an employer's obligations & opportunities under the affordable care act

AN EMPLOYER’S OBLIGATIONS AND OPPORTUNITIES UNDER THE AFFORDABLE CARE ACT

Suzanne Sentman, McKonly & AsburySusan Orr, Rhoads & Sinon

INTRODUCTIONSSuzanne SentmanHuman Resource DirectorMcKonly & Asbury

Susan OrrPartnerRhoads & Sinon

INTRODUCTION

•Overview of ACA topics, including:• What Constitutes a Large Employer • Determining Employee’s Eligibility for Coverage• When must Insurance Become Effective• Affordable and Minimum Essential Coverage • SHOP Marketplace

APPLICABLE LARGE EMPLOYERS (APL)Large employers must offer health coverage that is “affordable” and of “minimum value” to substantially all (95%) of their “full-time employees,” and their “dependents”, to avoid monetary penalties.

APPLICABLE LARGE EMPLOYERS (APL)Employers should be in the process of determining:

(1) Whether they are “large employers” subject to the mandate; (2) If so, the number of full-time workers within their employment that are eligible for coverage; (3) Measurement periods for ongoing and variable hour employees; (4) Whether the health plan provides “minimum” and “affordable” coverage; (5) Potential monetary penalties for non-compliance, and(6) Whether required notices and written policies are in place

APPLICABLE LARGE EMPLOYERS (APL)Large Employers Subject to the Mandate• Applicable “Large employers “are those “who employed an average of at least 50 full-time

employees on business days during the preceding calendar year.”• Under the ACA, a “full-time employee” is one that, “with respect to any month, is employed on

average at least 30 hours of service per week” (or one hundred thirty hours (130) per month). • Part-time and seasonal employees are taken into consideration under the full-time equivalent

(“FTE”) method. • An employer determines the number of full-time equivalents (FTEs) by dividing the total number

of hours worked by part-time and seasonal employees each month by one hundred twenty (120) - the result being the number of equivalents.

• Note, seasonal employees are considered to an extent

LARGE EMPLOYERSThe “large employer” determination is measured on a controlled group basis• Employees of a controlled group of corporations, partnerships or proprietorships

under common control, affiliated services group or others as prescribed by Treasury.

WHO IS OFFERED COVERAGE?• IF you are a large employer, the next step is to determine who gets

offered coverage.• Large employers must offer health coverage that is “affordable”

and of “minimum value” to substantially all (95%) of their “full-time employees,” and their “dependents”, to avoid monetary penalties.

WHO IS OFFERED COVERAGE?

Dependents • Dependents are the employee’s children under

the age of 26. • Includes adopted, step and foster children.• Does not take into account: financial dependency,

residency, marital status, employment of child, student status, etc.

• Dependents DO NOT include spouses

PART-TIME / SEASONAL EMPLOYEESEmployers do not have to offer health insurance coverage to part-time or seasonal employees, including former full-time employees who are now part-time.

FULL-TIME EMPLOYEESEmployees that are reasonably expected to be employed 30 hours or more per week on average (and who are not seasonal employees) must be offered health insurance within their first ninety (90) days of employment.

TRACKING FULL-TIME STATUSIRS has provided for the implementation of measurement and stability periods• Used to keep track of the status of ongoing employees• Used to determine the status of new variable hour or seasonal employees

if employers are unsure whether they will be working 30 hours per week on average.

• Should have written policies in place regarding the use of measurement and stability periods. Specific rules regarding their implementation

TRACKING FULL-TIME STATUSIf it is difficult to determine hours worked by salaried employees, one of three methods set forth by the IRS may be used:• Actual hours worked from payroll records• Days-worked equivalency of 8 hours per day• Weeks worked equivalency of 40 hours per week

TRACKING VARIABLE HOUR EMPLOYEESVariable Hour Employee • Weekly hours hover around 30• Some weeks work < 30 hours and others > 30 hoursFailure to track subjects employer to penalties, especially if such tracking would require employer to provide employee with insurance

MEASUREMENT/STABILITY SAFE HARBOR FOR TRACKING VARIABLE HOURS EMPLOYEES• Full-time status may be determined over a “Measurement Period” of no less than 3

but up to 12 months (preferred)

• Employer chooses length as well as when it starts and ends

• Can be coordinated with pay periods

• At the end of 12 months, review hours in month 13 (Administrative Period) to see if employee worked 30+ hours/week

• Administrative Period can be up to 90 days if using less than 12 months measurement period

MEASUREMENT/STABILITY SAFE HARBOR FOR TRACKING VARIABLE HOURS EMPLOYEES

- This period is followed by a “Stability Period” of like length• During this period coverage must be offered without regard to hours as long as the individual remains

employed

- Continue tracking hours during Stability Period to determine insurance coverage for following year

- Measurement and stability periods must uniformly apply to all employees. Distinctions are only allowed with regard to:

• Salaried and hourly employees

• Employees located in different states

• Employees working at different business entities

WHEN MUST INSURANCE BE EFFECTIVEDefinitions• “Waiting Period” – period before coverage for an individual who is “otherwise eligible” to

enroll can become effective:• Not greater than 90 days

• “Otherwise Eligible”: individuals who have met the plans’ substantive eligibility conditions, i.e., obtaining training, licensure, orientation – but not lapse of time (1 month)

Example: 1 month orientation, 90 days waiting periodStart date: January 6Coverage Start: May 1

AFFORDABLE AND MINIMUM ESSENTIAL HEALTH INSURANCE COVERAGEThe individual mandate, requires “applicable individual[s]” to maintain “minimum essential” health insurance coverage, or face a mandatory “shared responsibility payment”

AFFORDABLE AND MINIMUM ESSENTIAL HEALTH INSURANCE COVERAGEA plan is considered “affordable” if the employee's required contribution for his or her own coverage does not exceed 9.5 percent of the employee's household income for the taxable year.

• Does not take into account the affordability of dependent coverage • Affordability can be determined by looking at the employee’s

wages reported in Box 1 on the Form W-2.

MINIMUM VALUE• A plan is of “minimum value” if it covers at least 60 percent of the total allowed

cost of benefits that are expected to be incurred under the plan.• Not required to provide essential health benefits but MV will be

determined in comparison to standard pop. claims data based on: Hospital/ER Services Physician/mid-level practitioner care Pharmacy benefits Lab/imaging services

• Use minimum value calculator released by HHS or get a certification from a member of the American Academy of Actuaries to ensure of MV

OTHER LARGE GROUP PLAN STANDARDS• No lifetime or annual limits on benefits that are considered essential health

benefits• Plans must allow adult children under age 26 to enroll on a parent’s plan• Plans must offer preventative services without cost-sharing• No discrimination based upon pre-existing conditions and no discrimination

against similarly situated individuals • However, rewards for participation in wellness programs are permissible.

• Patient-Centered Outcomes Research Institute Fee imposed• Internal and external appeals processes• Out-of-pocket maximum: $6,350 single/$12,700 other for in-network benefits.

NOTICE / REPORTING REQUIREMENTS

•Beginning in 2015, large employers must report to IRS via Forms•Employee responsibility to submit form when tax filing•Failure to file forms - $250 penalty per form

FORMS• IRS Form 1095-A: For Individuals who purchase insurance on an

exchange

• IRS Form 1095-B: Issued by insurance carrier for individuals who work for company with a fully insured plan

• IRS Form 1095-C: If Employer is self-insured or has 50+ employees

FORM 1095-A

FORM 1095-B

FORMS 1095-C

PENALTIESFor offering no insurance: annual penalty of $2,000 multiplied by the number of full-time employees minus 30 (the penalty is waived for the first 30 full-time employees). *

• To illustrate, an employer with fifty full-time employees that fails to offer coverage will be subject to an annual penalty of $40,000 reflecting the $2000 fine x (50 employees – 30 employees).

For offering inadequate insurance: annual fine of $3,000 per each employee that receives a tax credit through an exchange • Less draconian than the fine for failing to offer coverage

• For example, if four employees receive tax credits through an exchange, the employer will be subject to a fine of $12,000 representing the $3,000 fine x 4 employees

SMALL BUSINESS HEALTH OPTIONS PROGRAMThe Small Business Health Options Program (“SHOP”) Marketplace is open to employers with 50 or fewer full-time-equivalent employees (FTEs). Beginning in 2016, 100 or fewer FTEs.

SMALL BUSINESS HEALTH OPTIONS PROGRAMAccording to HHS, advantages of SHOP include:• Controlling the coverage you offer and how much you pay toward employee

premiums.• Obtaining ability to compare health plans online on an apples-to-apples

basis, which helps you make a decision that's right for your business.• Possibly qualifying for a small business health care tax credit worth up to

50% of your premium costs. You can still deduct from your taxes the rest of your premium costs not covered by the tax credit. The tax credit is available only for plans purchased through SHOP.

SMALL BUSINESS HEALTH OPTIONS PROGRAM• You may qualify for employer health care tax credits if you have fewer than 25 full-

time equivalent employees making an average of about $50,000 a year or less.• To qualify for the Small Business Health Care Tax Credit, you must pay at least 50% of

your full-time employees' premium costs. • You don’t need to offer coverage to your part-time employees or to dependents.• The tax credit is worth up to 50% of your contribution toward employees' premium

costs (up to 35% for tax-exempt employers).• Sliding scale. The tax credit is highest for companies with fewer than 10 employees who are

paid an average of $25,000 or less. The smaller the business, the bigger the credit.

SMALL BUSINESS HALTH OPTIONS PROGRAM• The SHOP Marketplace provides 4 plan categories based

on how your employees and the plan expect to share the costs for health care:• Bronze – covers 60% of the total average costs of care• Silver – covers 70% of the total average costs of care• Gold – covers 80% of the total average costs of care• Platinum – covers 90% of the total average costs of care

• Ten essential health benefits are minimum requirements for all plans in the Marketplace. Plans may offer additional coverage.

SMALL BUSINESS HEALTH OPTIONS PROGRAMENROLLING IN SHOP• You can apply for coverage at any time. To get coverage, you must submit

your completed application along with your employees’ applications by the 15th of any month for coverage to take effect on the 1st of the following month. • For example, if you enroll by April 15th, coverage will begin May 1st. If you enroll between

April 16th and April 30th, coverage will begin June 1st.

• You will be able to use a licensed agent or broker to provide help or handle your SHOP business. You won’t pay more if you use a SHOP agent or broker.

QUESTIONS?Suzanne SentmanHuman Resource DirectorMcKonly & [email protected]

Susan OrrPartnerRhoads & [email protected]