Affordable Care Act County of Sacramento September 26,
Affordable Care Act County of Sacramento September 26, 2012 1 Agenda 2 Employer Timeline & Compliance 2012 2015+ Employee Timeline 2014 and Group Insurance California Health Benefits Exchange Wrap-Up
Employer Timeline & Compliance 2012 2015+ 3 Employers Timeline & Compliance 2012 2013 2014 SBC (OE/PY 9/23/12) SBC Carve Out Arrangements Uniform Glossary (PY 9/23/12) 60-day notice of material change (Mid-PY Only) Preventive care for women (NGF PY
8/1/12) (Plan amendment) Plan for Form W-2 Reporting 4 $2 million annual limit on EHB (PY 1/1/13) Plan amendment required Definition of EHB $2,500 cap HFSA (PY 1/1/13) Plan amendment required by 12/31/14 Report value of coverage on Form W-2 (1/31/13) Coordinate with
payroll Notice of Exchange (3/31/13) Clinical Effectiveness Research Fee for 2012 (File IRS Form 720 with payment due 7/31/13) Additional .9% HI FICA withholding Coverage for all adult children regardless of other coverage (PY 1/1/14) Amendment No dollar limits on EHB (PY 1/1/14)
Amendment No Pre-ex regardless of age 90-day waiting period (PY 1/1/14) Amendment Clinical Trial coverage (NGF) (PY 1/1/14) Amendment Reinsurance Program Fee (3/31/14) Voluntary Reporting to Exchange by employers (1/1/14) Amend FSA by 12/31/14 retroactive to 2015 +
Automatic Enrollment Employer reporting to IRS about employee coverage Tax penalties assessed on employers who do not offer any medical coverage or affordable coverage of minimum value in 2014 Discrimination rules issued on insured executive medical plans
2018: Cadillac Tax 2012 Summary of Benefits and Coverage and Related Documents Summary of Benefits and Coverage 5 Effective for open enrollments and plan years beginning on or after September 23, 2012 Applies to every group health plan (excluding excepted benefits such as dental and vision) Must be provided to eligible employees and family members
Must be provided in a culturally and linguistically appropriate manner Electronic delivery permitted but paper copy must be made available free of charge Carve out plans have special challenges 2012 Summary of Benefits and Coverage and Related Documents Uniform Glossary 60-Day notice of material change to SBC 8
Same model document for everyone Found at DOL and HHS websites Employer may post on its intranet but inform employees of this fact in the SBC and advise that a paper copy is available free of charge Any material change to a plan during the plan year that would cause a change to the SBC requires 60 days advance notice before change becomes effective 2012 Preventive Care for Women Preventive Care for Women (NGF Plans) Effective for Plan Years on/after 8/1/12 Well women visits Screening for gestational diabetes Human papillomavirus testing Counseling for STDs Counseling and Screening for HIV All FDA approved contraceptive methods except vasectomies
Breastfeeding support and counseling Screening and counseling for domestic violence Market these benefits You have paid for them Value-Based Designs are permitted 10 2012 Planning for W-2 Reporting Not a tax just a reporting Report value of 2012 health coverage by January 31, 2013 Includes employer and employee portion of:
11 Major medical and Rx; wellness, EAP and on-site medical clinics if COBRA; employer contribution to Health FSA Pre-tax payments for voluntary benefits, or if paid by employer (e.g. cancer insurance) Use unsubsidized COBRA rate to calculate value (minus administrative fee) Issues to address: Reporting on employees who leave mid-year Off-month payroll cycle final payroll Information obtained after the close of the plan year Non-calendar year plans Mid-month changes Optional reporting
2012 Planning for W-2 Reporting Coverage Type Report Major Medical X Do Not Report Dental/vision not integrated with Medical X HFSA funded solely by employee salary HFSA employer
contributions X X HRA Contributions 12 Optional X HSA Contributions X Specified Illness paid after-tax X
Specified Illness paid pre-tax or by employer X EAP, On-site medical clinic, wellness IF COBRA component Domestic Partner coverage include in income X If no COBRA component ACA Compliance 2013 $2 million overall aggregate annual dollar
limit on Essential Health Benefits $2,500 contribution cap to Health Flexible Spending Arrangements (Health FSA) Report value of health coverage on IRS 2012 Form W-2 Notice of Exchange Clinical Effectiveness Research Fee for 2012 .9% HI FICA withholding on wages exceeding $200,000 13 2013 Annual Dollar Limit Floor Rises $2 million overall aggregate annual dollar limit on Essential Health Benefits 14
Effective for Plan Years beginning on/after January 1, 2013 Plan Amendment required Review your definition of Essential Health Benefit Consider converting dollar limits to visit limits 2013 Definition of Essential Health Benefits Self-insured plans and fully-insured large group health plans will not be required to offer Essential Health Benefits, but, if they do offer an EHB, the definition applies to: Lifetime limits Annual limits Sponsors may continue to use good faith effort to define what is, and what is not, an
Essential Health Benefit until guidance is issued. Likely that the definition will be effective for 2014 Examples: acupuncture, TMJ, durable medical equipment 15 2013 Health FSA Cap $2,500 salary reduction cap to Health FSAs 16 Effective for plan years beginning on or after January 1, 2013 $2,500 limit applied on an employee-byemployee basis Plan amendment required but no later than December 31, 2014 retroactive to 2013 provided that the plan is operated in
compliance for the 2013 Plan Year 2013 Notice of Exchange 17 Plan Sponsor must deliver to employees no later than March 31, 2013 Anticipate a model form for 2013 Informs employees of availability of health coverage on the Exchange Advises of the potential for government subsidies and reduced cost-sharing Advises of penalties for failure to have Minimum Essential Coverage 2013 Clinical Effectiveness
Research Supports federally mandated research on best practices for most effective treatments $1.00/covered life for the 2012 Plan Year $2.00/covered life for each year thereafter to 2019 Sponsor liability for self-insured plans Insurance carrier liability for fully-insured plans Annual Tax Return and payment Payment due no later than July 31 18 ACA Compliance 2014 Plans must offer coverage for all children to age
26 regardless of their eligibility for other coverage No overall aggregate annual dollar limits on Essential Health Benefits No preexisting condition exclusions regardless of age Eligibility waiting periods limited to no more than 90 days Non-grandfathered plans may not prohibit participation in clinical trials and must cover routine services of clinical trials Exchange Reinsurance Program Fee imposed on plans 19 Employer reporting to Exchange 2014 Dependent Coverage to age 26 Plans must offer coverage for all children to age 26 regardless of their eligibility for other coverage
20 Covered under any parent plan Covered under their employers plan Covered under their spouses plan Coordination of Benefits challenges Mid-Year Enrollment Rights Need for guidance 2014 No Annual Dollar Limits No overall aggregate annual dollar limits on Essential Health Benefits Revisit definition of Essential Health Benefits
Take advantage of visit limits as compared to dollar limits No need to offer Essential Health Benefits No preexisting condition exclusions regardless of age 21 Certificate of Creditable Coverage may be obsolete 2014 Limits on Waiting Periods Eligibility waiting periods limited to no more than 90 days
22 If eligibility is based on time-served only 90-day period starts when all other requirements satisfied. For example, promotion to new classification Confirm probationary period not tied to eligibility for benefits Check collective bargaining agreement for work rules for full-time employees may need to re-define FTE Part-Time employees can be required to satisfy an hours-worked requirement before the 90day period commences. For example, 1250 2014 Coverage for Clinical Trials Non-grandfathered plans must cover routine services for clinical trials
23 Cannot prevent participation in a Clinical Trial if (1) recommended by participants physician; or (2) participant makes the case that he/she satisfies the eligibility requirements for the Clinical Trial Must cover all routine costs of Clinical Trial that are covered under group health plan (e.g. blood draw) 2014 Exchange Reinsurance Program Fee Exchange Reinsurance Program Fee imposed on plans from 2014 to 2016
24 Paid by the (i) carrier; or (ii) TPA on behalf of sponsor To U.S. Department of Health and Human Services Additional amounts may be required by the California Health Benefit Exchange Carrier/TPA reports to HHS Amount has not yet been determined but $60 $80 per participant has been suggested 2014 Compliance Reporting and FSA Exchange states that employer reporting to the Exchange will be voluntary 2013 amendment for Health FSA must be adopted before the end of 2014, provided the FSA operated in compliance with the $2,500 cap for 2013 25
Employee Timeline 2012 2015+ (ACA From the Employees Point of View) 26 Employee Timeline 2012 SBC (OE/PY 9/23/12) Uniform Glossary (PY 9/23/12) 27 2013 2014 $2,500 cap HFSA (PY 1/1/13) Plan
amendment required by 12/31/14 Mass marketing begins for California Exchange (1/1/13) Value of coverage reported on Form W-2 (1/31/13) Notice of Exchange (3/31/13) .9% Medicare payroll tax increase for high earners 3.8 % Medicare contribution tax on unearned income Open enrollment
for California Exchange begins October 1 Individual Mandate Exchange coverage effective Jan 1 Premium subsidies for Exchange coverage available to low paid Coverage for all adult children regardless of other coverage (PY 1/1/14) Amendment New Definition of
FTE 90-day waiting period Clinical Trial coverage (NGF) (PY 1/1/14) Amendment 2015 + Automatic Enrollment Employer reporting to IRS about employee coverage Tax penalties assessed on employees who did not have Minimum
Essential Coverage in 2014 2018: Cadillac Tax 2013 HR Checklist Regarding Employees Preparation: Anticipating Employee Behavior 28 Mass marketing campaign by California Exchange Questions? Value of coverage on IRS Form W-2 Questions? Notice of Exchange Questions? Collective bargaining considerations Education/Schedule Planning Individual mandate - Questions Government subsidies for Exchange coverage Questions Adverse selection - Planning .9% Medicare Payroll Tax on High Earners
Communications Open enrollment for the California Exchange Request for plan info Full-Time Employee - Questions How to responding to employee questions Develop communications strategy 2014 and Group Insurance 29 Exchange and Tax Impacts 2014 Individual Mandate Exchange health plans become effective Exchange coverage issued on a guaranteed issue basis with no medical underwriting Premium subsidies and cost sharing reductions
for low-paid individuals who purchase Exchange coverage New definition of full-time employee Potential tax penalties for employers who for full-time employees: 30 Provide no coverage, Provide unaffordable coverage, or Provide coverage that provides less than minimum value New Definition of Full-time Employee Works, on average, 30 hours per week (130 hours/month)
May use hourly equivalents for salaried individuals FTE under ACA is only for group health coverage Month-by-month calculation 31 Doesnt affect other work rules or overtime Revisit collective bargaining agreement definition Tracked monthly
Part-time employee in one month may be a fulltime employee in another month FTE Look-Back/Stability Safe-Harbor is available New Definition of Full-time Employee Why is this important? Employers are encouraged to provide affordable medical coverage of minimum value to FTEs Employer tax penalties are based on a number of FTEs 32 $2000 x number of FTEs for failing to offer
coverage Lesser of (i) $3000 x number of FTEs offered coverage who instead gets a premium credit to purchase on the Exchange, or (ii) $2,000 x FTEs in excess of 30 Certain Lower-Paid FTEs are eligible for government subsidies (triggering employer tax penalties for employers with at least 50 FTEs) ACA Full-Time Employee No penalty tax is imposed on employers who do not provide group medical coverage, or affordable coverage or coverage of a minimum value to: Part-Time Employees Independent Contractors Leased Employees Seasonal (Temporary) Employees: (New rules regarding these employees) Newly Hired Full-Time Employees during up to a 90-day waiting period (New rules
regarding these employees) 33 Employer Tax Penalties Unaffordable is based on the cost (to the employee) of the employers lowest cost single only coverage as a percentage of an employees household income 34 If the employees cost is more than 9.5% of the employees household income, coverage
is unaffordable How is an employer to estimate an employees household income? Affordability Safe-Harbor 2014 Group Insurance Strategy Realign workforce using ACA definition of FTE Articulate a benefits philosophy (i.e. what are you trying to accomplish with your health benefits?) Begin preliminary workforce analysis using ACA definition of FTE Estimate potential tax exposure, if any Continual realignment of workforce benefits to benefits philosophy to FTE workforce Consider realignment of workforce benefits to benefits philosophy to PTE workforce 35 2014 Group Insurance
Strategy Employer cost of medical coverage for the low-paid FTEs may be significantly greater than the tax penalty Employee cost of medical coverage on the Exchange may be significantly less than employer coverage when subsidies are available Decision: eliminate the possibility of government subsidies (and employer tax penalties); embrace them; ignore them; or something else? Depends upon your benefits philosophy, collective bargaining 36 2014 Group Insurance Strategy Evaluate impact of the Exchange
37 Could it change employee behavior? Employment practices (e.g. cash-in-lieu) relative to the Exchange What behaviors do you want to promote/discourage? Does the Exchange present an opportunity? Would it impact retention of different types of employee? Would employees near Medicare retirement age leave the workforce? 2014 Collective Bargaining Give yourself an opener, to be able to adjust to the final guidelines Flexibility is important Definition of FTE and PTE in CBA/MOU Coverage for Part-Time Employees
Opportunities for subsidy-eligible employees Medicare retirees Early retirees 38 California Health Benefits Exchange 39 California Health Benefit Exchange Has divided California into geographic regions and sub-regions It has defined plan as consisting of Bronze, Silver, Gold and Platinum (full metal tier) levels of benefits including a catastrophic plan within a geographic region A health insurance carrier can bid up to three plans for each geographic location RFPs issued at end of September
Plans selected early 2013 Recently received a $195 million grant, a portion of which is for marketing and outreach 40 California Health Benefit Exchange Exchange is very concerned about: Impact of adverse selection on it Must be self-sustaining by January 1, 2015 Pricing Marketing and outreach The California Healthcare Eligibility, Enrollment and Retention System (CalHEERS)
41 Wrap Up 42 Commentary Health Care Reform is now part of the California landscape and is not going away in California, regardless of the outcome of the elections Divide into three broad categories Compliance Employees Workforce Strategy Strategic planning should not be delayed 43 Thank You . . .
44 Keenan & Associates is an insurance brokerage and consulting firm. It is not a law firm or an accounting firm. We do not give legal advice or tax advice and neither this presentation, the answers provided during the Question and Answer period, nor the documents accompanying this presentation constitutes or should be construed as legal or tax advice. You are advised to follow up with your own legal counsel and/or tax advisor to discuss how this information affects you.
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