1. health and fitness

How to make the Affordable
Care Act more affordable:
The employer’s perspective
Karen Kirkpatrick
In the sixteen years Karen Kirkpatrick has worked
at Infinisource, she has gained a national
reputation for being one of the foremost experts
on HR, Payroll, COBRA, HIPAA, FMLA, Consumer
Driven Health Plan Options and Health Care
Reform.
She has conducted more than 1,000 seminars,
webinars and executive briefings on numerous
federal insurance laws.
Karen brings Infinisource the valuable expertise of
many years of marketing and professional
development experience.
“The only thing that is
constant is change.”
― Heraclitus
Agenda
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Employer mandate
Employer requirements
Employer disclosures and reporting
Plan design options
Employer Mandate
5
What is the Affordable Care Act (ACA)?
Part of it expands health insurance coverage by:
Individual mandate
Requiring individuals to
obtain minimal essential
coverage (MEC) for
themselves
Play-or-pay
and
Requiring employers to
offer minimum essential
coverage for
substantially all
employees (70% in 2015
and 95% in 2016)
Employer Mandate
• Applicable Large Employers (ALE) must offer to all full time
employees, Minimum Essential Coverage (MEC) that is both
Affordable and meets the Minimum Value (MV) definitions
• Or - be subject to potential penalties.
• As seen below: the $2,000 penalty is referred to as the No
Coverage Penalty. This means no MEC.
• The $3,000 penalty is referred to as the Inadequate Coverage
Penalty. This means the MEC is not meeting both the Affordable
and MV requirements.
• The lesser of:
• $2,000 x total FT employee count – 80 (if at least one FT
employee gains coverage and a subsidy in the HIX) or,
• $3,000 for each FT employee who gains coverage and a subsidy
in the HIX
Who Does the Act Apply to?
Employer mandate: What is an ALE?
Do you have 100+ employees in 2014 for 2015 and 5099 in 2015 for 2016?
# full-time
employees (FT)
# hours worked by
part-time
employees per
month
120
Full-time Employee Status
Is not always clear, is it?
Hours of Service
Each hour of work for
which the employee
is paid
Each hour of non-work
for which employee
is paid or entitled to
payment (e.g.,
vacation, PTO,
holidays, various
leaves, etc.)
Ongoing Employee
Employed for at least one complete standard measurement
period
Employer permitted to use defined measurement and
stability periods of up to 12 months
Employers may need time between the those periods to
determine which ongoing employees are eligible for
coverage, and to notify and enroll employees
Employer may make time for these administrative steps by
having its standard measurement period end before the
associated stability period begins
Defined as an “administrative period” not to exceed 90 days
New Employee-Safe Harbor
Employer maintains a GHP that would offer coverage
only if the employee were determined to be a
full-time employee
The employer may use both a 3-12 month
measurement period and an administrative period of
up to 90 days for variable hour and seasonal
employees (now defined as <6 months)
The initial measurement and administrative period,
combined, can’t extend beyond 13 months, plus a
fraction of a month
New Employee-Safe Harbor
• Employer using facts and circumstances on
the employee’s start date cannot reasonably
ascertain that the employee will work an
average of 30 hours a week
• After January 2015 these employees will be
considered employed for the entire
measurement period
Controlled Groups
Look at entire group to determine 100 FTE count
Each corporation is looked at individually to
determine penalty
Each corporate gets a ratio % of less 80 FT count
Rehired or Resuming Employees
On/off employees, unpaid for some legitimate reason
or even unpaid leave of absence affected employees
– Break of at least 26 weeks - treat as new employee
– Break is not 26 weeks - employer determines average
hours of service per week during the measurement period
(excluding special unpaid leave period) and uses that
average for the entire measurement period
Dependent
IRC Section 4980H requires large employers to
offer minimum essential coverage to all
full-time (30 hours) employees and their
dependents
Dependent is defined as the employee’s child
under age 26 (2015 is another year of
transition for this requirement)
No penalty for not offering coverage to spouses
Substantially all Full-time Employees
The penalties under IRC Section 4980H(a)
should not apply to employers who offer
minimum essential coverage to substantially
all full-time employees
– Defined as 70% of their full time employees (so, coverage
can be offered to all but 30%-think those working 30-39
hours?)
Ongoing Employee Example
Measurement period (MP): October 15-October 14
Administrative period (AP): October 15-December 31
Stability period (SP): January 1-December 31
John & Amy are ongoing employees. John works 31
hours per week during the MP, Amy works 29 hours.
John is a full-time employee during 2014, even if his
hours drop below 30 in 2014; Amy is not a full-time
employee during 2014, even if her hours increase
above 30 in 2014
Non-standard Measurement Periods
Subcategories of employees
Employers can use different measurement,
administrative and stability periods for:
–
–
–
–
Both collectively and noncollectively bargained employees
Groups of employees within different unions
Salaried and hourly employees
Employees working in different states
Graphic that Marketing is working on
Administrative Periods
• Employers have an option to use specified administrative
periods of up to 90 days from measurement period - stability
period to determine which ongoing employees are eligible for
coverage and to notify and enroll employees
• The employer can use an administration period of up to 90
days for new variable-hour and seasonal employees, which
may not extend beyond the last day of the first calendar
month beginning on or after the one-year anniversary of their
start date (13 months and some change)
Affordable Coverage
Employee’s portion for self only coverage does
not exceed 9.5% (Box 1) of W-2 income
Safe harbors for affordability include
– Rate of pay
– Federal poverty line
Cost Sharing Tiers
• Effective in 2014 with the HIM
• ACA established four standard tiers of insurance coverage
− Bronze (60%) - minimum amount of coverage to meet the
individual mandate
− Silver (70%)and Gold (80%) - must be offered by any health insurer
participating in the HIM
− Platinum - provides for 90%
• Tiers vary by level of cost sharing required, also defined as
actuarial value
− Represents amount of health expenses a health insurer will pay for
a standard population
− The individual is responsible for the remaining percent, paying
through some combination of deductibles, co-pays and coinsurance
Waiting Period
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Waiting Period
• A group health plan (GHP) or
individual health insurance
coverage shall not apply any
waiting period (as defined in
section 2704(b)(4)) that exceeds
90 days
• Effective for plan years starting
on or after January 1, 2014
• Non-compliance would violate
ERISA making employer subject
to ERISA Penalties
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General Rules
• Applies to group health plans, fully insured
and self-insured and individual insurance
• Not applicable to HIPAA excepted benefits
• Time spent as a part-time employee would
not count if eligibility were based on full-time
status
Future Reporting Responsibilities
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Employer Disclosures and Reporting
28
Model Exchange Notice
• Applies to all employers that are subject to the
Fair Labor Standards Act
• Model Exchange Notice must be sent to all
current employees
• Model Notice should have been sent no later
than October 1, 2013; thereafter, it must be
provided within 14 days to all new hires
Summary of Benefits & Coverage (SBC)
• All applicants and enrollees for all GHPs, except
HIPAA-excepted benefits (e.g., stand-alone
dental, vision, most Health FSAs)
• The ACA requires employers to provide an SBC,
a four-page, double-sided summary that allows
health care consumers to compare coverage
options
• Annual requirement
Grandfathered Plan Notices
• ACA requires this notice be provided to all
participants if the plan is to maintain its
grandfathered status
• Explains that the plan or coverage is a
grandfathered health plan with the ACA definition
• Annual requirement while GHP maintains
grandfathered status
• Grandfathered plans do not have to comply with
some of the rules related to the ACA. However, they
must comply with other rules, like annual and
lifetime limits, dependent coverage up to age 26,
rescission and limits on preexisting condition
exclusions (PCEs)
Patient Protection Disclosures
• Employers must notify participants of their right
to designate any primary care provider who
participates in the network
• Annual notice must be provided whenever the
plan provides a SBC
• This notice provides individuals enrolled in the
health plan information regarding rights to
choose a primary care provider or a pediatrician
when a plan or issuer requires designation of a
primary care physician or obtain obstetrical or
gynecological care without prior authorization
COBRA Qualifying Event Communications
• During the release of the Marketplace Notice, an
updated Qualifying Event Notice was posted on
the DOL/EBSA website
• Employer’s notices should have been updated
immediately
• New language in notice regarding rights within
the marketplace
• Language for TAA and HIPAA deleted
Form 8928 and Form 720
• http://www.irs.gov/pub/irs-pdf/f720.pdf
• http://www.irs.gov/pub/irs-pdf/f8928.pdf
PCOR Matrix
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Marketplace Notice
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• May 8, 2013, the DOL issued Technical Release 2013-02
• All employers subject to the FLSA must provide:
– Model Notice to Employees of Coverage Options related to Health
Insurance Marketplace
• Current employees no later than October 1 regardless of
eligibility for health insurance and employee class
• Post October, to all new hires within 14 days (through 2014)
Existence of the Marketplace
Description of the services provided by the Marketplace
How employees may contact the Marketplace for assistance
If the employer’s share of total costs of provided benefits is
less than 60 percent (i.e., whether it offers minimum value)
• The possibility of being eligible for a premium tax credit under
the Marketplace
• The loss of their employer’s contribution (if any) for health
benefits and
• All or a portion of the contribution may be excludable from
income for federal tax purposes
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Plan Design Options
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Account based plans
•FSAs
•HRAs
•HSAs
•CDH combo
•Pitfalls
Prohibited arrangements
HRAs, Health FSAs
and Employer
Payment Plans must
either be a HIPAAexcepted benefit or
integrated with a
medical plan
Prohibited arrangements
HIPAA-excepted Health FSAs must meet two conditions:
1
The employer makes available GHP coverage that is not
HIPAA-excepted
2
The maximum benefit cannot exceed two times the salary
reduction or, if greater, cannot exceed $500 plus the
salary reduction
Permitted arrangements
Two categories of
arrangements remain
permissible:
 HIPAA-excepted HRAs
 Integrated HRAs
Permitted arrangements
HIPAA-excepted
benefits
retiree-only plans,
limited scope
dental/vision plans,
and plans that cover
cancer, hospital
indemnity, accident
and disability
Permitted arrangements
Permissible:
 An HRA that covers only HIPAA-excepted benefits
 Retiree-only HRAs
More and more large employers are moving to a
retiree-only HRA model to control retiree medical
costs.
Permitted arrangements
An HRA must pass
one of two integration
tests to be considered
integrated with another
non-HRA group health
plan (GHP) (i.e., a
major medical plan)
Permitted arrangements
Five criteria for each test
When it’s effective
A stand-alone HRA
that was in effect
before September 13,
2013, can continue
until the end of the
current plan year
New HRAs created on
or after September
13, 2013, will be out
of compliance
Penalties
What are the penalties for a prohibited arrangement?
Reimbursements made to
highly compensated employees
are considered taxable.
Violations of the ACA rules on
annual limits and preventive
services: payment of a daily
excise tax equal to $100 per
participant.
New: IRS Allows FSA Carryover
• An employer must amend its
125 cafeteria plan document no
later than the last day of the plan
year from which it wants to carry
over the amount
• Cannot have a carry over feature
and a grace period
• Eliminate current grace period by
the same deadline that applies to
the carryover
• Employer may limit carryover
amount to less than $500 or not
allow at all
New: IRS Allows FSA Carryover
• Carry over amount is available for the entirety
of the next plan year
• Carry over amount is
available, even if a
participant does not
make an election for
the next plan year
• In theory, a balance
could be carried over
for several years
even though the
participant does not
elect Health FSA
coverage
New: IRS Allows FSA Carryover
• The carry over amount does not affect the
125(i) limit on salary reduction contributions
• Carryover is a plan option and applies to all
participants, including COBRA Qualified
Beneficiaries
• This Notice does not change the COBRA rule
that applicable HIPAA-excepted Health FSAs
may be terminated at the end of the plan year in
which the qualifying event occurs
New: IRS Allows FSA Carryover
• Any unused amounts
above the employerestablished carry over
limit are subject to
forfeiture
• Cash-out of unused
amounts or a transfer of
unused amounts to other
taxable or nontaxable
benefits is not allowed
• Health FSAs can still use
run-out periods
Elections
• The IRS also expanded
application of an election
change exception
• Under the guidance, noncalendar (fiscal) year plans can
permit participants to make
election changes in 2013 to
enroll in or drop coverage
outside of open enrollment
• This rule applies to employers of all sizes
• Employers must amend their plan documents before
December 31, 2014
Wellness Initiatives
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Wellness Incentives
A program of health
promotion or disease
prevention
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Wellness Incentive Types
1. Participatory
2. Health-contingent
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Wellness Requirements
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Frequency
Amount
Availability
Reasonableness
Notice
Examples
Annual medical plan premium: $6,000
Employer pays: $4,500
Employee pays $1,500
Employer offers $600 health-contingent reward and
imposes $2,000 tobacco premium surcharge
Good incentive. The total of all rewards is $2,600,
which is less than 50% of premium and $600
reward does not exceed 30%. Total cost is $6,000,
not $1,500.
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Examples
Annual medical plan premium: $5,000
Employer provides: $250 reward for completing health
risk assessment, $1,500 for meeting health-contingent
standard
Good incentive. Even though $1,750 is more than 30%
of premium cost, the $250 reward is not counted
because it is participation based.
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Examples
• Employer rewards cholesterol test under 200.
Employer provides a different, reasonable means of
qualifying for reward. June’s count is above 200.
Employer’s nurse recommends diet and exercise
routine that is not unreasonably difficult. After
program, June’s count is still above 200. Program
requires doctor visit and to follow additional
recommendations. Doctor prescribes medication and
requires periodic evaluations.
Good incentive. June qualifies for reward, but only if
she actually follows doctor’s advice.
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Gray Areas
• Financial reward
apportionment
• How to define tobacco use
• Applying percentage limits to
a financial reward
• Design requirement – use
evidence- or practice-based
standards?
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