Health Care Reform Update

1. Health Care Reform Update

2. The PPACA Timeline • Individual mandate • Employer mandate – Note: penalties have been delayed • Public exchanges • Premium and cost-sharing subsidies • Medicaid eligibility expanded in participating states • Additional market reforms/group health plan mandates • Transitional Reinsurance Fee Assessment 2014-2016 (2014=$63) • PPACA enacted • Summary of Benefits and Coverage (SBC) and uniform glossary • Supreme Court ruling • PCORI Fee per person 2012-2018 (2013=$1) • Sale of health insurance across state borders permitted • W-2 issued (using 2012 information) • Additional Medicare tax and unearned income contribution • $2,500 cap on employee pretax contributions to health FSAs • Notice to employees of exchanged-based coverage options • Exchange development and certification • Initial open enrollment in exchanges • States may open exchanges to large employers • Excise tax on high-cost, employer-sponsored health coverage • Auto enrollment possibly? (delayed from 2014) • Additional Reporting Requirements – still undefined • Pay or Play Penalties (delayed from 2014) • Adult child coverage to age 26 • No lifetime dollar limits/restricted annual dollar limits on essential health benefits • No pre-existing condition exclusions for enrollees under 19 • First-dollar preventive care coverage • No rescissions Ongoing regulations, guidance and legislation — evolving interpretations — enforcement

3. Affordable Care Act — The Total Rewards Issue • Affordable Care Act (ACA) is both an organizational issue and a benefits issue; it will ultimately affect : • It’s for Real: • The Supreme Court has upheld the law • HCR requires proactive assessment and planning It’s Immediate: • In early Fall 2013, required employee communications on Exchanges and subsidies, which is likely to include comments on organization’s strategy Every Individual is required to have Minimum Essential Coverage (MEC) beginning January 1, 2014.

4. UM Cost Impact of PPACA 2015 Bottom Line: UM will offer coverage to all employees who average 30 hours or more per week during a 12 month measurement period. Penalty of $39 million if not compliant.

5. Definition of Populations University of Missouri Population Red denotes Variable Hour Employees

6. UM Revised Employment Status definitions • Fully Benefit eligible (all benefits) • Based on primary job AND, • 75% FTE or greater AND, • 9 month appointment • New: Medical benefit eligible (VARIABLE HOUR EMPLOYEES) • All concurrent jobs • 30 hours per week or more • No minimum appointment period, but count average of total hours during measurement period

7. Changes to prepare for Health Care Reform • While employer penalties under PPACA (Health Care Reform) will not be effective until 2015, the measurement period will be October 4, 2013 through October 3, 2014 • Hours worked and recorded during this time will determine whether a Variable Hour Employee will be offered medical coverage • UM will implement revised business processes around the 30 hour rule beginning October 1, 2013

8. Rationale for Changes • By not offering coverage to at least 95% of employees that average 30 hours per week or more, the University could face a penalty of $2,000 per benefit eligible employee • Based on the University’s benefit eligible headcount this penalty may be as much as $39,000,000 • Compliance reportable to the Department of Labor which could lead to additional exposure • Current reporting is inaccurate, creating exposure for the university when standard hours/FTE do not reflect actual time worked • Delay of penalties allows time to implement consistent processes • Improves data quality which reduces risk of penalty • Allows for more accurate assessment of financial impact • Allows offer of medical coverage to those who qualify

9. Decisions Made to Date

10. Recording Time and determining medical eligibility – VARIABLE HOUR EMPLOYEES • Academic Appointments • Teaching: Time worked for teaching employees will be taken from the Standard Hours entered in PeopleSoft HR. The FTE should be calculated using 3 1/3 hours worked per 1 credit hour taught. This applies to classroom teaching, on-line teaching and classes taught by graduate students. • Exempt non-teaching (e.g. Research Asst., Research Scientist): Beginning in October, these individuals must track worked time using a non-pay earn code in Time and Labor. Campus HR can provide training. • Hourly: These employees are already entering their worked time into standard hours/FTE and should continue to do so.

11. Recording Time and determining medical eligibility – VARIABLE HOUR EMPLOYEES • Administrative Service and Support Staff • Exempt variable hour employees: Beginning in October, these individuals must track worked time using a non-pay earn code in standard hours/FTE. Campus HR can provide training. • Hourly: These employees are already entering their worked time into Time and Labor and should continue to do so.

12. Unit Pay – VARIABLE HOUR EMPLOYEES • Whenever possible, fixed pay for a task (unit pay) is being eliminated • UMSL and Missouri S&T do not use unit pay • MU and UMKC are currently working to convert unit pay to appointments in which worked hours can be tracked • If a job is approved for unit pay a methodology must be developed to equate the unit to hours worked (standard hours/FTE). • The same methodology must be used for the same job on all campuses.

13. “Combination” VARIABLE HOUR EMPLOYEES • Some employees may have concurrent jobs that are in two separate tracking categories • A separate job record should be used for an employee that tracks time using different methods • Time should be tracked as described on previous slides • For employees with both teaching and non-teaching concurrent jobs, the information will be combined to determine an overall standard hours/FTE (or hours worked) for the purpose of determining medical eligibility

14. Work Breaks • General Rule: Employees who are placed on leave (i.e. short work break) should be terminated after 26 weeks without pay (military leave or FMLA time excluded) • This is needed to identify whether employees return to a current measurement/coverage period or begin a new measurement period • Further analysis is being done to identify how many employees exceed a 26 week break and return to work within the following 12 months • Summer break – Academic Institutions • Any one summer month (June, July or August) with zero hours worked, will be excluded from the calculation of average hours worked • This only applies to summer months and does not apply to holiday breaks (i.e. December holiday break) even if it is more than 4 weeks

15. Graduate Students • While many students and faculty view the entire research assistantship as part of the student educational experience, the IRS and as a result the University of Missouri, now must consider the portion of the assistantship for which the student is paid, as employment. • Students assist in and contribute to faculty “work”, and thus university “work” in many uncountable ways over the lifetime of their graduate education (publications, grants, and university prestige) • Clearly, components of this "work", such as publications, also are part of the educational experience. • Advisors and students are encouraged to discuss the role of the graduate student in University and faculty contributions.

16. Tracking Hours for Graduate Students: UM Approach • Student workers should always be given a student title (see HR policy 204) • Those in student titles should not average more than 28 worked hours per week over the 12 month measurement period as their primary role is for educational purposes • Employees who average greater than 28 hours per week should be placed in a staff title as their primary role is employment • Graduate student work generally entails an average of 10-20 hours of work per week per semester or academic year • For the 2013 Fall Semester, the FTE listed in the payroll system will be used to identify worked hours for graduate students; no additional tracking is necessary • UM is continuing to analyze the work being done by graduate students and further guidance will be forthcoming

17. Other reminders • All concurrent appointments for Variable Hour Employees will be retroactively tracked and reported. • Working retirees will be limited to less than 0.70 FTE so as not to jeopardize pension payments. • Consideration of a different flat rate for variable hour employees is still under consideration • Employee will be asked to enter a reason code when declining coverage beginning with annual enrollment 2014 (begins with annual enrollment on 10/21/13) • Other coverage • Unaffordable • Religious reasons • Not interested

18. Next Steps • Each department is responsible for accurately tracking the hours worked by Variable Hour Employees and making sure that information recorded in PeopleSoft is accurate • Campus HR representatives have been trained to assist you as needed; UM System will generate reports to assist you • Although benefits are managed as a centralized service, full compliance with PPACA will require significant campus involvement in tracking and monitoring eligibility of part time (variable) employees • Campus departments will manage workforce needs, staffing and tracking of hours worked • UM System will identify eligible employees and offer medical insurance as outlined under PPACA