Affordable Care ActIssues and Impact

Presentation to the State and HE Agency Benefit Coordinators

August 15, 2014

Patrice Steinhart & Melissa WisemanBenefits Administration, State of Tennessee

Presentation Outline

• Affordable Care Act (ACA) – broad strokes

• Practical issues facing employers and health plan administrators

• ACA Impact

• TN Hours for Benefits

2

Stated Intent of the ACA

• To establish a mechanism to provide for health care coverage to uninsured individuals and families at affordable rates

• To provide that coverage through employer-sponsored plans or through competitive marketplaces

• To help ensure that pre-existing conditions would not be a barrier to health care

• To help ensure that the insurance coverage offered meets established standards

3

Affordable Care Act — Compliance Timeline 2011 Plan Year 2011 2012 2013 2014 2018

Lifetime dollar limits on

Essential Health Benefits (EHB)

prohibited

Preexisting Condition

Exclusions Prohibited for

Children under 19

Overly restrictive annual dollar

limits on EHB prohibited

Extension of Adult Child

Coverage to Age 26

Prohibition on Rescissions

No Cost Sharing and Coverage

for Certain In-Network

Preventive Health Services

Effective Appeals Process

Consumer/patient protections

Nondiscrimination requirements

on fully insured plans

(DELAYED)

Certain Retiree Medical Claims

Reimbursable (ERRP)

Retiree Drug Plan FAS Liability

Recognition

Over-the-Counter

Medicines Not

Reimbursable Under

Health FSA, HRAs, or from

HSAs Without a

Prescription, Except

Insulin

HSA Excise Tax Increase

Public Long-Term Care

Option (CLASS Act) –No

Longer Supported by HHS

Medicare Part D Discounts

for Certain Drugs in

“Donut Hole”

Distribution of Summary

of Benefits and Coverage

to Participants (Ongoing)

PCORI (Comparative

Effectiveness) Fee

Quality of Care Report

(delayed)

Medical Loss Ratio

rebates (insured plans

only)

Employer Reporting of

Health Coverage on Form

W-2 (due January 31, 2013)

Notice to Inform

Employees of Coverage

Options in Exchange

Limit of Health Care FSA

Contributions to $2,500

(Indexed)

Addition of women’s

preventive health

requirements to No Cost

Sharing and Coverage for

Certain In-Network

Preventive Health Services

Elimination of Deduction

for Expenses Allocable to

Retiree Drug Subsidy

(RDS)

Individual Mandate to

Purchase Insurance or Pay

Penalty

State Insurance Exchanges

Employer Responsibility to

Provide Affordable Minimum

Essential Health Coverage***

Preexisting Conditions

Exclusions Prohibited

Annual Dollar Limits on EHB

Prohibited

Automatic Enrollment

(DELAYED)

Limit of 90-Day Waiting Period

for Coverage

Employer Reporting of Health

Insurance Information to

Government and Participants

Increased Cap on Rewards for

Participation in Wellness

Program

Cost-sharing limits for all

group health plans, not just

HDHPs/HSA (deductibles and

OOP maximum)

Coverage of routine patient

costs for participants in

approved clinical trials

Transitional reinsurance

contributions

Excise Tax on

High-Cost Coverage

*** Applies to full time employees (e.g., 30 hours per week) and will require coverage that is affordable and satisfies a certain actuarial value to avoid the penalty.

Employer Responsibility noted in RED above

Plan Compliance Requirements

Extension of adult child coverage to age 26

Summary of Benefits & Coverage communication

100% coverage for preventive services

W2 reporting of the value of coverage

Elimination of pre-ex for children

Final appeals moved to Independent Review Organization

• Marketplace notification

• Women’s preventive services

Plan Compliance Requirements

Employer mandate to provide affordable minimum essential health coverage

Preexisting conditions exclusions prohibited

No annual dollar limits on essential health benefits

Limit of 90-day waiting period for coverage

Cost-sharing limits for all group health plans (deductibles and OOP maximum)

Employer Mandate (a.k.a. Shared Responsibility)

Requires employers with 50 or more “full time employees” to offer “affordable health coverage” that provides a “minimum actuarial value” and “minimum essential coverage” to at least 95%* of their full-time employees and their eligible dependents, or else face a penalty

Who is a “full-time employee”?

What is “affordable coverage?”

What is “minimum actuarial value”?

What is “minimum essential coverage”?*70% in 2015

7

Health Care Reform Impact – Individual Responsibility

• Individuals have a responsibility to maintain minimal essential coverage or pay a penalty that is generally based on taxable income• Payable on tax return for the year in which the penalty was incurred

• Individuals on Independent and Service Contracts will evaluate their own employment status to determine if they must maintain coverage

8

Key Questions

• How will we handle PT and seasonal employees and those who will not be considered FT under the ACA and who could trigger a penalty?

• How will we handle PT employees who work two positions?

• Are any of our PT or contractors considered to be common law employees according to IRS guidelines?

• What measurement period makes sense for our organization?

9

ESR – Determining covered employees – special considerations

-Seasonal employees expected to work less than 6 months per year – not full time

-Volunteers – not full time

-Student work-study programs – not full time

-Educational employees - not part time simply because school is closed or operating on limited schedule during summers

-Adjunct faculty – final regulations allow crediting 2.25 hours of service in addition to each of hour of teaching or classroom time

Look-Back Measurement Safe Harbor

Standard Measurement Period12 months to determine if full time

Admin Periodup to 90

days

Stability Period12 months

Ongoing Employees

New Variable Hour and Seasonal Employees

DETERMINING FULL-TIME EMPLOYEE STATUSTime Periods under Proposed IRS GuidelinesOnly pay 4980H penalty during stability period if required

Measurement & Stability Periods repeat

Initial Measurement Period12 monthsto determine if full time

Stability Period12 months

Then use the Measurement Period for Ongoing employees

Cannot exceed 13 months for new EE

Admin Period30 days

Source: Congressional Research Services (CRS) based on IRS Notice 2012-58 Determining Full-time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage.

12

Employer Responsibility Flow Chart

Sources: Kaiser Family Foundation, Segal

Employer Mandate & Penalties delayed

“No Coverage Penalty” (Code section 4980H(a)) Employer does not offer Minimum Essential Coverage (“MEC”) to all eligible FTEs and

eligible dependents and at least one FTE enrolls in Exchange and receives Federal subsidy

Penalty equals $2,000 per year for all FTEs (minus first 30 FTEs), regardless of whether the FTE elected employer-provided health care coverage

Applies if less than 70% of FTEs (and their eligible dependents) are offered coverage in 2015 (95% in future years)

OR

“Inadequate Coverage Penalty” (Code section 4980H(b)) Employer offers MEC to FTEs but coverage is either

“Unaffordable,” or Does not provide “minimum actuarial value” (State plans exceed this threshold)

Penalty equals $3,000 per year per each FTE who enrolls in an Exchange insurance product and receives a Federal subsidy Not more than the No Coverage Penalty Also applies to the excluded 5% above

13

• Not a new employment issue - new financial risks

• State of Tennessee created a working group of financial, insurance, human resource, and procurement staff to

• Identify risk• Communicate this risk to relevant parties• Develop a solution to mitigate the risk going forward

Not Just About Insurance

• Part-Time report for managers to monitor hours worked

• Decision model to hire an employee, obtain independent contractor, or temporary employee

• Simple questionnaire for hiring managers to determine whether to hire an employee or contractor using IRS 20 Common Law questions

• Contract language for agencies to use for RFPs

• Master contract that includes contractor relationships and defines employer responsibilities

• http://intranet.tn.gov/dohr/hr/acquiring-hr.html

Solutions to Mitigate Risk

ESR – Liability for payment

-IRS will review the credits paid to individual taxpayers

-Employers will be sent notice that they may be liable for an ESR payment

-Earliest notices would be issued in 2016

-Employers should research and dispute liability if appropriate

-Payment will be $2,000 per full time employee

Regs Require Employer Offered Coverage

• Regulations only require that employers provide information about offers of coverage

• Decision guide mailed to all eligible members• State will require proof that newly hired employees declined

coverage

• Using ESS is the preferred approach• Enrollment form

Current Eligible not Enrolled

• 4,000 State employees who are eligible but not enrolled

• These employees will receive a letter in mid-September notifying them that they are eligible for coverage and can enroll during Open Enrollment this year.

Key Administrative Employer Requirements

W-2 reporting

Summary of Benefits and Coverage (SBC)

Employer Exchange-related notices

Reporting to IRS starting in 2015

Automatic enrollment (not yet issued)

IRS Reporting

Two reporting requirements; single report: Form 1095-C Employer-sponsored coverage provided to full-time employees Employer-sponsored minimum essential coverage

Statements to employees notifying them of the information reported to the IRS (on for before 2/1/16)

File electronic returns to the IRS on or before 3/31/16

20

Key Questions

• How will we handle PT and seasonal employees and those who will not be considered FT under the ACA and who could trigger a penalty?

• How will we handle PT employees who work two positions?

• Are any of our PT or contractors considered to be common law employees according to IRS guidelines?

• What measurement period makes sense for our organization?

21

Questions?

22

TN Hours for Benefits Report

• Standard Measurement period

• Individual Measurement period