An Employer’s Obligations and Opportunities Under the Affordable Care Act

1. An Employer’s Obligations and Opportunities Under the Affordable Care Act By: Allen Warshaw, Esq. Nicole Radziewicz, Esq.

2. INTRODUCTION • Overview of ACA topics, including: • Employer Mandate • Individual Mandate • Grandfathered Plans • SHOP Marketplace • Can you keep your insurance • Contraceptive Mandate • Medicaid Expansion .

3. EMPLOYER MANDATE POSTPONED UNTIL 2015 FOR EMPLOYERS WITH 100+ WORKERS Postponed until 2016 for Employers with 50-99 workers • Employers should be in the process of determining: • (1) Whether they are “large employers” subject to the mandate; • (2) If so, the number of full-time workers within their employment that are eligible for coverage; • (3) Measurement periods for ongoing and variable hour employees; • (4) Whether the health plan provides “minimum” and “affordable” coverage; • (5) Potential monetary penalties for non-compliance, and • (6) Whether required notices and written policies are in place .

4. EMPLOYER MANDATE • Large Employers Subject to the Mandate • “Large employers “are those “who employed an average of at least 50 full-time employees on business days during the preceding calendar year.” • Under the ACA, a “full-time employee” is one that, “with respect to any month, is employed on average at least 30 hours of service per week” (or one hundred thirty hours (130) per month). • Part-time and seasonal employees are taken into consideration under the full-time equivalent (“FTE”) method. • An employer determines the number of full-time equivalents (FTEs) by dividing the total number of hours worked by part-time and seasonal employees each month by one hundred twenty (120) - the result being the number of equivalents. • Note, seasonal employees are considered to an extent .

5. EMPLOYER MANDATE • The “large employer” determination is measured on a controlled group basis • Employees of a controlled group of corporations, partnerships or proprietorships under common control, affiliated services group or others as prescribed by Treasury. .

6. EMPLOYER MANDATE • Large employers must offer health coverage that is “affordable” and of “minimum value” to substantially all (95%) of their “full-time employees,” and their “dependents”, to avoid monetary penalties. .

7. EMPLOYER MANDATE Dependents • Dependents are the employee’s children under the age of 26. • Includes adopted, step and foster children. • Does not take into account: financial dependency, residency, marital status, employment of child, student status, etc. • Dependents DO NOT include spouses • Questions surrounding affordability of dependent care: Doesn’t have to be affordable? • Most comply by 2016 .

8. EMPLOYER MANDATE • Employers do not have to offer health insurance coverage to part-time or seasonal employees, including former full-time employees who are now part-time. .

9. EMPLOYER MANDATE • Employees that are reasonably expected to be employed 30 hours or more per week on average (and who are not seasonal employees) must be offered health insurance within their first ninety (90) days of employment.   • Eventually, employers with 200+ FT employees will have to automatically enroll new FT employees in the employer’s health plan. • Not required to comply until final regs are promulgated. .

10. EMPLOYER MANDATE • IRS has provided for the implementation of measurement and stability periods • Used to keep track of the status of ongoing employees • Used to determine the status of new variable hour or seasonal employees if employers are unsure whether they will be working 30 hours per week on average. • Should have written policies in place regarding the use of measurement and stability periods. Specific rules regarding their implementation .

11. EMPLOYER MANDATE • Measurement periods may range between 3 and 12 months. Subsequent stability periods may range between 6 and 12 months. • You may have an administrative period of ninety (90) days in between the measurement and stability periods but the initial measurement period and the administrative period combined cannot extend beyond the last day of the first calendar month beginning on or after the employee’s one year anniversary (up to 13 mos.) • Measurement and stability periods must uniformly apply to all employees. Distinctions are only allowed with regard to: • Salaried and hourly employees • Employees located in different states • Employees working at different business entities .

12. EMPLOYER MANDATE • If it is difficult to determine hours worked by salaried employees, one of three methods set forth by the IRS may be used: • Actual hours worked from payroll records • Days-worked equivalency of 8 hours per day • Weeks worked equivalency of 40 hours per week .

13. EMPLOYER MANDATE • Transition Relief Available to Determine Large Employer Status • The final rules allow employers to use an optional look-back measurement method to determine whether employees with varying hours and seasonal employees are full-time. • Can use a six-month look-back period to determine employment status for a stability period of up to 12 months. .

14. EMPLOYER MANDATE • Employer- sponsored plans must be of “minimum value” and must be “affordable” • A plan is of “minimum value” if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. • Not required to provide essential health benefits but MV will be determined in comparison to standard pop. claims data based on: • Hospital/ER Services • Physician/mid-level practitioner care • Pharmacy benefits • Lab/imaging services • Use minimum value calculator released by HHS or get a certification from a member of the American Academy of Actuaries to ensure of MV .

15. EMPLOYER MANDATE • A plan is considered “affordable” if the employee's required contribution for his or her own coverage does not exceed 9.5 percent of the employee's household income for the taxable year. • Does not take into account the affordability of dependent coverage • Affordability can be determined by looking at the employee’s wages reported in Box 1 on the Form W-2. .

16. EMPLOYER MANDATE • Other Large Group Plan Standards: • No lifetime or annual limits on benefits that are considered essential health benefits • Plans must allow adult children under age 26 to enroll on a parent’s plan • Plans must offer preventative services without cost-sharing • No discrimination based upon pre-existing conditions and no discrimination against similarly situated individuals • However, rewards for participation in wellness programs are permissible. • Patient-Centered Outcomes Research Institute Fee imposed • Internal and external appeals processes • Out-of-pocket maximum: $6,350 single/$12,700 other for in-network benefits. .

17. EMPLOYER MANDATE • PENALTIES: • For offering no insurance: the annual penalty is equal to $2,000 multiplied by the number of full-time employees minus 30 (the penalty is waived for the first 30 full-time employees). • To illustrate, an employer with fifty full-time employees that fails to offer coverage will be subject to an annual penalty of $40,000 reflecting the $2000 fine x (50 employees – 30 employees). • For offering inadequate insurance: annual fine of $3,000 per each employee that receives a tax credit through an exchange • Less draconian than the fine for failing to offer coverage • For example, if four employees receive tax credits through an exchange, the employer will be subject to a fine of $12,000 representing the $3,000 fine x 4 employees .

18. EMPLOYER MANDATE Notice/Reporting Requirements: • 2012- Employer W-2 reporting for cost of health care coverage • Applies to employers issuing 250+ W-2s • 9/12- Summary of Benefits and Coverage • Provide first day of plan year or when the individual is eligible to enroll for self or beneficiaries. • Include Uniform Glossary • Fine of $1,000 for each failure to provide • 10/1/13- Provide notice regarding availability of the health insurance exchange • Provide to all new hires within 14 days of starting. • DOL has issued two model notices. .

19. EMPLOYER MANDATE Notice/Reporting Requirements: • Beginning in 2015, large employers must report to IRS: • Length of waiting period • Months for which coverage was available • Monthly premium for lowest-cost option under the plan • Large employer’s share of total allowed cost of benefits • Name/address/TIN of each FTE who was covered • Must also provide statements to individuals of name and address of person required to submit the return • Integral in determining whether compliant with ACA obligations .

20. EMPLOYER MANDATE Cadillac Tax • Effective in 2018, a 40% excise tax will be levied upon health plans exceeding specific value thresholds: • $10,200 for individual coverage • $27,500 for family coverage • Determine now whether subject to the tax. Consider making changes to plan design to avoid tax. .

21. INDIVIDUAL MANDATE • The individual mandate, requires “applicable individual[s]” to maintain “minimum essential” health insurance coverage, or face a mandatory “shared responsibility payment” .

22. INDIVIDUAL MANDATE • Persons not subject to penalty, include: • (i) persons with religious exemptions; • (ii) members of health sharing ministries; • (iii) individuals not lawfully present (not in the country); • (iv) incarcerated individuals • (v) persons who do not meet the income threshold for filing income tax returns; • (vi) members of Indian tribes; • (vii) persons who have breaks in coverage for no longer than three continuous months; • (viii) persons qualifying for a hardship exemption .

23. INDIVIDUAL MANDATE • Must have “minimum essential coverage” • Either employer-sponsored coverage, private insurance; or government-sponsored insurance. • Exchanges: • Government-operated health insurance marketplaces offering qualified health insurance plans by competing companies. • Pennsylvania’s exchange is being operated by the federal government • Use of healthcare exchange in Massachusetts helped result in 97% coverage .

24. INDIVIDUAL MANDATE • Individual and small group plans must include ten essential health benefits: • Ambulatory patient services; • Emergency services; • Hospitalization; • Maternity and newborn care; • Mental health and substance use disorder services, including behavioral health treatment; • Prescription drugs; • Rehabilitative and habilitative services and devices; • Laboratory services; • Preventive and wellness services and chronic disease management; and • Pediatric services, including oral and vision care. .

25. INDIVIDUAL MANDATE • Benefit Plan Tiers • Bronze: actuarial value of 60% of plan costs • Silver: actuarial value of 70% of plan costs • Gold: actuarial value of 80% of plan costs • Platinum: actuarial value of 90% of plan costs • Catastrophic: available for individuals up to age 30. Coverage levels set at HSA current law .

26. INDIVIDUAL MANDATE • Advance Premium Tax Credit • Those making up to 400% of the poverty level ($46,000 for individuals/$94.200 for families) will be eligible for subsidies in the form of advance premium tax credits (“APTC”) • Not eligible if have an offer of affordable coverage through employer or if eligible for government insurance .

27. INDIVIDUAL MANDATE • Advance Premium Tax Credit • Three ways it can be applied: • In its entirety, evenly across all monthly payments • In part towards monthly payments, with the balance being refunded as part of tax return • None of the credit is applied toward monthly payments, and it is refunded in its entirety as part of tax return • Changes in life such as marriage/divorce, births/deaths, change of jobs will affect eligibility. • Can immediately update information through exchange account • If information isn’t updated, may have to pay-in difference or will receive a refund .

28. INDIVIDUAL MANDATE • PENALTIES • Greater of: $695 per individual (up to $2085 per family) OR 2.5% of household income • Phased-in: • 2014: $95.00 or 1% of household income (higher of two) • 2015: $325 or 2% of household income (higher of two) .

29. GRANDFATHERED PLANS • What is a “grandfathered plan.” • A health plan may qualify as a grandfathered plan if it existed as of March 23, 2010, the date on which the Act was enacted, and has served, at least one individual since that date. It may have lost that status if it changed the terms of its coverage in significant ways after that date. And, it will lose that status if makes such changes in the future. • The changes which would affect the grandfathered status include: • Cannot Significantly Cut or Reduce Benefits. For example, terminating coverage for people with diabetes, cystic fibrosis or HIV/AIDS. • Cannot Raise Co-Insurance Charges. This is the fixed percentage of a charge (for example, 20% of a hospital bill). • Cannot Significantly Raise Deductibles.. .

30. Grandfathered Plans • Cannot Significantly Raise Co-Payment Charges. • Cannot Significantly Raise Deductibles. • Cannot Significantly Lower Employer Contributions. • Cannot Add or Tighten an Annual Limit on What the Insurer Pays. • Cannot force consumers to switch to another grandfathered plan that, compared to the current plan, has less benefits or higher cost sharing as a means of avoiding new consumer protections. • Cannot be bought by or merge with another plan simply to avoid complying with the law. • CAN Change Insurance Companies provided the plan does not make any of the above six changes to its cost or benefits structure. .

31. GRANDFATHERED PLANS • What new requirements apply to grandfathered health plans? • A grandfathered health plan must comply with following requirements • No lifetime limits on coverage for all plans. • No rescissions of coverage when people get sick and have previously made an unintentional mistake on their application. • Extension of parents’ coverage to young adults under 26 years old • Disclose to consumers every time it distributes materials whether the plan believes that it is a grandfathered plan The plan must also provide contact information for enrollees to have their questions and complaints addressed .

32. GRANDFATHERED PLANS • What requirements do not apply to grandfathered health plans? • Coverage of recommended prevention services with no cost sharing. • Patient protections such as guaranteed access to OB-GYNs and pediatricians .

33. SMALL BUSINESS HEALTH OPTIONS PROGRAM • For 2014, the Small Business Health Options Program (“SHOP”) Marketplace is open to employers with 50 or fewer full-time-equivalent employees (FTEs). Beginning in 2016, 100 or fewer FTEs. .

34. SMALL BUSINESS HEALTH OPTIONS PROGRAM • According to HHS, advantages of SHOP include: • Controlling the coverage you offer and how much you pay toward employee premiums. • Obtaining ability to compare health plans online on an apples-to-apples basis, which helps you make a decision that's right for your business. • Possibly qualifying for a small business health care tax credit worth up to 50% of your premium costs. You can still deduct from your taxes the rest of your premium costs not covered by the tax credit.Beginning 2014 the tax credit is available only for plans purchased through SHOP. .

35. SMALL BUSINESS HEALTH OPTIONS PROGRAM • You may qualify for employer health care tax credits if you have fewer than 25 full-time equivalent employees making an average of about $50,000 a year or less. • To qualify for the Small Business Health Care Tax Credit, you must pay at least 50% of your full-time employees' premium costs. • You don’t need to offer coverage to your part-time employees or to dependents. • Starting in 2014, the tax credit is worth up to 50% of your contribution toward employees' premium costs (up to 35% for tax-exempt employers). • Sliding scale. The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit. .

36. SMALL BUSINESS HEALTH OPTIONS PROGRAM • The SHOP Marketplace provides 4 plan categories based on how your employees and the plan expect to share the costs for health care: • Bronze – covers 60% of the total average costs of care • Silver – covers 70% of the total average costs of care • Gold – covers 80% of the total average costs of care • Platinum – covers 90% of the total average costs of care • Ten essential health benefits are minimum requirements for all plans in the Marketplace. Plans may offer additional coverage. .

37. SMALL BUSINESS HEALTH OPTIONS PROGRAM • ENROLLING IN SHOP • You can apply for coverage at any time. To get coverage, you must submit your completed application along with your employees’ applications by the 15th of any month for coverage to take effect on the 1st of the following month. • For example, if you enroll by April 15th, coverage will begin May 1st. If you enroll between April 16th and April 30th, coverage will begin June 1st. • You will be able to use a licensed agent or broker to provide help or handle your SHOP business. You won’t pay more if you use a SHOP agent or broker. .

38. SMALL BUSINESS HEALTH OPTIONS PROGRAM • How to sign up for a Marketplace account: For 2014, small employers will enroll their employees in coverage through an agent, broker, or insurer that offers a certified SHOP plan and has agreed to conduct enrollment according to HHS standards. .

39. Can you keep your insurance? • The Problem • The President Said that “if you like your plan you will be able to keep it.” • Turned out not to be accurate • PPACA requires all insurance policies plans provide a certain minimum level of benefits • Many existing policies do not provide the required benefits • Insurance companies were originally required to cancel those policies .

40. Can you keep your insurance? • Originally you could only keep an existing policy • If it meets minimum benefit requirements or • if it is part of grandfathered plan Many plans – mostly individual policies -- do not meet the minimum benefit requirement .

41. Can you keep your insurance? • The solution CMS has decreed that, subject to state approval, insurance companies will be permitted to renew non-compliant policies until October of 2016. Pennsylvania has allowed insurance companies take advantage of this extension. However, whether or not to do so is still up to the insurance company. .

42. CONTRACEPTION MANDATE • The preventative health provisions of the PPACA, require that all employers, with the exception of religious employers, must provide insurance that covers contraception and contraception counselling, without cost-sharing. • Effective August 1, 2013, a religious employer is defined as an employer that is organized and operates as a non-profit entity and is referred to in section 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code. • The full range of FDA-approved prescription contraceptive methods are included. .

43. Contraception Mandate • The final rules also lay out the accommodation for other non-profit religious organizations - such as non-profit religious hospitals and institutions of higher education - that object to contraceptive coverage. Under the accommodation these organizations will not have to contract, arrange, pay for or refer contraceptive coverage to which they object on religious grounds, but such coverage is separately provided to women enrolled in their health plans at no cost. .

44. Contraception Mandate • With respect to an insured health plan, including a student health plan, the non-profit religious organization provides notice to its insurer that it objects to contraception coverage. The insurer then notifies enrollees in the health plan that it is providing them separate no-cost payments for contraceptive services for as long as they remain enrolled in the health plan. • Similarly, with respect to self-insured health plans, the non-profit religious organization provides notice to its third party administrator that it objects to contraception coverage. The third party administrator then notifies enrollees in the health plans that it is providing or arranging separate no-cost payments for contraceptive services for them for as long as they remain enrolled in the health plan. .

45. CONTRACEPTION MANDATE • Many for profit corporations and their owners rejected this accommodation • Nearly 100 lawsuits have been filed, with six Circuit Courts splitting on the issue of whether the mandate, even as modified, violates the rights of corporations or their owners. • The Supreme Court will hear argument in two of these cases later this month and presumably issue a decision by the end of its session in June or July. .

46. CONTRACEPTION MANDATE • At the crux of these cases is a question that the Supreme Court has not previously addressed: Do for-profit corporations have protections under the 1993 Religious Freedom Restoration Act (RFRA)? If the Court finds that for-profit corporations have protections under the RFRA, then the Court will need to determine if it is a violation of the RFRA to require a business to provide insurance that includes coverage for contraceptives when that coverage violates the owners’ personal religious beliefs. The Court will also consider whether the contraceptive coverage requirement violates the First Amendment’s protection for free exercise of religion. The corporations’ owners have also asserted rights under the RFRA and the First Amendment. The Court will need to determine if the owners’ rights are violated by a regulation imposed on the corporation. .

47. MEDICAID EXPANSION • States have the choice of whether or not to expand Medicaid per Nat'l Fed'n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2595 (2012). • Pennsylvania has sought CMS approval of an alternative plan using private insurance • Affects approximately 520,000 low-income Pennsylvanians • Follows Arkansas’ approach .

48. MEDICAID EXPANSION • The current Medicaid program generally offers federal funding to States to assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care. 42 U.S.C. § 1396d(a). • The Affordable Care Act provides for the expansion of the Medicaid program to increase the number of individuals the States may cover. • Federal government will cover the full cost of newly eligible Medicaid beneficiaries for the first 3 years and not less than 90% of the cost in years thereafter • Individuals earning up to 133% of the FPL (138% using the current formula) • $15,800 for individuals, $32,400 families .

49. MEDICAID EXPANSION • The “Healthy Pennsylvania Plan” • Qualified individuals use Medicaid funds to purchase private insurance through the exchange – the covered benefits will be significantly less than the traditional Medicaid program. • Cost-sharing requirements for current adult Medicaid recipients ─ accomplished through instituting a monthly premium on a sliding scale up to $25 for an individual and $35 for families The original proposal included a work search requirement for all unemployed working-age Medicaid beneficiaries, with limited exceptions. Last week, the Governor dropped that requirement from the proposal. .