Your Speaker Today: Constance Starkey

What’s New? The Buzz State of the ACA Supreme Court & King v Burwell The MLR California

New Tools On the Informer Compliance Kit

Scenarios Scenario #1 Corporation X: Is a large employer who sponsors a health plan that covers all full-time employees as defined under the ACA. Has a maximum orientation period prior to a 90-day waiting period for coverage. Has hired Abby whose start date in a full-time position is October 1. What date is the latest that Abby’s coverage should start?

Scenarios Scenario #1: Orientation If Abby’s start date as a full-time employee is October 1, the last permitted day of the orientation period is October 31. From Abby’s start date: One calendar month = November 1 Minus one calendar day = October 31

Scenarios Scenario #1: Waiting Period 90 days The waiting period must start November 1, and the 90th day would be January 29 which would indicate coverage must start no later than January 30.

Scenarios Scenario #1 Answer: In order to be in compliance with ACA regulations, Abby’s coverage must begin no later than January 1 4 th Calendar Month However, this does not meet the employer shared responsibility requirements that coverage can begin no later than the first day of the fourth calendar month of employment. January 1

Scenarios Scenario #2 Corporations A, B and C are members of a Controlled Group for the 2015 calendar year. – Corporation A has 50 FT employees, – Corporation B has 40 FT employees and – Corporation C has 20 FT employees How many employees could Corporation C subtract from their total when calculating a possible penalty?

Scenarios Scenario #2: Calculations Corporation A has 50 FT employees Corporation B has 40 FT employees Corporation C has 20 FT employees For 2015 ONLY, for the sake of calculating possible penalties, the employer may subtract 80 employees. However, each entity is able to subtract only their % of employees. Total Number of Employees 110

Scenarios Scenario #2 Answer: The employees are divided among the entities whether they are in compliance or not. 110 FT employees Corporation A 50 = 46% 110 FT employees Corporation B 40 = 36% 110 FT employees Corporation C 20 = 18% 46% of 80 = 3736% of 80 = 2918% of 80 = 14 Corporation C may subtract 14

Scenarios Scenario #3 Corporations D, E, and F are members of a Controlled Group, Company Y, for the 2015 calendar year. Company Y has a combined total of 110 FT employees. – Corporation D has 50 FT employees, all of whom receive affordable, MV, employer-sponsored coverage – Corporation E has 40 FT employees, 10 of whom receive affordable, MV, employer sponsored coverage, the remaining 30 receive coverage that does not meet MV or the affordability requirements. – Corporation F has 20 FT employees. They are not currently offered employer-sponsored coverage. If this employer changes nothing, what is the potential penalty?

Scenarios Reminder:  Each company within a control group is considered a separate entity  Penalties are confined to the entity or entities that are out of compliance  The entities that are in compliance are not penalized based on the other entities.

Scenarios Scenario #3 Corporation D: 50 FT Employees Corporation D is in compliance with the law. Coverage for all 50 FT employees: Affordable Meets MV Employer-sponsored Penalty for Corporation D = $0

Scenarios Scenario #3 Corporation E: 40 FT Employees Coverage for 10 employees: Affordable Meets MV Employer-sponsored Coverage for 30 employees: Does Not Meet Affordability Requirements Does Not Meet MV Corporation E is NOT in compliance with the law.

Scenarios Scenario #3 Corporation E: Penalty Calculations OR = 36% Percentage of Employees in Corporation E 36% of 80 = 29 Allowable subtraction = 11 Number of Penalties 11 X $2,000 = $22,000 Corp E Penalty 30 Employees Receive Subsidy in the Exchange: 30 X $3,000 = $90,000 The ACA allows employers to pay the lesser of either penalty, therefore, Corporation E would pay $22,000

Scenarios Scenario #3 Corporation F: 20 FT Employees  No Employer- Sponsored Coverage  Corporation F is NOT in compliance with the law.

Scenarios Scenario #3 Corporation F: 20 FT Employees OR = 18% Percentage of Employees in Corporation F 18% of 80 = 14 Allowable subtraction = 6 Number of Penalties 6 X $2,000 = $12,000 Corp F Penalty 20 Employees Receive Subsidy in the Exchange: 20 X $3,000 = $60,000 The ACA allows employers to pay the lesser of either penalty, therefore, Corporation F would pay $12,000

Scenarios Scenario #3 Company Y Penalties: Corporation D = $0 Corporation E = $22,000 Corporation F = $12,000 Company Y would owe $34,000 in tax penalties $34,000

Scenarios Scenario #4 Corporation Z has 110 FTEs. Employee salary range is $30,000 to $70, employees have monthly wages of $3,200 or more 35 employees each have monthly wages of $2,500 Corporation Z offers all employees Minimum Value, Minimum Essential Coverage Employer-paid premium is $62,000 annually Current employee monthly contribution for employee-only coverage is $300

Scenarios Scenario #4 Does Corporation Z owe a penalty and if so, what would the potential cost of the penalty be? Would it be advantageous for this employer to drop coverage and pay a penalty? Why or why not?

Scenarios Scenario #4 Answer: Does employer owe a penalty?  Employee contribution is $300 per month  Annual employee contribution is $3600 $300 X 12 months $3,600 annual

Scenarios Scenario #4 Answer: Does employer owe a penalty?  Employee contribution is $300 per month  Annual employee contribution is $3600  $3,600 is 9.5% of $37,894 per year $3600 / 9.5% = $37,894

Scenarios Scenario #4 Answer: Does employer owe a penalty?  Employee contribution is $300 per month  Annual employee contribution is $3600  $3,600 is 9.5% of $37,894 per year  Annual salary must be at least $37,894 to meet affordability requirement 75 employees earn $38,400 or more Employer contribution meets affordability requirement for 75 employees 35 employees earn $30,000 annually Employer contribution does not meet affordability requirement for 35 employees

Scenarios This employer does not meet the affordability requirements, and is subject to penalty Scenario #4 Answer: Does the Employer Owe a Penalty?  75 employees meet affordability requirements = 68% 68% < 70%  35 employees do not meet affordability requirements  75 = 68% of total employees (110)  ACA requirement = affordable coverage to 70% of employees (note: this goes up to 95% for 2016)

Scenarios Scenario #4 Answer: What would the penalty be? Employer would pay lesser of the penalties, so, maximum penalty would be $60,000 Penalty 1 $60, employees X $2,000 OR All 35 Eligible Employees Receive Subsidy in the Exchange: $105,000 Penalty 2 35 employees X $3,000 $60,000 For 2015 ONLY employer may subtract 80 employees. From 2016 on, employers may subtract 30 employees.

Scenarios Scenario #4 What would be your recommendation? A.Do nothing B.Increase Employer Contribution C.Increase salaries for those 35 employees D.Drop coverage and pay the penalty

Scenarios Scenario #4 : What if they do nothing?  Employer currently pays $62,000 annual premium  Penalty would be $60,000 If the employer does nothing, the cost to the employer would be $122,000 62, ,000 $122,000

Scenarios Scenario #4: What if they increase employer contribution? $30,000 X.095 $30,000 X 9.5% $2,850  Lowest wage is $30,000/year  Maximum employee contribution for affordable coverage is 9.5%, or $2,850

Scenarios Scenario #4: What if they increase employer contribution?  Lowest wage is $30,000/year  Maximum employee contribution for affordable coverage is 9.5%, or $2,850  Currently, employees are paying $3,600 per year $3,600 Current employee contribution -$2,850 Maximum employee contribution Additional employer contribution required $ 750  Employer must increase contribution by $750 per employee

Scenarios Scenario #4: What if they increase employer contribution?  Lowest wage is $30,000/year  Maximum employee contribution for affordable coverage is 9.5%, or $2,850  Currently, employees are paying $3,600 per year  Employer must increase contribution by $750 per employee $ 750 X 110 employees $82,500  Cost of increase for 110 employees is $82,500

Scenarios Scenario #4: What if they increase employer contribution?  Lowest wage is $30,000/year  Maximum employee contribution for affordable coverage is 9.5%, or $2,850  Currently, employees are paying $3,600 per year Total cost with increased employer contribution: $144,500  Employer must increase contribution by $750 per employee $62,000 Current employer- paid premium + $82,500 Additional employer contribution Total cost with increased employer contribution $144,500  Cost of increase for 110 employees is $82,500

Scenarios Scenario #4: What if they increase wages? What we know:  With current employee contribution of $300/month  Wages must be $37,894/year to meet affordability requirement of 9.5% $37,894  35 employees earn $30,000 per year - $30,000 $7,894 Wage adjustment required to meet affordability  Employer must increase 35 employee wages by $7,894

Scenarios Scenario #4: What if they increase wages? Increasing the wages of the 35 employees from $30,000 to $37,894 would cost the company $276,290 + $62,000 in annual premium would equal $338,290 What we know:  With current employee contribution of $300/month  Wages must be $37,894/year to meet affordability requirement of 9.5%  35 employees earn $30,000 per year  Employer must increase 35 employee wages by $7,894 $7,894 X 35 $276,290

Scenarios Scenario #4: What if the employer drops coverage?  Employer would pay $2,000 penalty per employee for all employees (minus 80) Total employer cost by dropping coverage would be $60, employees 30 X $2,000 $60,000 penalty For 2015 ONLY employer may subtract 80 employees. From 2016 on, employers may subtract 30 employees.

Scenario #4 Answer: Recommendation: Increase Employer Contribution Scenarios Do Nothing 2015 Employer Cost $122, Employer Cost $222, Employer Cost $144, Employer Cost $144,500 Increase Employer Contribution Increase 35 Employee Wages 2015 Employer Cost $338, Employer Cost $338,290 Drop All Coverage 2015 Employer Cost $60, Employer Cost $160,000

Questions Constance Starkey Public Affairs & Policy Analyst

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