Affordable Care Act/Healthcare Reform Legal Issues

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Affordable Care Act/Healthcare ReformLegal
Issues What You Need to Know!!

• Rebecca Dobbs Bush
• SmithAmundsen LLC
• rdobbs_at_salawus.com
• [phone]

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Patient Protection and Affordable Care Act (PPACA)

• General Disclaimer
• At the outset note that the law is VERY
  confusing.
• There are many ambiguities where we are still
  awaiting relevant government agencies to issue
  detailed regulations.

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2014 Are you Ready?

• Mandates Individual and Employer
• Automatic Enrollment (gt200 FT Employees)
• On Hold pending further guidance
• Insurer Fees/ Plan tax
• Benefit limits
• Premium Subsidies
• Maximum waiting period (90 days)

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Insurer Fees/Plan Taxes

• Paid annually
• For insured plans
• Will be paid by insurance company
• Passed on to employer noted as separate charge
  on invoice
• For 2014, estimated to be 63 per enrollee per
  year
• For self-insured plans
• For plan years ending on or after 9/30/12
• Each self-insured plan must pay to the IRS an
  annual fee of 2 per participant (reduced to 1
  for the first plan year)

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Benefit Limits

• Deductible limits applied to small group market
• Maximum of 2,000 deductible for single coverage
  and 4,000 for other than single coverage
• Out-of-pocket limits applied to all size
  fully-insured and self-funded groups
• Capped at HSA qualified plan limits (6,250
  single/12,500 Family)

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Premium Subsidies/Exchanges

• States will receive funding to establish health
  insurance exchanges
• Individuals and small employers can purchase
  coverage through an exchange
• Individuals can be eligible for tax credits
• Limits on income and government program
  eligibility
• Employer plan is unaffordable and/or not of
  minimum value
• Three model options
• State-run facilitator
• State-run active purchaser
• Federally run

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Status of IL Exchange

• IL received approximately 39 million in
  establishment funds from Federal Government
• IL is only 10 complete has asked for
  assistance from Federal Government in finalizing
  set up
• Illinois will use a Federal/State Partnership
  Model
• Supposed to be operational by October of 2013

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Exchange Plan Designs

• Four Levels of coverage
• Platinum 90
• Gold 80
• Silver 70
• Bronze 60
• Other Factors
• Guaranteed availability and renewability of
  coverage
• Fair health insurance premiums (age-31 Tobacco
  Family Size Geography)
• Single statewide risk pools
• Catastrophic plans (lt30 years old financial
  need)
• Rate review program (annual review process)

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Individual Responsibility (and Premium Subsidies)

• Starting 1/1/14 individuals, including
  children, must enroll in minimum essential
  coverage, or pay a penalty-tax
• Penalty Tax Amount Greater of amount or a of
  income
• 2014 95 or 1
• 2015 325 or 2
• 2016 695 or 2.5
• Family penalty capped at 300 of the adult flat
  dollar penalty or bronze level premium
• Assessed on a monthly basis

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Premium Credit and Subsidies

• Those who dont have access to affordable,
  minimum essential coverage may be entitled to a
  credit and/or subsidy based on income level.
• Under 133 of Federal Poverty Level (FPL) driven
  to Medicaid (provision still unclear)
• Between 133 and 400 of the FPL
• For an individual, that is between 15,282 and
  45,906 per year (2013)
• For a family of four, that is between 31,322 and
  94,200 per year (2013)

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Employer Responsibility Provisions

• To Whom Does it apply?
• Employers with 50 or more full-time equivalent
  (FTE) employees
• Initially for 2014, can use any consecutive
  six-month period during 2013 to measure
• Employers that are part of a controlled group
  have to count total employees of controlled
  group BUT, Pay or Play rule penalty generally
  applies separately with respect to each
  applicable large employer member of the control
  group

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How do you count employees under the ACA?

• A full-time employee is one who works 30 hours a
  week.
• Part-time employees count as a fraction of an
  employee.
• When employee thresholds are referenced the
  reference is to a full-time equivalent employee
  (FTE).

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Counting Employees

• To figure out if an employer meets the
  50-employee threshold
• An employer would first count full-time
  employees.
• If they do not have 50 full-time employees, they
  would then count part-time employees.
• To count part-time employees
• Count the total number of part-time employees.
• Then, count all the hours worked by those
  part-time employees in the month and divide them
  by 120 (30 x 4) to figure out how many FTEs the
  employer has.

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Example

• A company has 35 full-time employees (30 hours).
  In addition, the company has 20 part-time
  employees who all work 24 hours per week (96
  hours per month).
• These 20 part-time employees would be treated as
  equivalent to 16 full-time employees based on the
  following calculation
• 20 employees x 96 hours / 120 1920 / 120 16
• Thus, this employer would be considered a large
  employer with a total FTE count of 51 employees
  (35 16 51).

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Pay or Play

• Employers with 50 or more employees
• The Sledge Hammer Tax -- Effective 2014, these
  Employers are not required to offer coverage, but
  where they do not (to at least 95 of their
  full-timers) AND they have at least one full-time
  employee receive a subsidy and purchase coverage
  in an exchange, they will be required to pay
  2,000 per full-time employee annually (167 per
  full time employee monthly).
• The first 30 employees will be excluded.
• Example
• So, an employer with 60 employees that does not
  offer health coverage will be required to pay
  60,000.
• 60 employees less first 30 employees
  multiplied by 2,000 60,000.

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The Sledge Hammer Tax vs. the Tack Hammer Tax

• Coverage offered must be affordable and of
  minimum value
• The Tack Hammer Tax -- For those employers
  offering unaffordable coverage that is not of
  minimum value, they will be assessed a 3,000
  penalty for each full-time employee that receives
  a subsidy and purchases coverage in an exchange.

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Criteria for assessing penalty Coverage must be
Affordable

• Coverage offered must be affordable
• For those employers offering unaffordable
  coverage, they will be assessed a 3,000 penalty
  for each full-time employee that receives a
  subsidy and purchases coverage in an exchange.
• Coverage is unaffordable where
• The employees share of the premium exceeds 9.5
  of family income.
• Example If you have a single employee working
  full-time at Illinois minimum wage (8.25 as of
  July 1, 2010), coverage would be unaffordable
  if the employee has to pay more than 135.85 per
  month.

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Criteria for assessing penalty Coverage must be
of Minimum Value

• To be of minimum value
• Plan must cover at least 60 of the total allowed
  cost of benefits that are expected to be incurred
  under the plan.
• (i.e., actuarial value of the plan must be at
  least 60)
• Note A minimum value calculator was made
  available by the IRS and the Department of Health
  and Human Services (HHS) on February 25, 2013

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Penalty Amount Examples

• 1. Employer does not offer coverage or offers
  coverage to less than 95 of its FT employees,
  and at least one (1) of the FT employees receives
  a premium tax credit on the exchange.
• 2,000 annual penalty (per full-time employee)
• First thirty (30) FT employees are exempt
• EXAMPLE Acme, Inc. has 100 FT equivalent
  employees and 70 FT employees. They do not offer
  coverage and one employee receives a premium
  credit.
• ANSWER 2,000 x (70-30) 80,000/year

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Penalty Amount Examples

• 2. Employer offers coverage to at least 95 of
  its FT employees but at least one (1) of the FT
  employees receives a premium tax credit on the
  exchange.
• 3,000 annual penalty
• Calculated by taking the number of FT employees
  who receive the tax credit for that month
  multiplied by 1/12 of 3,000.
• Maximum penalty is capped at the number of the
  employers FT employees for that month multiplied
  by 1/12 of 2,000 (i.e., the penalty they would
  have incurred for not offering coverage at all
  and remember, the 1st 30 are exempt)

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When are the penalties effective?

• Generally effective for calendar months beginning
  January 2014.

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Transition Rule

• Delayed effective date for some non-calendar year
  health plans
• First transitional rule states that no penalty
  will be imposed against an employer with a
  non-calendar year plan with respect to any
  employees who are eligible to participate in a
  fiscal year plan under its terms as of December
  27, 2012 (whether or not they take coverage)
  until the first day of the non-calendar year plan
  starting in 2014.
• Second transitional rule exists to allow a plan
  additional time to expand eligibility provisions
  and offer coverage to those who were not
  previously eligible.
• If you offered to at least 1/3 of the FT and PT
  employees at the most recent open enrollment
  period
• OR, if you covered at least ¼ of the total
  employees
• Then, you are not subject to the penalty until
  the 1st day of the plan year starting in 2014
  provided that those FT employees will all be
  offered coverage no later than that date.
• In determining whether you meet the 1/3 or ¼
  test, you can look at any day between October 31,
  2012 and December 27, 2012.

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What else should we be thinking about to get
ready for 2014?

• Should you lower eligibility criteria for your
  health plan to 30 hours per week to meet the pay
  or play sledge hammer tax requirements?
• Do you need to increase the amount you contribute
  towards premiums to meet the pay or play tack
  hammer tax affordability considerations?
• Do you need to schedule more employees to work
  less than 30 hours per week?
• How is guaranteed issue going to affect health
  care costs?
• Do you need to consider self-funding your health
  plan?
• Is it really an option to drop health insurance
  and just pay the penalty?

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Questions???

• Rebecca Dobbs Bush
• rdobbs_at_salawus.com
• [phone]