2010 Patient Protection & Affordable Care Act: 2013 Updates, Extensions, and Deadlines – What Employers Need to Know By: Casey S. Stevenson

Patient Protection and Affordable Care Act  Colloquially referred to as “Obamacare”  Employer Mandate –Originally Scheduled to take effect in January, 2014  “Pay or Play” and employer reporting requirements  Penalty provision, and employer mandate and reporting requirements effective date has been extended to until January, 2015

The Employer Mandate, Generally  Applicable Large Employers  Minimum Essential Coverage –Minimum Value –Affordable  Must meet certain reporting requirements  Pay a penalty

Not All Provisions of the ACA have Been Extended  Health Care Marketplaces (formerly health care exchanges) are scheduled to open their virtual doors on January 1, 2014  Open enrollment for Health Care Marketplaces is October 1, 2013  Premium subsidies are scheduled to become effective in 2014  Individual mandate is scheduled to become effective in 2014

The Employer Mandate Applicable Large Employer  Applicable Large Employer –Employers with 50 or more full-time or full-time equivalent employees  Full-time: average of 30 or more hours of service per week calculated on a monthly basis, or 130 hours  Full-time equivalent employees (“FTE”): FTE is determined based upon the total number of hours of service each month by part-time employees divided by 120 –Employers can calculate the monthly average of full- time employees and FTEs on business days during any consecutive six-month period in the prior year  If that number is more than 50 then the employer is an Applicable Large Employer

The Employer Mandate Applicable Large Employer (cont.)  Who’s an employee? –Common law standard –So this is something that has not changed  Hours of service is not hours worked. –An employee's hours of service include:  each hour for which an employee is paid, or entitled to payment, to perform duties for the employer  each hour of paid leave

The Employer Mandate Applicable Large Employer (cont.)  Aggregate employers: companies under common control are combined together for purposes of determining whether they meet the 50 full-time (or equivalents) threshold –Common ownership:  “Parent-subsidiary”  “Brother-sister”  “Affiliated service group” –Each entity considered an “applicable large employer member” –But each individual company will have penalties, if applicable, calculated separately

The Employer Mandate Full-Time Employees  Full-time employees: Any employee that averages more than 30 hours per week based upon a monthly basis, or 130 hours in a month  Hours of part-time workers are counted for purposes of determining whether an employer is Applicable large employer  But penalties only apply to full-time employees  So, the determination of whether or not an employee is full-time versus part-time is critical

The Employer Mandate Full-Time Employees (cont.)  Penalty regulations require determination of employee status on a month-by-month basis –Problematic for many reasons:  Some employers may not know until month is over which employees are full-time  Work for employees may vary considerably from month to month  Safe harbor provision allows full-time status to be determined based on a “look back” period –Differing categories of employees are contemplated:  On-going employees  New variable hour employees  Seasonal employees

The Employer Mandate Full-Time Employees (cont.)  Look back: –Measurement Period: Period of 3 months to 12 months in which hours are calculated  Standard Measurement Period (for ongoing employees)  Initial Measurement Period (for new variable hour employees) –Stability Period: period in which employee status is locked in.  Permissible length varies but length must be same for new variable hour and ongoing employees –Administrative Period: period after measurement period but before stability period for determination of full-time status and enrollment of eligible full-time employees

The Employer Mandate Full-Time Employees (cont.)  Hours of service: –Hourly employees: hours worked and hours for which pay is received, including vacation, disability, holiday, illness, layoff, paid leave  Special rules for certain unpaid leaves of absence –Non-hourly (salaried) employees: have three options:  Count actual hours  Count 8 hours/day in which 1 hour of service is performed  Count 40 hours/week in which an hour of service is performed  Counting hours of service using pay periods (for ongoing employees only):

The Employer Mandate Calculating Full-Time and Equivalents  Full-time employees: Any employee that averages more than 30 hours per week based upon a monthly basis, or 130 hours in a month –Four weeks in September  Week 1 – 20 hours  Week 2 – 25 hours  Week 3 – 40 hours  Week 4 – 40 hours  Total of 125 hours/4 weeks = (more than 30 hours per week so this is a full-time employee) –Let’s suppose you have 45 full-time employees

The Employer Mandate Calculating Full-Time and Equivalents (cont.)  Full-time equivalent employee: –Four weeks in September  Week 1 – 25 hours  Week 2 – 30 hours  Week 3 – 30 hours  Week 4 – 25 hours  Total of 110 hours/4 weeks = 27.5 (less than 30 hours per week so this is a part-time employee) –20 part-time employees that work 110 hours per month

The Employer Mandate Calculating Full-Time and Equivalents (cont.)  45 full-time employees  20 part-time employees that work 110 hours per month  Are you an Applicable Large Employer?? –Yes. –Why?  20 part-time employees x 110 hours worked = 2,200  2,200/120 (the statutory magic number) = FTE’s  full-time employees = or more than 50  What that mean for you?

The Employer Mandate Minimum Essential Coverage  Employers meeting the “50 employee” threshold must offer minimum essential coverage to employees –Minimum essential coverage generally includes coverage under an “eligible employer-sponsored plan” –An eligible employer-sponsored plan is defined to mean:  a group health plan or group health insurance coverage offered by an employer to an employee which is a governmental plan or  any other plan or coverage offered in the small or large group market or  grandfathered plan offered in the group market –Minimum essential coverage must be offered to all but 5% of employees and their dependents

The Employer Mandate Affordability Assessment  Determining whether offered coverage is affordable: –If an employee’s share of the premium for employer- provided coverage would cost the employee more than 9.5% of the employee’s annual household income, the coverage is not considered affordable –If an employee’s share of the premium for employer- provided coverage would cost the employee more than 9.5% of the employee’s annual household income, the coverage is not considered affordable –If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost option available to the employee that also meets the minimum value requirement –There are safe harbors for affordability

 Determining minimum value: –A plan fails to provide minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of such costs –A minimum value calculator is downloadable as an Excel spreadsheet at Guidance/Downloads/mv-calculator-final xlsm Guidance/Downloads/mv-calculator-final xlsm Guidance/Downloads/mv-calculator-final xlsm The Employer Mandate Minimum Value

 Penalties will be levied by the Internal Revenue Service if: –Employer does not offer minimum essential coverage; or –Employer offers minimum essential coverage, and  Is not affordable; or  Does not offer minimum value; AND –Any full-time employee receives a subsidy to purchase insurance through a Health Care Marketplace –No coverage at all then the penalty is $2,000 x the number of full-time employees over 30 –Not affordable or no minimum value then the lesser of  $2,000 x the number of full-time employees over 30; or  $3,000 x the number of full-time employees that receive a subsidy The Employer Mandate Penalties

Cornerstone of the ACA  Health Care Market Places (both state run and federally run)  Premium Tax Credits (subsidies)  Individual Mandate (tax on individuals who do not obtain insurance) –Implementation and effective dates have not been extended –And, all are closely tied to the Employer Mandate

Individual Aspects of the Employer Mandate?  Individuals with household incomes between 100% and 400% of the federal poverty level will be eligible for a federal subsidy  Access to employer-sponsored coverage that is both "affordable" and provides "minimum value" disqualifies an individual from receiving the subsidy  The Department of Health and Human Services (HHS) has been tasked with verifying whether an individual has access to employer sponsored coverage

Individual Aspects of the Employer Mandate? (cont.)  So, since individuals may apply for a subsidy, an employer cannot ignore “affordability” and “minimum value” determination until 2015  Employers will receive inquiries from federally run exchanges  Employees will also make inquiries to determine whether they can apply for a subsidy

Individual Aspects of the Employer Mandate? (cont.)  “Affordability” and “minimum value” of minimum essential coverage is also important for the notice requirements related to health care marketplaces  Employers must to send a notice to current employees by October 1, 2013 advising them about the availability of coverage through a health care marketplace  New employees must receive the notice within 14 days of hire  ns.pdf ns.pdf ns.pdf

Other Provisions of the ACA in Effect or Which Have not Been Extended  90-Day Waiting Periods Limit: Effective January 1, 2014, no waiting period more than 90 days  Maximum Out-of-Pocket Limitation: Effective January 1, 2014, $6,350 for employee-only coverage and $12,700 for family coverage  Patient-Centered Outcomes Research Institute (PCORI) Fee: Health insurance issuers and sponsors of self-funded plans must pay a fee to fund the PCORI based upon the average number of lives covered –Generally the PCORI fee is $2 per life covered ($1 for plan years ending before October 1, 2013) –The fee expires in 2019

Other Provisions of the ACA in Effect or Which Have not Been Extended (cont.)  Transitional Reinsurance Fee: –Insured and self-funded plans must pay a per enrollee fee of $63 –The number of enrollees must be reported by November 15, 2014 –The first fee must be paid in early  Preexisting Condition Exclusions: Effective January 1, 2014, the prohibition on preexisting condition exclusions is extended to individuals of all ages  Elimination of Annual Limits: Effective January 1, 2014, annual limits on the dollar amount of essential health benefits are prohibited

Other Considerations  Defunding the Patient Protection and Affordable Care Act  Passed in the House on September 20 th –Somewhat surprising since, to date, there have been over 40 futile votes to repeal the law  Probably will not get passed the Senate –A vote could come as early as Sunday  Even if the Senate passed the bill, President Obama would never sign  So – Defunding is DOA, and the Affordable Care Act is here to stay!

Patient Protection & Affordable Care Act Questions?