different entities

Employees located in different states

Collectively bargained with different collective bargaining agreements

Safe Harbor for Current Employees


Optional administrative period. Overlaps with stability period

New measurement period begins (for 2016 stability period)

Stability period (following 2013 measurement period)

2014 2015 2016

Stability Period #1 Measurement Period #3

Measurement Period #2 Stability Period #2Admin

Admin

Starting with 2014, every year will feature a simultaneous measurement and stability period

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Overlapping Periods



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When Must Coverage Be Offered?

• Full-time position

► If know that the position is more than 30 hours/week, must offer coverage within 3 months of hire

► May be allowed to take 6 months, depending on facts and circumstances at time of hire

► Monitor hours going forward under Measurement Period approach


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• Based on facts and circumstances at date of hire,

• Cannot determine that employee is reasonably expected to work, on average, at least 30 hours per week (or 130 hours per month)

• The IRS may disagree with determination and impose penalty if every crew member is labeled as “variable hour” but many end up working full-time

What is a “Variable Hour” Employee?


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• Examples*

► Part-time employees

► Hourly employees with fluctuating schedules

► Seasonal employees

*These are merely examples of individuals that might be considered variable hour new hires. Facts and circumstances may limit an employer’s ability to treat these employees as variable hour new hires.

• NOTE: Expected (short) length of employment can be taken into consideration, but only for 2014

What is a “Variable Hour” Employee?


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What is a “Seasonal Employee”?

• Seasonal Employee

► No definition for purposes of theEmployer Mandate

► Through 2014, employers may makea good-faith interpretation of the term

► Example

• Employees hired for summer season

• Employees hired over holiday break


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When Must Coverage Be Offered?

• “Variable hour” o New hires must be offered coverage within 13

months of hire date (or start of next calendar month thereafter),

o if they work at least 130 hours per month on average during that time


Stability Period coverage begins April 1, 2015 (and continues through March 31, 2016)

Variable Hour New Hire – Hire Date February 15, 2014

Measurement Period ends February 14, 2015Administrative Period From February 15 – March 31


2014 2015 2016

Measurement Period #1 Stability Period #1

Measurement Period #2

Employee switches to ongoing employee measurement period effective October 1, 2014

Stability Period #2

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When Must Variable Hour New Hires be Offered Coverage?


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Transition Relief for 2014

• Shorter 6-Month Determination Period for 2013 (for purposes of determining “large employer” status)

o Any 6 consecutive months

o Normally would look back to prior 12 month year

• Shorter Measurement Period for 2013 (even if using a 12-Month Measurement Period going forward)

• Off-Calendar Year Plans can wait until first day of Plan Year after Jan. 1, 2014

• Dependent Coverage Not Required in 2014

o Never required for spouses


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Special Rule: Breaks in Service

Length of Break Length of Employment

Result Upon Rehire

More than 26 weeks

N/A Treat employee as new hire (i.e., start new measurement period and disregard prior service)

Less than 26 weeks but more than 4 weeks

Shorter than break

Treat employee as new hire (i.e., start new measurement period and disregard prior service)

Less than 26 weeks but more than 4 weeks

Longer than break

Continue existing measurement period (0 hours counted during break*)ORContinue coverage for remainder of stability period

Less than 4 weeks

N/A Same as above


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• For “special leaves” employees must not be penalized for breaks in serviceo Two methods:

Apply average hours worked before and after leave to determine “hours” equivalent during leave,

Exclude leave period when calculating average hours

o Special leaves include: FMLA

USERRA

Jury Duty


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• Employees on paid leave must be credited with hours of service during leave, regardless of length!!!!!


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Special Rule: Other Terminations of Coverage

• No penalty if:o Employee is offered but fails to elect coverage during open

enrollmento Employee fails to pay premiums so coverage terminates

• Grace period runs through conclusion of plan year to which employee’s failure relates


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Nondiscrimination Requirements

• Nondiscrimination Rules Extended to Insured Plans► Insured plans may not discriminate in favor of highly-

compensated employees ► Prior to PPACA, Code Section 105(h) applied to self-funded plans

• No discrimination in (1) eligibility or (2) benefits

► Post-PPACA, similar rules apply to fully insured plans, BUT► Penalty is different

• $100 per day per non-highly compensated employee

• Civil action to enjoin noncompliance (or to seek appropriate equitable relief)

• No imputed income penalty for highly compensated employee

Doesn’t apply to grandfathered plans



Key Considerations

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Key Considerations

• Employers are not required to pay 100% of the cost of coverageo Employees can be required to contribute to the cost of

coverage, in increasing amounts based on increasing incomeo Employees can be required to pay the full cost of dependent

coverage

• Large employers are only required to offer coverageo There is no penalty if an employee declines coverageo Not all employees will elect the coverage that is offered


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Next Steps

• Start to project cost of optionso Determine maximum number of employees who could elect

coverageo Determine number of employees likely to elect coverage

• Select Measurement Period and Stability Periodo Document

• Consider design options for 2014o Wellness rewards


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Homepage


[email protected]

To sign up for Seyfarth Alerts, email [email protected]

@SeyfarthEBLaw


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EPAY Systems

Michelle Lanter Smith

Chief Marketing OfficerEPAY Systems, Inc.

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Real Time Data Collection

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Secure web management

Data Collection

Data Export Payroll

Payroll Process

or

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EPAY’s Mobile Expertise

John Gaudiuso

Sales EngineerEPAY Systems, Inc.

Contact John at:[email protected]

Today’s Expert

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Determining FTE’s in Blueforce

• Compare all employees average hours to AHA guidelines to determine total FTE’s

• Will give total Full Time Employees (> 30 hours)

• Will give total Part Time Employees (< 30 hours)

• Total the two to determine total FTE’s

• Could also use alerting to ensure employees not going over 30 hours per week

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Determining Average Hours in Blueforce

• Calculate employees’ average hours per week from hire date

• Report to show the employee, the hire date and the average hours worked per week

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Track Covered Employees in Blueforce

• Report to give information on average hours worked per week

• Includes whether employee has insurance

• Easily identify employees that do not have coverage

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Upcoming Education

• New Time & Attendance Technologies for Tracking the Mobile Workforce Webinars. May 30: 10:00 cst

• California Wage & Hour Labor Law--Avoiding Common Pitfalls with a Distributed Workforce. June 26: 12:00 cst

• How to Avoid Costly Wage & Hour Pitfalls for Healthcare Employers with a Distributed Workforce. Sept 25: 12:00 cst

• How to Avoid Costly Wage & Hour Pitfalls for Employers in the Hospitality Industry. Nov 6: 12:00 cst

Register at www.EPAYsystems.com

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Thank You!

Jennifer A. KraftPartner, Seyfarth Shaw LLPEmployee [email protected](312) 460-5983

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Connect With Us

Connect with EPAY:o LinkedIn – follow our company page

at EPAY Systemso Twitter -- @EPAYsystemso Sign up for our e- newsletter at

www.EPAYsystems.com

Connect with Seyfarth Shaw LLP:o Wage & Hour Litigation Blog

http://www.wagehourlitigation.com/o Twitter - @SeyfarthShawLLPo Twitter - @SeyfarthEBLaw

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Thank You!

Understanding the Affordable Care Act: Should You Pay or Play?

Technology

Transcript of Understanding the Affordable Care Act: Should You Pay or Play?