Health Care Reform Update The session will begin shortly • • • Sound should come through your speakers when the session begins Verify that the volume is turned up on your computer You can listen through your computer or over the phone If there is no sound on your computer or you would like to call in directly, use the following information: • Session phone number: (877) 668-4493 • Access code: 920 861 378 Health Care Reform Update April 2014 Presented by: Erica Storm, Esq. Becca Kopps, Esq. Robert D. Reynolds, CIC, CPIA, AAM, AIS, AU Introduction About the presenters Erica Storm, Esq. Becca Kopps, Esq. Robert D. Reynolds, CIC, CPIA, AAM, AIS, AU • Employment and benefits attorney • Employment and benefits attorney • President & CEO Morris & Reynolds Insurance • Expertise in health care reform and health plan issues • Primary focus: health care reform • Creates educational materials and compliance resources • Insurance & Employee Benefits Broker For Over 30 Years • Educates companies on compliance obligations • Certified Healthcare Reform Expert Webinar Logistics To call in to connect to audio: We welcome your questions at any time! Questions will be addressed at the end of the session. •Phone number: 1-877-668-4493 •Access code: 920 861 378 Select Q&A and choose “Send to All Panelists” to submit your questions. Health Care Reform Affordable Care Act • Enacted in March 2010 • Implemented over several years • Major changes for 2014 and 2015 Provisions that impact: • Health care providers • Government programs • Health insurance issuers • Employers/plan sponsors • Individuals Most employers that offer health plans have been impacted (and will continue to be impacted) Pay or Play Rules Employer Shared Responsibility Rules Effective Jan. 1, 2015 Penalties may apply: Penalties triggered when: • Employer does not offer coverage to all FT employees (and children) OR • Employer offers coverage to all FT employees (and children) but coverage is unaffordable or does not provide minimum value • Any FT employee gets a subsidy for coverage through an Exchange Rules apply to Applicable Large Employers: employed 50+ full-time employees during the prior calendar year Potential Penalties Penalty A (annual amounts) • Employer did not offer coverage to substantially all FT employees and dependents (children) • $2,000 x (all FT employees – 30) • Special rule for 2015 Penalty B (annual amounts) • Employer offered coverage to substantially all FT employees/dependents • But not all employees, OR coverage is not affordable or does not provide minimum value • $3,000 x each employee who gets subsidized coverage (capped at Penalty A amount) Pay or Play Guidance Jan. 2013 • Proposed pay or play regulations issued July 2013 • Effective date for penalties and reporting delayed until Jan. 1, 2015 Sept. 2013 • Proposed reporting regulations issued (finalized in March 2014) Feb. 2014 • Final pay or play regulations issued with additional delays and transition relief Pay or Play Rules: Mediumsized Employer Delay One-year Delay for Medium-sized Businesses Applies to ALEs with fewer than 100 full-time employees (including FTEs) on business days during 2014 • No 4980H penalties will apply during 2015 • For non-calendar year plans, includes the portion of the 2015 plan year that is in 2016 • Eligibility conditions apply Eligibility for Transition Relief Employers that change plan years after Feb. 9, 2014 to begin on a later calendar date are not eligible for the delay Maintenance of Workforce and Hours of Service •May not reduce workforce size or hours of service Feb. 9-Dec. 31, 2014 to qualify based on size •Changes for bona fide business reasons permissible Maintenance of Previously Offered Coverage •May not eliminate or materially reduce coverage offered as of Feb. 9, 2014 during maintenance coverage period Certification of Eligibility •Must certify that it meets all eligibility requirements •Certification form aligned with employer reporting requirements Pay or Play Rules: Extended Transition Relief Determining ALE Status for 2015 Proposed rule: • Can measure number of FT employees for any consecutive 6-month period in 2013 (instead of the full 12 months) for 2014 Final rule: • Can determine ALE status by reference to a period of at least six consecutive calendar months in 2014 (for 2015) Seasonal worker exception • Will be determined based on entire calendar year Non-Calendar Year Plans Can delay compliance until the 2015 plan year • Conditions must be met • Final rules extend 2014 transition relief and expand conditions so that more employers are eligible Transition relief tests related to: • Pre-2015 eligibility • Significant percentage of all employees • Significant percentage of full-time employees To qualify: • Must have a non-calendar year plan as of Dec. 27, 2012 • May not have modified the plan year after Dec. 27, 2012 to start at a later date Transition Relief Conditions Pre-2015 Eligibility • Applies for employees who would be eligible for coverage on the first day of the 2015 plan year • Under the eligibility terms in effect on Feb. 9, 2014 Significant % of all Employees Significant % of FT Employees • Must have covered at least ¼ of employees as of any date in the 12month period ending Feb. 9, 2014 OR • Must have covered at least 1/3 of fulltime employees as of any date in the 12-month period ending Feb. 9, 2014 OR • Must have offered coverage to at least 1/3 of employees during the most recent open enrollment period before Feb. 9, 2014 • Must have offered coverage to at least ½ of full-time employees during the most recent open enrollment period before Feb. 9, 2014 Coverage for Dependents ACA: to avoid penalties, ALEs must offer coverage to full-time employees and dependents 2015 Relief For employers that: • No penalties for employers that take steps during the 2014 and/or 2015 plan years to offer dependent coverage • Do not offer dependent coverage • Offer dependent coverage that is not MEC • Offer dependent coverage to some but not all dependents Limits • Relief is not available if coverage was offered in 2013 or 2014 and later dropped Pay or Play Rules: New Rules for 2015 “Substantially All” Full-Time Employee Percentage Employers still exposed to lesser penalties if coverage is not offered to all full-time employees 4980H(a) Penalty Calculation 2015: ALEs with 100+ full-time employees can reduce fulltime employee count by 80 when calculating the penalty Annual Penalty Calculation • $2,000 x (all full-time employees minus 80) Applies for: • 2015 • Months of 2016 in the 2015 plan year Pay or Play Rules: Determining Full-time Employee Status How to Determine Full-time Status Full-time Employee: for any month, an employee who is employed on average at least 30 hours of service per week (or 130 hours per month) Two methods Employer choice •Monthly measurement method •Look-back measurement method •May apply either monthly measurement method or lookback measurement method based on permitted categories of employment Permitted Employee Categories Collectively bargained vs. noncollectively bargained Hourly vs. salaried employees Different groups of collectively bargained employees (separate CBAs) Employees whose primary places of employment are in different states Monthly Measurement Method • Used to identify full-time employees by employers who do not use the look-back measurement method • Employees are identified based on the hours of service for each calendar month • Employer must offer coverage to an employee by the end of three full calendar months beginning with the month the employee is otherwise eligible for coverage to avoid penalties • Must be treated as returning employee unless there is a 13 week break in service or 4 week break in service that is longer than the prior period of employment Look-back Measurement Method • • • May be used for new variable hour and seasonal employees IF used for ongoing employees Generally may not use the look-back measurement method for variable hour/seasonal employees and use monthly measurement method for employees with predictable schedules Transition measurement periods allowed for 2014 Measurement Period Counting hours of service (3-12 months) Administrative Period Time for enrollment/disenrollment (Up to 90 days) Stability Period Coverage provided (or not) – same length for new and ongoing employees Transition Measurement Periods for 2015 Stability Periods • Proposed look-back measurement method included in final regulations for determining full-time employee status • Employers can use a shorter standard measurement period in 2014 for a stability period beginning in 2015 • Transition measurement period must: − Be at least 6 but shorter than 12 consecutive months − Begin no later than July 1, 2014 and end no earlier than 90 days before the 2015 plan year Measurement Period Administrative Period Stability Period Look-Back Measurement Method for Ongoing Employees 2013 Nov. 1 Dec. 31 Measurement Period 2014 Jan. 1 Nov. 1 Measurement Period cont. Dec. 31 Admin Period 2015 Dec. 31 Jan. 1 Stability Period Transition Measurement Period for Ongoing Employees Jan 1, 2014 April 1 Nov. 1 Transition SMP Jan 1, 2015 Dec 31 Admin Period Dec 31 Stability Period Offering Coverage to New Employees New employees expected to work full-time • Reasonably expected at start date to work full-time (not seasonal) • Offer coverage by end of first 3 full calendar months of employment New variable hour employees New seasonal employees New part-time employees • Can measure using an Initial Measurement Period • Offer coverage if full-time during IMP Employer Reporting Requirements Section 6056 Reporting Section 6056 • Applicable large employers must provide information regarding coverage offered in the prior year • File information returns with the IRS • Provide employee statements to each full-time employee • Final rules issued in March Purpose of reporting • Promote transparency of coverage and costs • Assist IRS with ACA enforcement Separate but related rules apply to self-insured plan sponsors and health insurance issuers Deadlines • Rules effective for 2015 coverage (2016 reporting) • General rules: − Employee statements due by Jan. 31 of the following year − IRS returns due by Feb. 28 of the following year (March 31 if filed electronically) • 2016 dates: − Employee statements: Feb. 1, 2016 − IRS returns: March 1, 2016 (or March 31 for electronic filing) Required Information IRS Return • Employer contact information • Whether coverage was provided to FT employees/dependents (by month) • Number of FT employees (by month) • Specific employee information Employee Statement • Employer contact information • Information shown on IRS return related to that employee • Months coverage was available • Share of lowest-cost monthly premium offered • Months covered by employer plan How to Report • General Reporting Method − File Form 1094-C (transmittal) and Form 1095-C (employee statement) or substitute form with same information − Provide copy of Form 1095-C or substitute form with same information − Will use indicator codes for reporting some information • Alternative Methods (optional) • Medium-sized Employers • Electronic filing required for employers filing 250+ returns − Details to be provided in forms and instructions − Available for specific groups of employees − Must still report for 2015 − Must certify that they meet requirements for delay 90-Day Waiting Period Limit General Rules A group health plan may not impose any waiting period that exceeds 90 days Definition • The period of time that must pass before coverage becomes effective for an employee or dependent who is otherwise eligible to enroll in the plan Effective date • 2014 plan year • Final regulations issued in Feb. 2014 • May rely on proposed regulations for 2014 Permissible Eligibility Conditions Examples • Being in an eligible job classification (may measure new variablehour employees for full-time status) • Achieving job-related licensure requirements specified in plan terms • Cumulative hours of service rule (up to 1200 hours, one-time only) • Satisfaction of a reasonable and bona fide employment based orientation period Reasonable and bona fide employment-based orientation period • Employer/employee can evaluate whether situation is satisfactory • Standard orientation and training processes would begin • Maximum length of one month (proposed) Anti-Abuse Rule • Cannot use eligibility conditions or take actions that are a subterfuge to avoid compliance with the 90day limit • If no subterfuge, can require a terminated and rehired employee to satisfy eligibility conditions again • Same analysis applies to employee who moves to a job classification that is ineligible for coverage under the plan but then later moves back to an eligible job classification Individuals Currently in a Waiting Period Individuals in a waiting period when the rule becomes effective: the waiting period can no longer apply to the individual if it would exceed 90 days Example A calendar year plan has a 6-month waiting period for FT employees prior to Jan. 1, 2014. Employee A begins work as a full-time employee on Oct. 1, 2013. The first day of A’s waiting period is Oct. 1, 2013. A must be given the opportunity to elect coverage that begins no later than Jan. 1, 2014, (which is 93 days after A’s start date). If not, on Jan. 1, 2014, the plan would be applying a waiting period that exceeds 90 days. 40 Cost-Sharing Limits Small Group Deductible Limit Repealed ACA Rule • Small group insured health plans subject to annual deductible limit beginning with 2014 plan year 2014 limits • $2,000 single coverage • $4,000 family coverage Exception • Many insurers took advantage of an exception permitting higher deductibles for 2014 Repealed April 1 • Protecting Access to Medicare Act of 2014 • Retroactively effective to March 23, 2010 Out-of-Pocket Maximum Limit Applies to ALL non-grandfathered group health plans beginning with 2014 plan year Annual limits to increase each year: 2014: 2015: $6,350 for single coverage $6,600 for single coverage $12,700 for family coverage $13,200 for family coverage Special Rules for OOP Maximum For 2014, plans with multiple service providers will satisfy the limit if they: • Comply with the out-of-pocket maximum limit for major medical coverage AND • Comply with the out-of-pocket maximum limit for any other coverage with an out-of-pocket maximum Clarifications for 2015 plan year: • Must have OOP max on all essential health benefits (no limitation required for non-EHBs) • May use separate OOP limits for different categories of benefits if they do not exceed overall annual limit • Plans may count spending for out-of-network items and services toward OOP limit Upcoming Changes SHOP Exchange • Small Business Health Option Program (SHOP) – Exchange for small employers 2014-15 • States can limit size to up to 50 employees • 2016 • States must increase size to up to 100 employees 2017 • States can let any size employer participate Small employers can offer employees enrollment in a QHP through a SHOP − Can offer benefits through a cafeteria (Section 125) plan − Exchange sets contribution methods Exchange Enrollment Enrollment opportunities differ for individuals and small employers Individuals Small Employers • Initial open enrollment: Oct. 1, 2013-March 31, 2014 • Can buy coverage for employees any time after Oct. 1, 2013 • Annual open enrollment delayed for 2015 coverage: • Nov. 15, 2014-Jan. 15, 2015 • Oct. 15-Dec. 7 for later years • 12 month plan year and annual election periods required • Online enrollment delayed in FF-SHOPs until late 2014 (does not impact state-run SHOP) 47 SHOP Timeline for Employers Employer’s plan year 12-month period Beginning with effective date of coverage Annual employer election period Annual employee Employer gets notice election period 90 days before end of plan year Has 30 days to change SHOP plan Plan will continue if no changes made 30 day period after employer election period Employees can change elections or plans Nondiscrimination Rules for Fully Insured Health Plans ACA: Nondiscrimination rules: • Non-grandfathered fully insured health plans must comply with nondiscrimination rules • Similar to rules for self-funded plans • Prohibit discrimination in favor of highlycompensated individuals 2010: • IRS delayed rules indefinitely, pending issuance of regulations 2014: • IRS confirmed that rules will not be enforced this year due to prior delay Automatic Enrollment Applies to large employers that: • Have more than 200 full-time employees • Are subject to the FLSA • Offer health coverage Requirement: • Must automatically enroll new employees (and re-enroll current employees) in one of the employer’s health plans • Subject to any permissible waiting period Effective date: • Rules will be applicable after final regulations are issued Cadillac Tax 40% excise tax • On “high-cost” group health coverage • Applies to “excess benefit” of each employee’s aggregate employer-sponsored coverage over annual limitation Annual limitation for employees: • $10,200 for single coverage • $27,500 for family coverage • Higher limits for retirees and high-risk professions Applies for taxable years beginning in 2018 • Employers must calculate and report tax • Coverage provider must pay tax Questions? For more information about Health Care Reform visit: www.morrisandreynolds.com/health-reform/ Morris & Reynolds Insurance 14821 South Dixie Highway, Miami, FL 33176 Telephone 305.238.1000 | Fax 305.255.9643 Thank you! This presentation is current as of the date presented and is for informational purposes only. It is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Please contact legal counsel for legal advice on specific situations. This presentation may not be duplicated or redistributed without permission. © 2012-2014 Zywave, Inc. All rights reserved.