Make sure you company is prepared for health insurance changes on the horizon. By Bob Hoffer, DBL Law

1. Affordable Care Act –
Planning for the 2014 Mandates
Bob Hoffer
Dressman Benzinger LaVelle

2. Challenges to the Individual Mandate
 On June 28, 2012, the U.S. Supreme
Court upheld the entire Affordable Care
Act (ACA) as constitutional.

3. Penalty
 The Affordable Care Act (ACA) was largely
upheld.
 Penalty is now called a tax.
 States can “opt out” to expand Medicaid
Programs.

4. Responsibilities
 ACA is the health care reform law
currently in effect.
 Employers should continue to prepare for
ACA changes that become effective in
2013.
 Employers should also keep in mind the
ACA reforms that will take place in 2014
and 2015.

5. Should Have:
 Determined Grandfather status
 Reviewed the Small Business
Credit (<25 –ees)
 Allow dependent children
coverage to age 26
 Remove lifetime limits
 Eliminate pre-ex on under 19
 Created a break room of
nursing mothers (>50 –ees)
 Provided Summary of Benefits
Coverage (SBC) distribution
(9/23/12)
 Reported “applicable employer
sponsored coverage” on Form
W-2 (1/1/2013)
 FSA limit to $2,500 in 2013
 Medical Loss Ratio rebates
(8/1/12)
 Review Medicare tax on highly
compensated -ees

6. ACA REFORMS - 2012 AND 2013
Form W-2 Reporting Requirements
 Employers with more than 250 employees should have
reported aggregate cost of employer-sponsored group
health coverage on W-2 Forms for 2012.
 The report was due in January 2013.
 This requirement was optional for smaller employers
 Reporting was for informational purposes only; was not
intended to affect the taxability of benefits.

7. ACA REFORMS - 2012 AND 2013
Women’s Preventive Care Services
 Effective for plan years starting on or after Aug. 1, 2012.
 Non-grandfathered plans must cover specific preventive services without
cost-sharing. (deductibles, co-payments and coinsurance)
 These services include:
 well-woman visits, breastfeeding support
 domestic violence screening
 STD screening and contraceptives
 HPV DNA testing
 Screening for gestational diabetes
 Counseling for HIV
 Exceptions to the contraceptive coverage requirement apply to certain
exempt religious employers.

8. ACA REFORMS - 2012 AND 2013
Medical Loss Ratio (MLR) Rebates
 Fully insured plans may have received rebates in August 2012
 Insurance companies must spend a percentage of premium dollars on
medical care and health care quality improvement, not administrative
costs.
 Groups with less 50-80%
 Groups greater than 50-85%
 Employers may have received rebates from issuers
 Any portion of a rebate that is a plan asset must be used for the exclusive
benefit of the plan’s participants and beneficiaries.
 This may include, for example, reducing participants’ premium payments.

9. FSA $2,500 Contribution Limit
 Effective for plan years beginning on or
after Jan. 1, 2013, an employee’s
contribution to a health FSA offered
under a cafeteria plan is limited to
$2,500.
ACA REFORMS - 2012 AND 2013

10. ACA REFORMS - 2012 AND 2013
Medicare changes
 Effective for 2013, the deduction for the retiree
drug subsidy (Medicare Part D) will be eliminated.
 Effective Jan. 1, 2013, an additional 0.9%
Medicare tax will apply to high-income
individuals.
 Employers are required to withhold the
additional Medicare tax on an employee’s
wages in excess of $200,000 ($250,000 for
married couples filing jointly).

11. ACA REFORMS - 2012 AND 2013
Health Insurance Exchanges – Notice of Availability
 Employers must provide all employees with a written notice about
ACA’s health insurance Exchanges and the consequences of
forgoing employer-sponsored coverage and purchase a qualified
health plan through an Exchange.
 This notice requirement was to become effective as of March
1, 2013; however, this deadline was extended with no new date
specified.
 The Department of Health and Human Services (HHS) has
indicated that it intends to issue model Exchange notices.

12. ACA REFORMS - 2012 AND 2013
Nondiscrimination Rules for Fully Insured Plans
Effective date delayed for regulations.
Important to review each renewal date.
 Fully-insured plans must follow rules regarding
nondiscrimination in favor of highly-compensated
employees
 Cannot discriminate with respect to eligibility or benefits
(e.g., Doesn’t allow for Class Carve-Outs. Must be consistent on
contributions toward cost of insurance paid by Employer, etc.)
 Highly Compensated Employees (Testing Applies):
 5 highest paid officers, more than 10% shareholder, or highest
paid 25% of all employees

13. ACA REFORMS – 2014
Additional ACA coverage mandates and reforms
become effective in 2014.
For example, group health plans may not:
 Impose pre-existing condition exclusions on any
covered individual, regardless of the individual’s age;
 Have a waiting period for coverage that exceeds 90
days; or
 Apply any annual limits on essential health benefits.

14. ACA REFORMS – 2014
 ACA’s state-based insurance Exchanges
are scheduled to be operational.
 Also in 2014, the individual mandate
will become effective.
 The ACA’s “pay or play” penalties for
employers were originally slated to take
effect in 2014, but have been delayed for
one year.

15. ACA REFORMS – 2015
 The ACA’s “pay or play” penalties for employers will
become effective in 2015.
 Under the pay or play rules, certain employers with at least
50 full-time equivalent employees will face penalties if one
or more of their full-time employees obtains a premium
credit through an Exchange.
 An individual may be eligible for a premium credit either
because the employer does not offer health care coverage
or the employer offers coverage that is either not
“affordable” or does not provide “minimum value.”

16. Health Care Reform:
Individual Effects
The 65+ now receive:
 Free preventive services under Medicare
 Once those with Medicare prescription drug coverage
enter the “doughnut hole” coverage gap, they will be
entitled to 50 percent off certain brand-name
medications.
 Medicare beneficiaries earning $85,000 or more will pay
higher Part B premiums until 2019.
 Those with Medicare Advantage plans may lose some
benefits or experience an increase in co-payments.

17. Health Care Reform:
What Does it Mean for You?
Low-income employees:
 Even without children or a disability, those among the
lowest-income workers will be eligible for Medicaid as of
2014.
 Those who earn less than 400 percent of the federal
poverty level (about $88,000 for a family of four) will be
eligible for subsidies to help buy coverage.
 The expansion of funding for community health
centers, designed to offer free and reduced-cost
care, will also provide relief.

18. Health Care Reform:
What Does it Mean for You?
Children with a pre-existing condition:
Group health plans and health insurance issuers
may not impose exclusions on coverage for
children with a pre-existing condition. Provision
applies to all employer plans and new plans in
the individual market.

19. Health Care Reform:
What Does it Mean for You?
Adults with a pre-existing condition:
 Starting 2014, adults with pre-existing
conditions will be able to obtain individual
coverage through an insurance exchange.
 Insurers cannot place annual or lifetime limits on
coverage, nor can they deny coverage or charge
higher premiums due to a pre-existing condition.

20. Health Care Reform:
What Does it Mean for You?
Unemployed and uninsured:
 Most individuals who are unemployed and
uninsured likely qualify for Medicaid under the
coverage expansion that began in 2010.
 The expansion of funding for community health
centers, designed to offer free and reduced-cost
care, will also provide relief.
 Certain uninsured individuals with pre-existing
conditions can obtain coverage through the
temporary high-risk pool as well (e.g., PCIP).

21. Health Care Reform:
What Does it Mean for You?
Small-business owners:
 Organizations with 25 or fewer workers may be eligible for
a tax credit to help provide coverage for employees (e.g.,
average annual wages of less than $50,000 per FTE).
 Those with 50 or more employees must provide benefits or
incur a penalty tax starting in 2015.
 Credit is up to 35% of premiums paid for small businesses
or 25% for nonprofits
 Must pay at least 50% of cost of single coverage for credit

22. Health Care Reform:
What Does it Mean for You?
Young adults:
 Children may stay on their parents’
policies until age 26.

23. Grandfathered Plans
 Exemptions if plan is grandfathered
 First dollar preventive care
 Non-discrimination rules on fully insured plans
 New appeals process
 Guarantee issue and renewal
 Automatic enrollment

24. Grandfathered plans
 Reforms that are not exempt from grandfathered
plans:
 Annual lifetime limits
 Cannot rescind plan benefits for unintentional mistake
on application
 Coverage for children must extend to age 26

25. Grandfathered plans
 Will lose status if:
 Reduce benefits related to specific condition
 Increase co-insurance percentages
 Increase deductible or out of pocket limits
 Increase copayment by certain amount
 Decrease employer contribution by 5% or more
 Reduce annual limit
 Switch insurance company

26. “Play or Pay” Mandates in 2015

27. ACA - Seeing the Whole Picture
“The winds
and waves
are always on
the side of
the ablest
navigators.” –
Edward Gibbon

28. E – A – S – I Approach
 E ducate – Owners & Employees
 A ssess – Snapshot of the current situation
 S trategize – Planning for 2014 and 2015
 I mplementation – Collaberative efforts

29. Spectrum of
Approach
PLAY PAY
Business Planning for Health Care Reform
Reporting and Compliance Mandated for All Business Owners

30. The Employer
Decision

31. Calculate Full
Time Equivalents
(FTE)

32. Calculating Full Time Equivalents (FTE)
 >30 hrs. weekly = Full Time
 <30 hrs. weekly = Part Time
 <120 days annually = Seasonal (Excluded)
 <90 day probation = Ineligible (Excluded)

33. Calculating Tax – Sample Calculation
 45 FT –ees
 25 PT –ees @ 20 hrs. avg. weekly
 (25 PT * 20 Hrs. = 500) x 4 wks = 2,000
hrs./120
 16 FTE
 45 + 16 = 61 FTE
 61 FTE – 30 Allowed reduction = 31
 31 employees x $166.67 monthly = $5,167
 Report to HHS monthly – Pay Annually

34. Minimum Value:
IRS designed spreadsheet
Affordability

35. Practical Approaches
 FTE calculations
 Renew medical plan prior to January, 2015
 Monthly reporting and budgeting annual
payment
 90 day Probation - $100/day fine per employee
 Define Net Cost of Benefits vs. Non-deductible
Tax
 Restructure and Redeploy
 Define strategic partners/Work collaberatively

36. Communication is Critical