Patient Protection and Affordable Care Act (ACA)

1. Patient Protection and Affordable Care Act (ACA) Scott Morrison Jr. Health Policy Analyst California Department of Human Resources (CalHR)

2. Introduction The ACA was enacted in March 2010 to ensure that all Americans have access to quality and affordable health care. It includes many employer-administered provisions that impact the State of California, such as: • Employer Notification Requirements • Employer Shared Responsibility Provisions • Annual Information Reporting to the Internal Revenue Service (IRS) and Employees • Affordable Care Act System (ACAS) and Compliance Reviews

3. Employer Notification Requirements Health Insurance Marketplace Coverage Options and Employee Health Coverage Notice • Provides information about the Health Insurance Marketplace and premium tax credits available to qualified individuals to help pay for their health coverage, for example if they are not offered affordable coverage from their employer, etc. • Identifies employees and dependents eligible for state-sponsored health coverage. • Notice must be issued to all new employees within 14 days of their hire, regardless of their health benefits eligibility. State may be subject to penalties for failure to provide notice timely. • CalHR PML #2013-030

4. EmployerNotification Requirements2 Summary of Benefits and Coverage Notice • Notice provides links and contact information to the health plans available to eligible state employees to assist them in making informed decisions. • Notice must be provided to employees, those newly eligible for health benefits, no later than the first day the employee is eligible to enroll in coverage. • CalHR PML #2014-038

5. Health Benefits Eligibility Employees eligible for state-sponsored health coverage include: • Permanent Full-Time; • Permanent Part-Time, if appointed half-time or more; • Permanent Intermittent, after working >480 hours in a Control Period; • Limited-Term of more than 6 months, Full-Time; and, • Limited-Term of more than 6 months; Part-time, only if appointed to time base of half-time or more. Note: Temporary and Limited-Term Intermittent employees are not eligible, regardless of their hours of work.

6. Health Benefits Eligibility Dependents eligible for state-sponsored health coverage include: • Employee’s spouse or registered domestic partner; • Employee’s children (including adopted, step, or registered domestic partner's children) up to age 26; • Disabled adult children of any age if they were enrolled prior to age 26; and, • Children up to age 26 for whom the employee has assumed a parent-child relationship and is considered the primary care parent.

7. Affordable Care Act Notification Checklist • The Checklist documents the distribution dates of the Health Insurance Marketplace Coverage Options and Health Coverage Notice and Summary of Benefits of Coverage Notice, if applicable. • The state may be subject to penalties for failure to provide these notices timely. • CalHR PML #2014-038

8. Employer Shared Responsibility Provisions • Requires the state to offer “affordable” health coverage that provides “minimum value” to at least 95% of its federally defined full-time employees (those who average 130 or more hours of service per month), and their dependent children. • All state departments and entities are considered one employer for purposes of the Employer Shared Responsibility provisions.

9. “Affordable” and “Minimum Value” Coverage • Affordable Coverage – Employee’s contribution for self-only coverage for the lowest cost plan available to employee, does not exceed 9.69 percent* (in 2017) of the employee’s monthly salary or the employee’s wages as reported on Form W-2, Box 1 for the calendar year, or the annual federal poverty level, divided by twelve for single-member household (for applicable calendar year). • Minimum Value- If the plan covers at least 60% of total allowed costs of benefits provided under the plan. *The affordability threshold is subject to annual inflation.

10. Annual Information Reporting To demonstrate compliance with the Employer Shared Responsibility Provisions, the state must: • Provide an annual statement (Form 1095-C) to its full-time employees, by January 31 (March 2 for 2017), with information about the health coverage offered, if any, the employee and their dependents for each month during the preceding calendar year. • File annual reports with the IRS, by March 31, with information about the health coverage offered, if any, to its full-time employees and their dependents for each month during the preceding calendar year.

11. Where Does the Data for Reporting Come From? The Affordable Care Act System (ACAS) Database • Database developed for departmental HR offices to track the various health benefit status data (e.g., offer of health coverage, accept, or declination) the state is required to report to the IRS and its full-time employees to demonstrate compliance under the ACA. • The ACAS database is the state’s system of record for reporting data to the IRS. • SCO Personnel Letters #14-021, #15-001, and #16-005

12. The Role of HR • Departments are responsible for accurate and timely entry of an employee’s health benefit status information in the ACAS database. • All relative health benefit status data for employees must be entered in the ACAS database in the pay period in which they are effective. • The integrity of the data captured in the ACAS is critical to the state’s ability to demonstrate compliance.

13. Form 1095-C

14. ACAS Health Benefit Status Codes Health Benefits Offered • 1A- Health benefits offered to the employee, the employee's spouse and all eligible dependents. The effective date must reflect the first day of the month following the employee's qualifying appointment. • 1C- COBRA continuation health coverage was offered to an "active" employee (not permanently separated) due to a COBRA qualifying event. The effective date must reflect the first day of the month following the cancellation of employee's health coverage.

15. ACAS Health Benefit Status Codes2 Health Benefits Not Offered • 2A- Health benefits not offered to employee since the employee does not meet the state’s health benefit eligibility criteria. The effective date must reflect the date of the employee's appointment. • 2B- Health benefits not offered to a Permanent Intermittent employee since the employee must first qualify for health benefits during a qualifying Control Period. The effective date must reflect the date of the employee’s appointment or the first date following a control period where they did not meet the hour criteria.

16. ACAS Health Benefit Status Codes3 Health Benefits Not Offered Continued… • 2D- Health benefits not offered to employee because employee is in a waiting period for new hires or newly eligible. The effective date must reflect the date of the employee’s qualifying appointment, or the first date following a control period where they didmeet the criteria.

17. ACAS Health Benefit Status Codes4 Health Benefits Offer Accepted • 3A- Employee accepted the offer of coverage within 60 days of his/her permitting event. The effective date must reflect the first day of the month in which the employee's health coverage was effective. • 3B- Employee accepted the offer of coverage after 60 days of his/her permitting event. (Late enrollment - employee must first serve a 90-day HIPAA waiting period.) The effective date must reflect the first day of the month following the 90-day waiting period, in which the employee's health coverage was effective.

18. ACAS Health Benefit Status Codes Health Benefits Declined • 4A- Employee declined health benefits for self, spouse and/or eligible dependents within 60 days of his/her permitting event. The effective date must reflect the same date as the effective date of the employee's 1A status code. • 4B- Employee failed to return his/her health benefit enrollment documents within 60 days of his/her permitting event (an administrative decline is documented). The effective date must reflect the 61st calendar day after the permitting event date.

19. ACAS Health Benefit Status Codes5 Health Benefits Cancelled • 5A- Health benefits administratively cancelled due to loss of eligibility. • 5B- Health benefits voluntarily cancelled by the employee. • 5C- Health benefits temporarily suspended because the employee is temporarily separated or placed on unpaid status. • 5D- Health benefits cancelled due to permanent separation, disability retirement, or lay-off. The effective date for all cancellation codes must reflect the last day of the month in which the employee's health coverage was effective.

20. ACAS Home Page

21. Exercise 1 New Permanent Full-Time employee appointed 2/15/2015 Returns paperwork to enroll in health benefits immediately

22. Exercise 1-New Permanent Full-Time Employee Appointed 2/15/2015,Returns Paperwork to Enroll in Health Benefits Immediately IMPORTANT: Be sure to key in a Health Coverage Notice Date with an effective date within 14-days of the employee’s hire date and a 2D code (employee is newly eligible for health benefits), effective the date of the employee’s hire date.

23. Exercise 1 (continued) -New Permanent Full-Time Employee Appointed 2/15/2015,Returns Paperwork to Enroll in Health Benefits Immediately

24. IRS Form 1095-C Reporting Line 14 • 1E- Minimum essential coverage providing minimum value was offered to employee, their spouse, and dependent children. • 1H- No offer of coverage (employee was not offered state-sponsored health coverage). Line 15 • Dollar amount reflects the employee’s share of the lowest cost monthly premium for self-only coverage offered by the state (health premium minus the employee’s respective health contribution for self-only coverage).

25. IRS Form 1095-C Reporting Codes Line 16 • 2A- Employee was not employed on any day of the calendar month. • 2B- Employee was not a full-time employee and not enrolled in state-sponsored health coverage during the month. • 2C-Employee was enrolled in state-sponsored health coverage during the month. • 2D- Employee was in a “Limited Non-Assessment Period” for the month. • 2F-2H- Employee was offered health coverage that met the law’s affordability standards.

26. 1095-C Tie-in1

27. Exercise 2 New Permanent Full-Time employee appointed 2/15/2015 Declines health benefits within 60 days, and enrolls in Cash Option.

28. Exercise 2-New Permanent Full-Time Employee Appointed 2/15/2015, Declines Health Benefits within 60 Days, and Enrolls in Cash Option 02/15/2015 03/01/2015 03/01/2015 02/15/2015

29. 1095-C Tie-in

30. Exercise 3 New Permanent Intermittent Employee (Appointed 12/31/2014) worked 900 hours during January 2015 to June 2015 control period AND enrolls in health coverage immediately upon becoming eligible.

31. Exercise 3 – New Permanent Intermittent Employee (Appointed 12/31/2014) Worked 900 Hours During January 2015 to June 2015 Control Period AND Enrolls In Health Coverage Immediately Upon Becoming Eligible ACTIVE

32. 1095-C Tie-in 2

33. Exercise 4 The same Permanent Intermittent Employee did not work enough hours during the subsequent control period of July 2015 to December 2015 ANDloses eligibility for health coverage to continue.

34. Exercise 4 – Same Permanent Intermittent Employee Did Not Work Enough Hours during Subsequent Control Period of July 2015 to December 2015 AND Loses Eligibility for Health Coverage To Continue ACTIVE 2016 02/01/2016 ACA 1C 04/04/2016 SCO ADMIN SEE PIMS 01/31/2016 ACA 5A 04/04/2016 SCO ADMIN SEE PIMS 01/01/2016 ACA 2B 04/04/2016 SCO ADMIN SEE PIMS 2015 08/01/2015 ACA 3A 04/04/2016 SCO ADMIN SEE PIMS 08/01/2015 ACA 1A 04/04/2016 SCO ADMIN SEE PIMS 07/01/2015 ACA 2D 04/04/2016 SCO ADMIN SEE PIMS 2014 12/31/2014 ACA 2B 04/04/2016 INITIAL LOAD SEE PIMS Note: The same Permanent Intermittent Employee loses his/her health benefit eligibility during the period of February 2016 to July 2016 because he/she did not work enough hours during the July 2015 to December 2015 Control Period. Department should key a 5A (Health Benefits Administratively Cancelled), with a January 31, 2016, effective date (the last day of the month that the employee’s health coverage was effective), a 2B(Health Benefits Not Offered to PI) with a January 1, 2016, effective date as the employee is no longer eligible for state-sponsored health coverage, AND a 1C (COBRA coverage was offered) with a February 1, 2016, effective date.

35. Exercise 5 Permanent Full-Time Employee cancels his/her health coverage effective 12/31/2015, and enrolls in Cash Option during Open Enrollment.

36. Exercise 5 – Permanent Full-Time Employee Cancels his/her Health Coverage Effective 12/31/2015, and Enrolls in Cash Option During Open Enrollment 01/01/2015 • Employee has been enrolled in health benefits since 2/1/2015, and elects to cancel his/her coverage effective 12/31/2015. Department should key in the following ACAS status codes: • 5B status code, Employee Voluntarily Cancels his/her Health Benefits, effective 12/31/2015; • 1A status code, Employee Was Offered Health Benefits, effective 1/1/2016; and • 4A status code, Employee Declines Health Benefits, effective 1/1/2016

37. 1095-C Tie-in3

38. Exercise 6 Permanent Full-Time Employee cancels his/her enrollment in Cash Option effective 12/31/2015, and enrolls in in health coverage during Open Enrollment.

39. Exercise 6 – Permanent Full-Time Employee cancels his/her enrollment in Cash Option effective 12/31/2015, and enrolls in health coverage during Open Enrollment • Employee was enrolled in the Cash Option program and elects to enroll in health coverage during Open Enrollment. Department should key in the following ACAS status code, assuming the employee already had a 1A (offer of health coverage) and 4A (declined health coverage) status code keyed in ACAS: • 3A status code, Employee Accepts the Offer of Health Coverage, effective 1/1/16

40. Exercise 7 New Retired Annuitant was appointed on 10/1/2015, and is not eligible for health benefits.

41. Exercise 7 – New Retired Annuitant was appointed on 10/1/2015, and is not eligible for health benefits.

42. Training • Departmental HR staff that have update or inquiry access to the ACAS are required to complete the two ACA training modules on CalHR’s website prior to obtaining access. • ACA Overview Video • ACA Database Training Module (Keying ACAS Transactions) • Departments are required to maintain a list of HR staff that have completed ACA training for audit by CalHR and the SCO. • CalHR PML #2014-038 and SCO Personnel Letter #14-021

43. Additional ACA-Related Resources Available to Departmental HR Staff: CalHR • ACA Tool Kit • ACAS Emulator -Sample Scenarios for ACAS Emulator • ACAS Database – Employee Benefit Transaction Worksheet • Annual Health Care Coverage Statements – Glossary of Commonly Used Terms and Frequently Asked Questions SCO • ACAS User Guide • Scenario Based Job Aid

44. ACA Compliance Review Monthly Departmental Compliance Review • The State Controller’s Office (SCO) has created several ACAS Exception Reports that departments can use to proactively monitor their ACA compliance. • ACAS Exception Reports are available via the SCO’s Personnel/Payroll Services Division’s ViewDirect database and are updated monthly. • Departments are expected to review their ACAS Exception Reports and take action to correct all errors identified within 30 days of receipt of the reports. • SCO Personnel Letters #15-009 and #15-013 and CalHR PML #2015-013

45. ACA Compliance Review1 CalHR Quarterly ACA Compliance Review CalHR is responsible for providing oversight of departmental ACA compliance efforts to ensure accurate and timely entry of health benefit status information on employees in the ACAS. • CalHR will notice departments with transaction errors in the ACAS database that are over 90 days old, via the Quarterly ACA Compliance Review Notification document. • Departments are to correct outstanding transaction errors within 30 days of receipt of notification from CalHR, and certify corrections were made, utilizing the form provided. • CalHR PML #2015-013

46. ACA Compliance Review2 Self-Monitoring • The departmental monthly ACAS Exception Reports capture most, but not all, errors and discrepancies in the ACAS database. • Departments are encouraged to utilize existing reports available on MIRS (Management Information Retrieval System) to compare an employee’s employment history data with ACAS data. (e.g. Permanent Intermittents who work 480 hours or more in a control period) • Be proactive! Don’t wait for monthly/quarterly reports to drive the work.

47. ACA-Related Penalties Employer Shared Responsibility Provisions Failure to demonstrate compliance could result in significant penalties to the state if at least one full-time employee receives a premium tax credit for purchasing individual coverage through Covered CA. • Penalty A─$2,260 annual penalty (in 2017) for each full-time employee if the state fails to offer health coverage to at least 95 percent of its full-time employees. • Penalty B─ Even if the state offers health coverage to at least 95 percent of its full-time employees, a $3,390 penalty (in 2017) may apply if the health coverage was “unaffordable” or failed to provide “minimum value.” *These Penalties are indexed annually for inflation.

48. ACA-Related Penalties2 Information Reporting • Penalties up to $520 for incorrect reporting: • Failure to file a correct information return with the IRS is $260. • Failure to furnish a correct employee statement (1095-C) is $260.

49. Other Information • Employer Notification Program • Detailed Safe Harbor Reports • HBD-12 and HBD-12A

50. Contacts CalHR ACA.Policy@calhr.ca.gov Elaine Smith (916) 445-9801 Elaine.Smith@calhr.ca.gov Scott Morrison (916) 322-3657 Scott.Morrison@calhr.ca.gov SCO ACASupport@sco.ca.gov (916) 322-3770