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Affordable Care Act

Affordable Care Act

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Affordable Care Act

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  1. Affordable Care Act SHRM April 10th, 2013 Chris Keen Keen Insurance Associates- President 410-213-9060 / 410-251-8605 cell ckeen@keeninsurance.com

  2. Affordable Care Act • Acronyms & Synonyms • ACA • Patient Protection and Affordability Care Act • PPACA (“Pa Pac a”) • Free Health Care • Health Care Reform • Obamacare

  3. Background & Key Provisions • Expansion of Medicaid up to 133%-138% of Federal Poverty Level (state specific down to 100% of FPL) • Requires US Citizens* & legal residents to have health insurance (Individual Mandate) • Create state-based exchanges for individual purchase of health insurance, to include federal funding for “subsidized premiums” • Incomes from 133% to 400% sliding subsidy • Requires large employers with 50 or more employees to provide Acceptable and Affordable Health Insurance (Pay or Play)

  4. Medicaid Expansion • Medicaid currently varies state to state • Offers need based coverage with income restrictions up to 100% of Federal Poverty Level (state specific) • Expansion provides federal funding for states up to 133%-138% of poverty • 133% Poverty estimates 2012: • $15,282 Single $31,322 Family of Four

  5. Individual Mandate- January 1, 2014Have Coverage or Pay Penalty Penalty will be the greater of: • 1% of income or $95 in 2014, • 2% of income or $325 in 2015, • 2.5% of income or $695 in 2016, • The amount is reduced by one-half for dependents under the age of 18, • The total family penalty is the greater of the annual percentage or capped at 300% of the flat dollar amount.

  6. Individual Penalty Example *2016 Family of 4 meets fixed dollar cap

  7. Individual Mandate- Subsidized Coverage via State Exchange Key Provisions- State Exchange Risk Pool • Premium- • No more than 3 to 1 difference • (Highest to Lowest) • No pre-existing coverage limits • No load for medical or life style risk • No more than 50% load for tobacco use

  8. FPL and Exchanges

  9. Individual Mandate- Subsidized Coverage via State Exchange Projected Premium on Exchange (Kaiser Health Foundation Non-Profit) Single Member Age 40- Income $34,000 (300% Poverty Estimate) Annual Monthly Projected Premium: $4,500 $375 Subsidy $1,165 $114 Premium to Member $3,335 $261* *Remaining Premiums after subsidy are paid with after tax income. No section 125 deductions are permitted.

  10. Individual Mandate- Subsidized Coverage via State Exchange Projected Premium on Exchange (Kaiser Health Foundation Non-Profit) Family with two children – Adults Age 61- Income $93,000 Annual Monthly Projected Premium: $25,100 $2,091 Subsidy $16,265 $1,355 Premium to Member $8,835 $736* *Remaining Premiums after subsidy are paid with after tax income. No section 125 deductions are permitted.

  11. Individual Mandate- Subsidized Coverage via State Exchange Projected Premium on Exchange (Kaiser Health Foundation Non-Profit) Family with two children – Adults Age 61- Income $95,000 Annual Monthly Projected Premium: $25,100 $2,091 Subsidy $0 $0 Premium to Member $25,100 $2,091* OVER 25% OF GROSS HOUSEHOLD INCOME *Remaining Premiums after subsidy are paid with after tax income. No section 125 deductions are permitted- Income above 10% may be deductible using federal itemized deduction options. Consult your tax adviser for review of any potential tax implications.

  12. Pay or Play- Large Employers • Paya penalty for not offering “minimum essential” coverage (MEC), and “affordable” coverage, or pay a penalty for not offering coverage at all. • Play by offering “affordable” & “minimum essential” coverage to all full-time employees*.

  13. Pay or Play- Large Employers Pay Option- Don’t Offer a MEC Plan: • $2,000 Annualized Tax Penalty Per Full Time Employee (Penalty is Valid for 2014) • (Less $60,000 for first 30 exempt employees) • Ex.130 FT Employees = $200,000 Penalty • Employees earning less than 400% of poverty can purchase coverage on exchange or pay their own tax penalty for being uninsured • Employees / Owners earning more than 400% of poverty can purchase insurance on or off the exchange at new unsubsidized rates

  14. Pay or Play- Large Employers Play Option- Offer a Plan: • If your plan meets the minimum essential benefit standard and is deemed affordable*: • Employees eligible for Medicaid will not require employer penalty • Full time employees must be offered coverage within 90 days of employment • Affordability measures employee payroll premium costs

  15. Pay or Play- Large Employers Play Option- MEC Plan • Make sure plan meets Minimum Essential Coverage Test (ACV 60%) • Plan Must meet 60% Determined Actuarial Calculated Plan Value • Plan should be “expected” to pay 60% of likely incurred medical expenses* • What wouldn’t qualify? • $10,000 deductible plan

  16. Pay or Play- Large Employers Play Option- Affordable Plan: • To be affordable by law • Premium cannot exceed more than 9.8% of household income- amended to 9.5% • Affordable under interim Safe Harbor rules • 3 allowable Safe Harbors maybe used to determine affordability

  17. Safe Harbors • W-2 Box 1 safe harbor allows a 9.5% affordability test of self only coverage • Rate of pay safe harbor takes the hourly rate, multiply by 130 hours, affordable if self only contribution is less than 9.5% of total. • Federal poverty line safe harbor allows self only contribution less than 9.5% of FPL($20.99 per week in 2013)

  18. Pay or Play- Large Employers Safe Harbor W-2 Earnings Example : • Sample Large Employer • Offers MEC Plan to all Eligible Fulltime employees within 90 days of hire • Employee required contribution for plan is $35 per week • Sample Employee W-2 Box 1 Earnings for 2014 are $22,000 • Employer is not liable for penalty – plan is deemed affordable under Safe Harbor (9.5% of $22,000 is $40.19 per week)

  19. Large EmployersDoes this apply to me? Large Employer is Well Defined within ACA • 50 or More combined Full time and Full time equivalent employees (FTEs) • Full time employee defined- • Reasonably expected to work 30 hours per week or 130 hours per month • FTEs • The aggregation process of adding all part time employees working less than 130 hours per month • Converting those hours into full time equivalents

  20. Large EmployersDoes this apply to me? Monthly Calculation • Step 1 – Count full-time employees • Step 2- Count all employees with 130 or more hours count each as one FTE • Step 3– Count the hours of all remaining employees, using no more than 120 hours for any employee. • Step 4 – Divide those hours by 120. • Step 5 – Add 1 + 2 + 4 • Step 6- Equals FTE for that month. • Step 7- Average the 12 months totals

  21. Large EmployersCalculations- Sample Month

  22. Large EmployersCalculations- Total Large Employer 68

  23. Avoid Being a Large Employer? Misinformation • Run two separate 90 day shifts of “seasonal employees”? • Still included in large employer count, not person specific, driven by hours • Separate companies, partnerships, lease backs, property leases, associated service organizations? • Employer aggregation is required in ACA as defined in IRS section 414 (b)(c)(f)(m)(o) • Hire non-us citizen work force? • All hours count towards 50 large employer. All legal workers are covered by ACA

  24. 90 Day Waiting Period 2012-59 • PHS Act section 2708 does not allow any waiting period that exceeds 90 days. 2012-59 gives guidance through 2014 regarding waiting periods. Defines “eligible to enroll” as having met the plan’s substantive eligibility conditions. • Also allows “reasonable time” to determine if variable hour employees meet the plan’s eligibility. Specifically gave an example stating a plan’s cumulative hours of more than 1200 hours would violate PHS Act 2708 • Guidance issued March 18th 2013 further stated that this provision is a one time eligibility requirement only and does not permit re-application to the same individual each year. • Also, while compliance with the 90-day waiting period limitation satisfies PHS Act 2708, incorrectly defining variable hour employees may not satisfy 4980H or HIPAA non-discrimination guidelines.

  25. Measurement Periods • 2012-58 released in August 2012 gives guidance through 2014 regarding MEASUREMENT PERIODS • See HRS insight dated 9-13-12 • 2012-58 allows up to a 12-month initial measurement period to determine full time status • 2012-58 also allows up to a 12-month standard measurement period for ongoing variable hour employees • It also determines subsequent stability periods for employee’s insurance coverage if they “qualified” • Guidance 12-27-2012 clarified that “an employer intending to ADOPT a 12-month measurement period will face time constraints in doing so”.

  26. New Areas Of Compliance • Employment classification as full-time, variable, or seasonal • Audit manuals and compliance documents 5% error results in maximum 4980H(a) penalty • First date of service for re-hired employees, change in employment status, and their eligibility • FMLA, jury duty, USERRA • IRS annual filings, 6056 reporting • New terminology and measurement periods

  27. Solutions for Large Employers • Pay Penalty- Do not offer plan! Need: • Estimate penalty • Section 6056 notice compliance • Track and manage the penalty • Provide payment and annual notice

  28. Solutions for Large Employers • Make sure plan meets Affordability & Benefit Standards • Define the employee populations you wish to reward with affordable benefit coverage • Budget for inclusion of these benefits • Manage additional labor needs with limited or no penalty exposure • Implement policies, procedures and controls to ensure ongoing compliance & review • Partner with a consultant prepared to audit your plan to assure ACA compliance.

  29. Run the Analytics

  30. Contact Information: Chris Keen Keen Insurance Associates- President 410-213-9060 / 410-251-8605 cell ckeen@keeninsurance.com