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THE AFFORDABLE CARE ACT IN LAYMAN’S TERMS
Chris Rivard, Partner Moss Adams
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WE’RE HERE TO HELP
The material appearing in this communication is for informational purposes only and should not be construed as advice of any kind, including, without limitation, legal, accounting, or investment advice. This information is not intended to create, and receipt does not constitute, a legal relationship, including, but not limited to, an accountant-client relationship. Although this information may have been prepared by professionals, it should not be used as a substitute for professional services. If legal, accounting, investment, or other professional advice is required, the services of a professional should be sought.
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THREE ANSWERS TO EVERY QUESTION
• The Regulatory Answer • The Legal Answer • The Practical Answer
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AGENDA • Where Do We Stand? • Basics and the Exchanges • Establishing a Company Demographic • Cost of Coverage • Impact of Offering Coverage • Record Keeping • The Body Politic • Q & A
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THE UNIVERSE OF ACA
ACA
Providers
Insurance Companies
Employers
Consumers
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IS IT WORKING? • Insurance reform
• Massive change in markets – delivery, price, eligibility • Rate increases modest, HD plans, narrow networks
• Reducing the uninsured population • Number of uninsured estimated at 45 million • Approximately 11.4 million people have purchased health
care policies through the public exchanges (87% eligible for tax credits/subsidies) • 8.6 million in states using HealthCare.gov platform
• Medicaid enrollment grew by approximately 8 million people
• 35% under 35 years of age
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THE HEADLINES
• 800,000 taxpayers received incorrect tax info from Health Insurance Marketplace.
• DHHS aims to shift 50% of Medicare FFS payments to alternative payment models that emphasize quality and value by 2018.
• Major providers, insurers plan aggressive push to new payment models – 75% of business to contracts with incentives for quality and lower cost by 2020.
• 9 million people lose health insurance.
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THREE TIERS OF EMPLOYERS
Small (less than 50 FTEs)
Medium (50-99 FTEs)
Large (100 or greater)
Effective date of shared responsibility provisions
NONE
January 1, 2015*
January 1, 2016*
*or first day of plan renewal in that year
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REQUIREMENTS TO QUALIFY FOR TRANSITION • Limited workforce size – calculations indicate FTEs
between 50 and 99 during 2014 • Maintenance of workforce and hours of service
• From 2/9/14 to 12/31/14 no reduction • Maintenance of previously offered coverage
• From 2/9/14 to 12/31/14 no reduction • Certification of Eligibility for Relief
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LARGE EMPLOYER CALCULATION
• Prior calendar year is look-back period (2014) • Determined monthly; then totaled and averaged annually
MAY JUN JUL AUG SEP OCT
Full-time employees (30 or > hours per week avg):
Part-time employees (10 employees aggregating 600 hours per month/120): 43 43 44 45 46 46 52 44
5 5 5 5 5 5
48 Total 48 49 50 51 51 577 12 =
48.1
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SEASONAL CALCULATION FOR ALE STATUS • Prior calendar year is look-back period • Determined monthly; then totaled and averaged annually
MAY JUN JUL AUG SEP OCT
Full-time equivalent employees:
Seasonal employees (30 or > hours per week avg):
40 40 40 40 40 40 40 40
20 30 5 20 30 20
60 Total 70 45 60 70 60
Months > 49 employees: 1 2 3 4 5
> 4
605 12 =
50.4
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APPLICABLE LARGE EMPLOYER PENALTIES Does the employer OFFER a health plan to at least
95%** of FT employees and dependents?
Yes No
“Unavailable” penalty
$2,000*
• If ONE FT employee goes to exchange and receives a subsidy, penalty triggered for ALL FT employees (less the first 30***)
• Plan must meet minimum value requirements • If ONE FT employee opts out of plan and goes
to exchange and receives a subsidy, penalty triggered for that employee only IF:
“Unaffordable” penalty
$3,000*
Employee share of premium for “employee only” coverage exceeds
9.5% of employee’s W-2 wages
*Non-deductible and measured and assessed monthly (1/12th)
**Transitional rules allow 70% for 2015
***Transitional rules allow deduction of 80 for 2015
MEC
MVP
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TYPES OF WORKERS
• Full Time (30 or more hours of service per week or 130 hours per month)
• Part Time (less than 30 hours of service per week)
• Variable Hour (unable to determine at hire date) • Seasonal • Temporary (Someone else’s common law
employee) • Currently in plan
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SEASONAL WORKERS
• The IRS has indicated that any interpretation of the term “seasonal” probably would not be reasonable if it included a working period of more than six months.
• If an employee terminates and returns, the break in service (BIS) must be at least 13 weeks to qualify as a new employee (unless Rule of Parity applies – BIS > 4 weeks and as long as employed period).
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EXCHANGE (MARKETPLACE)
Traditional Medicaid 100% of FPL
Expanded Medicaid 138% of FPL
100% of FPL
400% of FPL Subsidies/Credits (penalty trigger)
Family of 4
$94,200
$32,500
$23,550
$0
Single
$45,960
$11,490
$15,856
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THE EMPLOYER DEMOGRAPHIC
Medicaid # qualifying
# at subsidy level Subsidies/Credits
Family of 4
$94,200
$32,500
$0
Single
$45,960
$15,856
# already in plan
138%
400%
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DEPENDENT COVERAGE
• # of employees likely to fall into subsidy tier • Many dependent children will likely qualify for
some type of Medicaid assistance • Spouses may not qualify for any subsidy or
Medicaid • This impacts the potential cost to any employee
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Employee Savings (Cost)
POTENTIAL IMPACT TO EMPLOYEES QUALIFYING FOR SUBSIDIES (BASED ON 35 Y/O AT $30K PER YEAR)
* $2,000 penalty after adjusting for non-deductibility at 35% corporate rate **Kaiser Family Foundation (kff.org) – Subsidy Calculator. Premium is for a couple – no children.
Total Premium
Employer (employee only premium)
Employee
Plan Offered
**$6,500
[75%] ***3,000
**$ 6,500
*3,077
****1,800
No Plan Offered
Dependents Cost
[25%] 1,000
4,000
(77)
(800)
4,000 0
Savings
3,200 Total Employee Savings
****After Subsidy
****Assumes employee only at $4,000 premium
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OPTIONS • Offer no plan • Offer MVP plan • Defined contribution plan • Self-insure • Self-insure with MEC
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RUN THE NUMBERS
Medicaid 150 qualifying
50 at subsidy level Subsidies/Credits
Family of 4
$94,200
$32,500
$0
Single
$45,960
$15,856
10 in current plan
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COST ANALYSIS – OFFER PLAN
Existing plan (10) New plan (*50): • Employee Only – Monthly
Premium • Employer 75% • 12 months (per employee) Total Cost
* Assumption is that all employees above Medicaid threshold opt into plan and, conversely, all employees that qualify for Medicaid opt-out.
333
250
3,000
$ 250,000
$ 100,000
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COST ANALYSIS – NO PLAN Eligible employees Less first 30 Penalty Tax effect of non-deductibility Compensation in lieu of medical plan (10) Total cost
210
180 $ 2,080
$ 10,000
**(30)
$ 576,000
*118,064
$ 3,200
$ 694,064
** 80 in transition year 2015
* Grossed up for FICA at 15.3%
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OTHER ISSUES • What happens if an employee opts out of plan?
• As long as plan is affordable – no impact • If unaffordable – trigger for $3k penalty
• Discriminatory plans • No stand alone HRAs or anything that resembles
them • Cash in lieu of benefits • Tracking and reporting • The notices are already in the mail
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DISCRIMINATORY PLANS
• ACA disallowed discriminatory plans after September 23, 2010, unless “grandfathered.”
• Grandfathering does not mean you don’t have to offer coverage to previously uninsured.
Critical Point!
If you have a discriminatory plan –regardless of grandfathered status, consult legal counsel
experienced with health care reform!
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MEASUREMENT PERIODS
2015 2016 2017
…. Standard Measurement Period April 1, 2015 – March 31, 2016
Standard Measurement Period April 1, 2016 – March 31, 2017
Standard Measurement Period April 1, 2017 – March 31, 2018
Initial Measurement Period May 10, 2015 – May 9, 2016
Initial Coverage Stability Period
July 1, 2016 – June 30, 2017
Administrative Period May 10, 2015 – June 30, 2016
Administrative Period April 1, 2016 – May 31, 2016
Stability Period June 1, 2016 – May 31, 2017
Curr
ent
New
Var
iabl
e or
Sea
sona
l
…. Stability Period
June 1, 2017 – May 31, 2018
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IRS REPORTING Providing insurance? Yes
No
No filing necessary Insurance carrier/issuer
outside an Exchange (excludes self-insured)?
Yes
No
IRS Form 1094B 1095B
Carrier offering insurance in an
Exchange? No
Yes IRS Form 1094A 1095A
Filed by sponsor
Subject to Employer Shared Responsibility Provisions (employer
with 50 or more FTEs)? No
Yes IRS Form 1094C 1095C
Filed by sponsor
including Mcare and
Mcaid. File one copy for
each policy holder. To be used for tax return.
Complete for each employee. If one employee works for two aggregated ALE members, two 1095C’s must be filed. If one employee works for two divisions of a single ALE, info must be aggregated on a single 1095C.
Self-insured?
Yes No
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