affordable care act: large employer responsibilities august 6 2013 dan colacino rose & kiernan,...
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ROSE & KIERNAN
Affordable Care Act: Large Employer Responsibilities
August 6 2013Dan Colacino Rose &
Kiernan, Inc
Guidance Pending
Non-discrimination Rules: Fully Insured Non-Grandfathered Plans
Differences from 105h rules1. Applies only to group health plans so excludes
retiree plans, excepted benefit plans2. Penalties apply to employer including excise tax
and potential civil actions; Excise tax is $100 per day with respect to EACH individual discriminated against
Make sure you look at your contribution and eligibility policies
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Guidance Pending
Automatic enrollment of new employees into health plans (employers of > 200 employees). Will probably be after 2014 H.R. 1254 introduced March 2013 to repeal
automatic enrollment
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Patient Centered Outcomes Research Institute
This first fee was due by July 31,2013 if your plan year ended on 10/31/ 11/30 or 12/31 2012
The fee is due by July 31,2014 for all other plan years The fee is to be paid if;
Your plan is Self-funded ,you have an HRA or self-funded Rx plan along with insured medical
You have an FSA that you, as the employer, contribute to The fee to be paid in 2013 (for 2012) is $1 per member per
year The fee to be paid in 2014 is $2 per member per year The fee applies through 2019 Use IRS Form 720; Report of Excise Taxes
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Notice to Employees of the Exchange
Now referred to as the Health Insurance Marketplace Temporary guidance was issued on May 8th 2013 in response to employer
requests for a model notice A notice has to be provided to all employees, regardless of whether they
have coverage or are eligible for coverage
http://www.dol.gov/ebsa/compliance_assistance.html
Electronic distribution follows regular DOL guidelines All new employees get the notice within 14 days of hire Current employees must get the notice prior to 10/1/2013
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Revised COBRA Notice
Issued with DOL Technical Release 2013-02 Revises the Election Notice Intent is to make qualified beneficiaries aware of
other coverage options, such as the State Exchange
Briefly mentions availability of tax credits No timing for the use of the new Notice but
presumably after 10/12013 when Exchange is operational
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Employer Shared Responsibility Requirement
Effective for plan years beginning on or after January 1, 2015
Applies to all employers with at least 50 Full Time Equivalent Employees (Applicable Large Employers)
Employer must count all full-time employees and part-time employees – on a full-time equivalent basis – in determining if they have 50 or more FTE’s
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Applicable Large Employers are subject to assessable penalties
Defined as an employer that employed an average of at least 50 Full Time Equivalent employees on business days during the preceding calendar year
Employee is an individual who is an employee under common law standards (right to control and direct, subject to the will and control of the employer, etc.)
All entities treated as a single employer under section 414 are treated as a single employer for purposes of this section
Determination if you are an Applicable Large Employer
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All employees who are not full time employees for any month in the preceding calendar year are included in the calculation
Calculation is done by month1. Calculate the aggregate number of hours worked by non-
full time employees in a month (but not more than 120 per employee)
2. Divide the total number of hours by 120 which gives the number of FTE’s for the month
3. Add up the FTE’s for each month, divide by 12 which determines if you are a large employer
4. Always round down (e.g., 49.9 FTE’s is 49)
Determination of Applicable Large Employer Status
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30 FT employees in each month working at least 30 hours per week 20 PT Employees in each month January;
1,575 hours worked by the 20 PT employees Divide by 120 Equals 13.125 FTE’s Adding in 30 FT, January had 43.125 FTE’s
Same calculation each month for balance of the year Add up the months, divide by 12 to determine if the employer
exceeds 50 Seasonal workers are counted with a limited exception; if seasonal
workers cause the employer to exceed 50 employees in 4 or fewer months, those seasonal workers are not counted
Example of Applicable Large Employer calculation
Definition of Employee for Purposes of the Employer Shared Responsibility Requirement
The regulation uses the common law definition of employee “…employment relationship exists when the person for whom the services are
performed has the right to control and direct the individual not only as to the result…but also the details and means…”
“…if an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done.”
Leased employees are considered employees of the leasing company
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Employer Shared Responsibility Requirement refers to the Employer sharing the cost of providing health insurance with the Exchange
The incentive to provide insurance varies with the employer’s situation
Rules for Applicable Large Employers
Employer Shared Responsibility Requirement
Scenario #1If the Employer does not offer Minimum Essential Coverage
to substantially all of their FT employees and dependents
A Penalty applies if at least one FT Employee buys subsidized coverage in the Health Exchange
Penalty is $2,000 ($166.67 per month) times the number of full-time employees minus 30
Substantially all is defined as 95% or more
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Employer Shared Responsibility Requirement
Scenario #2If the Employer provides Minimum Essential Coverage
which does not provide Minimum Value
A Penalty applies if a FT Employee buys subsidized coverage in the Health Exchange (affordability test is not applicable)
Penalty is $3,000 ($250 per month) times the number of full-time employees who have purchased subsidized coverage
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Employer Shared Responsibility Requirement
Scenario #3If the Employer provides Minimum Essential Coverage to substantially all full time employees and dependents which
does provide Minimum Value
A Penalty applies each month that a FT Employee buys subsidized coverage in the Health Exchange and the coverage is unaffordable
Penalty is $3,000 annually ($250 per month) times the number of full-time employees who have purchased subsidized coverage
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Employer Shared Responsibility Requirement
Affordability of coverage
1. W-2 Income1. Divide current monthly contribution by .0952. Multiply by 12 to arrive at annual salary which qualifies as UnaffordableExample: Monthly contribution is $145.00 for single coverage$145.00 / .095 = $1,526.32$1,526.32 X 12 = $18,315.84Anyone making less than $18,315.84 may be eligible for an APTC
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Employer Shared Responsibility Requirement
Affordability of coverage
2. Rate of Pay1. Multiply hourly rate by 130 hours2. Compare that result against the results in #1
Example: hourly rate of pay is $12.35$12.35 X 130 hours = $1,605.50$1,605.50 X 12 months = $19,266
This employee is over the minimum of $18,315.84. Coverage is considered affordable for this person.
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Employer Shared Responsibility Requirement
Affordability of coverage
3. Federal Poverty Level
2012/2013 Federal Poverty Level is $11,1709.5% X $11,170 = $1,061.15$1,061.15/ 12 months = $88.43 per month
Any employer with a monthly contribution of $88.43 or less has guaranteed affordability for all employees
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Determining Full-Time Employees for the Employer Shared Responsibility Requirement
Measurement/Stability Period
1. Also referred to as Look Back Period
a) Employer determines average hours worked by employee over the measurement period; 3 months to 12 months
b) Applies to “ongoing employees” , those who have been employed for at least one standard measurement period.
c) If employee averaged at least 30 hours per week, then employee is considered full time
d) Employee is considered full time during the subsequent “stability period”
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Determining Full-Time Employees for the Employer Shared Responsibility Requirement
1. Stability Period
a) For employees determined to be FT during the measurement period, they will be considered FT prospectively during the stability period.
b) The stability period is a period at least 6 months in length and no shorter than the measurement period .
c) The stability period begins after the measurement period and any applicable administrative period
d) For employees not determined to be FT, they will be treated as not FT during the stability period that follows but not longer than the measurement period. The 6 month minimum does not apply
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Determining Full-Time Employees for the Employer Shared Responsibility Requirement
1. Administrative period
a) The time after the measurement period which the employer uses to notify and enroll employees in the health insurance
b) An administrative period can last up to 90 days.c) The administrative period will overlap with the prior stability period
which will prevent gaps in coverage for ongoing employees
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An employee’s hours of service include the following: 1. Each hour for which an employee is paid, or entitled to
payment, for the performance of duties for the employer; and
2. Each hour for which an employee is paid, or entitled to payment by the employer on account of a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence
Hours of service definition
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How the measurement/stability period works for ongoing employees
Employee who works an average of > 30 hours per week
1st Measurement period12 months 3 months
10/1/2013 9/30/2014 1/1/2015
Administrative period
12/31/2015
Stability period
9/30/2015
2nd Measurement period
Employee is considered FT
Transition Relief for 2014 only
Employers who want to use a 12 month measurement period can use a
transition measurement period in 2013 of less than 12 months as long as1. The measurement period is not less than 6 months
2. The measurement period begins no later than 7/1/2013
3. The measurement period ends no earlier than 90 days prior to the first day of the 2014 plan year
Example; Employer with a calendar year plan could use a measurement period of April 15, 2013 through October 14, 2013
Note. The stability period would still be 1/1/2014 – 12/31/2014 Rose
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How the measurement/stability period works prospectively
New variable hour or seasonal employees
Initial Measurement Period12 months
53 Days
3/9/2014
3/8/2015
5/1/2015
Administrative period
4/30/2016
Stability period12 months
9/30/2015Initial Hire Date
Anniv. Date of hire End of 1st standard
measurement period
1st standard measurement period after date of hire
10/1/2014
12/31/2016
If determined FT during Std. measurement period
4/30/2015
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Hire/Rehire Rule
If an employee is terminated and rehired within 26 weeks, the employer
may not treat them as a new hire when they return to work Hours of service prior to the termination are taken into account for
purposes of determining whether the employee is treated as a full time employee For example, if the employee was treated as full time employee prior to
termination, the employee is still considered full time until the end of the stability period
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Special Periods of Unpaid Leave Rule
Refers to counting hours during unpaid leave due to: Family and Medical Leave Act (FMLA) Uniformed Services Employment and Reemployment Rights
Act (USERRA) Jury Duty
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Special Rule for Employees on Special Unpaid Leave
For purposes of determining the average hours of service, the employer may:
1. Apply the average hours worked during the active portion of the year prior to the employment break period or;
2. Use the average hours worked during the active portion as the average hours worked during the measurement period
An employer may not credit the employee with a minimal number of hours during the employment break period for purposes of avoiding the employer rehire rules
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How to deal with breaks in employmentfor employees on special unpaid leave
Employee works an average of 35 hours per week
Period of employment38 weeks
Break in service
Stability period
Returns to work
Hire date
Measurement period
12 weeks
Employee is credited with an average of 35 hours per week
End of measurement period
2 week
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Leaves on FMLA
Various Benefit Plan Provisions Beginning in 2014
*Coverage in Approved Clinical Trials cannot be denied if for “…cancer or other life threatening disease or condition…” and if participation is “appropriate”
90 Day maximum on Waiting Periods No annual limit on Essential Health Benefits No pre-existing condition exclusions *Cost Sharing/Out-Of-Pocket Maximums $5950/$11,900
Note: out of pocket maximum includes all copays
* Doesn’t apply to Grandfathered Plans
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Various Benefit Plan Provisions Beginning in 2014
Wellness incentives are allowed up to 30% of the cost of the plan. HHS allows up to a 50% incentive for tobacco related incentives
The plan must allot at least 20 percentage points of the reward to eliminating tobacco use
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New Fees in 2014
Individual Market Reinsurance Fee Applies to health insurance issuers and TPA’s Payable for 3 years; 2014-2016 Fee is based on the number of covered lives under the plan Fee is $5.25 per member per month ACA requires HHS to collect $10 billion in the first year
Insurer Provider Fee Applies to health insurance, dental insurance and vision insurance issuers Payable annually with no end date Fee is based on net written premiums ACA requires HHS to collect $8 billion in 2014 rising to $14.3 billion in
2018. Amount increases by the rate of premium growth
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As stated in previous FAQs,(3) the Departments’ basic approach to ACA implementation is: “[to work] together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is and will continue to be marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.” Accordingly, consistent with this guidance, during this first year of applicability, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to comply.
Enforcement
