The PPACA and what employers need to know

Health Care and theHealth Care and the
Patient Protection andPatient Protection and
Affordable Care ActAffordable Care Act
Fundamentals of Employment Law
Dr. Greg Chartier, The Office of GJ Chartier
914-548-1689, greg@hrinfo4u.com

IntroductionIntroduction
Greg Chartier
◦ greg@hrinfo4u.com
◦ 914-548-1689
◦ www.linkedin.com/gregchartier
07/09/13 Fundamentals of Employment Law 2

What is the Affordable Care Act?What is the Affordable Care Act?
On March 23, 2010, President Obama
signed the health care reform bill into law.
On June 28, 2012, the Supreme Court
rendered a final decision upholding the
PPACA.
October 1, 2013, individuals and small
business will be able to enroll in NYS
“Marketplace.”
January 1, 2014, major provisions of the
law take effect.

What is the Affordable Care Act?What is the Affordable Care Act?
◦ Employers with 50 or more employees will now
be required to provide affordable health care or
pay a penalty.
◦ Employees who have health care offered to
them by their employers must take the health
care or pay a penalty.
◦ Children will be allowed to stay on their
parents’ policies until they turn 26.
◦ Lifetime limits on health coverage will be
eliminated.
◦ Insurance companies will no longer be able to
deny coverage to anyone with pre-existing
conditions.

Coming in 2014Coming in 2014
The biggest changes take effect 1/1/14.
◦ Most Americans will be required to have health
insurance, if they can afford it.
◦ Insurers cannot deny coverage to anyone and
they cannot charge you more, even if you cost
more.
◦ Each state is required to have an “exchange” to
purchase health care online.
 Low income individuals and families may qualify
for a discount or other subsidies.

Small Business Tax Credits
◦ Fewer than 25 full time equivalent employees
◦ Average annual wages less than $50,000
◦ Employers pay at least 50% of the premium
cost
◦ Non-profits also eligible (credit against
employment taxes)
◦ Consult your tax advisor

Health Insurer Fee
◦ $8 billion in 2014, $14.3 billion in 2018
Transitional Reinsurance Contribution
Program
◦ Aggregate fee of $25 billion over a 3 year
period, 2014-2016
Patient-Centered Outcomes Research Fee
◦ $1 per life in 2014, $2 per life in 2015
High Value Plan Tax (Cadillac Tax)
◦ 40% excise tax on amounts over $10,200 for
single and $27,500 for family

Employer Shared ResponsibilityEmployer Shared Responsibility
Effective 1/1/15
Employer must count all full-time
employees and part-time employees on a
full time basis in determining if they have
50 or more employees.
◦ Full time=30 or more hours per week, per
month or 130 hours of service per calendar
month
◦ Certain seasonal workers are not counted
◦ Penalties assessed for “no coverage” or
coverage that is “not affordable” or does not
provide “minimum value.”

For each calendar month of the preceding
year, employers must:
◦ Count the number of FT employees who work
an average of 30 hours per week per month.
◦ Aggregate the number of hours worked by non-
FT workers and divide by 120.
◦ Add the number of FT workers and the number
or FT equivalents.
◦ Add the monthly totals and divide by 12. If the
average exceeds 50 FT equivalents, determine
if the seasonal worker exception applies.

Employer Shared Responsibility:Employer Shared Responsibility:
The Penalties: Sledge HammerThe Penalties: Sledge Hammer
If a large employer does not currently
provide coverage to 95% of FT employees
and their dependents and at least 1 FT
employee receives a tax credit:
◦ The penalty is $2,000 x the total number of FT
after subtracting the first 30.
◦ Example (70 FT employees and 1 employee
receives a tax credit, penalty is $2,000 x 40
(70-30) = $80,000 (not deductible).

Employer Shared Responsibility:Employer Shared Responsibility:
The Penalties: Tack HammerThe Penalties: Tack Hammer
If a large employer offers coverage to
their FT employees and their dependents
but the coverage is “not affordable” or it
does not provide “minimum value.”
◦ The penalty is the lesser of $3,000 x the
number of FT employees receiving a premium
tax credit or $2,000 x the total number of FT
employees
◦ Example: 70 FT employees and 10 FT
employees get a tax credit, penalty = $3,000 x
10 $30,000

“Not Affordable”
◦ General rule: employee share of the self-only
premium for the employer’s lowest cost plan
that provides minimum value cannot exceed
9.5% of household income.
 Safe Harbor:
◦ W-2 safe harbor. Employee premium share does not
exceed 9.5% of the amount reported in Box 1 o W-2.
◦ Rate of pay safe harbor. Employee premium share does
not exceed 9.5% of an employee’s monthly wages
determined by the employee’s hourly rate time 130
hours.
◦ Federal Poverty Level safe harbor. Employee premium
share does not exceed 9.5% of Federal Poverty Level
for one person.

“Minimum Value”
◦ A plan fails to provide minimum value (MV) if
the plan’s share of the total allowed costs of
benefits provided under the plan is less than
60% of such costs (percentage of medical
expenses-deductibles coinsurance, copays,
etc.)
 Minimum Value Calculator:
cms.gov/resources/files/mv-calculator-find-2-20-
2013.xlsm
 Safe Harbor Checklist
 Actuarial Certification

Transition relief for tax penalty
◦ Transition relief for large employers that
maintain a non-calendar year plan as of
12/27/12.
◦ Employer is not subject to the penalty if they
offer affordable, minimum value, coverage on
the first day of 2014 if:
 The plan was offered to at least 1/3 of all
employees (FT and PT) prior to 12/27/12 or
 The plan covered ¼ of all employees (FT and PT)
as of 12/27/12.

Individual MandateIndividual Mandate
On 1/1/14, the individual mandate
requires most individuals to have
minimum essential coverage or pay a
penalty which is called the “shared
responsibility payment.”
◦ An employer group health plan
◦ An individual health insurance policy
◦ A government plan like Medicare or Tricare
◦ Student health coverage
◦ A Medicare Advantage Plan
◦ A state high risk pool coverage plan

Penalties will be assessed when
individuals file their 2014 taxes in 2015.
◦ 2014: Greater of $95 per adult and $47.50 per
child under age 18 (maximum of $285) or 1%
of income over the tax filing theshold.
◦ 2015: Greater of $325 per adult and $162.50
per child under age 18 (maximum of $975) or
2% of income over the threshold.
◦ 2016:Greater of $695 per adult and $347.50
per child under 18 (maximum of $2085) or
2.5% of income over the threshold.

Individuals may not be liable for the
penalty if they do not have minimum
essential coverage.
◦ Those who cannot afford coverage (more than
8% of household income)
◦ Those below the tax filing threshold
◦ Individuals who qualify for a hardship
exemption; personal or financial harships.
◦ Those with a gap of less than 3 consecutive
months in a calendar year
◦ Non-US citizens, individuals in prison

Marketplaces (Exchanges)Marketplaces (Exchanges)
Requires creation of American Health Benefit
Exchanges (AHBE) for individuals and Small
Business Health Options Program (SHOP) for
small business up to 50 lives.
Insurance coverage can be purchased beginning
October 1, 2013 and is effective January 1, 2014.
◦ In 2016, SHOP Marketplaces must increase to
small groups of 100 or less
◦ States can choose to expand their SHOP
exchanges to serve larger groups in 2017.

Exchange BasicsExchange Basics
An exchanges is an organized marketplace
designed to help people shop for and enroll in
health insurance plans.
Individual, families and small business will be
able to use the Exchange to compare options,
calculate costs and select coverage online, in
person or over the phone.
The Exchange will be able to tell what type of
financial assistance is available to applicants to
help them afford health insurance.

Exchange BasicsExchange Basics
Exchanges are not optional.
If a state doesn’t create one, the federal
government will step in and operate the
exchange for the state.
18 states, including New York, have been
approved to operate their own Exchange, 3 are
partnering with HHS and the rest will be run by
HHS.

Exchange Subsidy BasicsExchange Subsidy Basics
Subsidized coverage will be available to those
purchasing individual coverage through the
Exchange.
Low income individuals who are part of a SHOP
Exchange are not eligible for a personal premium
tax subsidy.
Only subsidies that will be distributed through
the SHOP Exchange are the small business tax
credits.
Those with “credible” and “affordable” coverage
through their employer may not leave and buy
subsidized coverage.

Employer ResponsibilitiesEmployer Responsibilities
Employers must provide a notice to
current employees and new hires about
Exchange and subsidies:
◦ model notice is available at HHS
Employers will have to help verify
coverage
◦ HHS will use date from insurance exchange to
determine if individuals have coverage through
their employers.

Form W-2 Cost of CoverageForm W-2 Cost of Coverage
ReportingReporting
Employers must report the cost of
employer provided health care coverage
on Form W-2, beginning 1/1/12.
◦ Under 250 W-2 forms in 2012
◦ HRAs
◦ Self insured plans not subject to COBRA

Automatic EnrollmentAutomatic Enrollment
Large employers (more than 200) must
automatically enroll employees in health
care plans staring 2014.
www.dol.gov/ebsa/healthreform

CostsCosts
So far, everything that has been done and
all of the requirements of the law, have
increased health care costs.
Is there some point at which costs will
come down?
◦ New models of care. How your receive care will
change.
◦ Experimentation and research
◦ Health care costs on reimbursements on
Medicaid and Medicare are now below the cost
of care.

AccessAccess
One of the keys to the law is the intention
to provide everyone with health care.
Will health care be universal?
◦ Medicaid expansion not provided by your state
◦ Is health care “affordable”
◦ Are there enough primary doctors?

Patients, consumersPatients, consumers
Patients will have to change their behavior
and accept that they will need to be
healthier and that the health care system
will not be as responsive as it currently is.

Questions/Comments?Questions/Comments?

The PPACA and what employers need to know

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