The Affordable Care Act

1. Overview of the Law and Employer Obligations The Affordable Care Act Julia Martin Brustein & Manasevit, PLLC jmartin@bruman.com

2. Agenda What is the Affordable Care Act? How does the law work? The Employer Mandate Deadlines and Things to Consider

3. What is the Affordable Care Act? • Also known as “ACA” or “Obamacare • Multi-part law designed to expand access to health care coverage and reduce costs through: • New regulations on insurers • New subsidies and “exchanges” • New requirements on coverage for individuals and employers

4. How does the law work?

5. The Problem: Rising Costs • Costs of procedures and care increasing at a higher rate than inflation • Delays in seeking preventive care lead to higher use of more costly emergency medicine

6. The Problem: Rising Costs

7. The Problem: Lack of Access • Lower-income individuals priced out of insurance markets when not provided with employer-subsidized coverage • Preexisting conditions preclude access to insurance, or make insurance prohibitively expensive

8. The Problem: Freeloaders • Hospitals required by law to treat all patients, regardless of ability to pay • Individuals without coverage seek treatment at emergency rooms • Emergency coverage is inherently more costly • When individuals can’t pay, hospitals raise costs to cover losses

9. The Idea: Reduce Costs • Reforms to all insurance plans: • Young individuals up to age 26 can stay on parental plans • Prohibits lifetime caps on coverage • Requires free preventive care visits • Limits increases in premiums based on age, gender, smoking, etc. • Limits denials or price increases based on preexisting conditions

10. The Idea: Increase Access • Uninsured individuals and small businesses can buy coverage through State- or federally-run “marketplaces” or “exchanges” • Low-income individuals may receive federal subsidies for coverage • In order to be sold on exchange, plans must meet requirements set by law and regulation • “minimum essential benefits”

11. The New Problem: Insurer Burden • ACA requires insurance companies to offer new benefits, but limits amount that can be charged for costly new services (e.g. coverage of preexisting conditions)  Increases costs to insurers • How to make sure insurers not unduly burdened? Increase number of low-cost insured in insurance pool

12. “Young Invincibles” • Who are low-cost insured? • Young, healthy individuals, who often forgo coverage because of high cost-benefit ratio • Sometimes referred to as “young invincibles” • How to increase number of low-cost insured?  Require them to buy insurance

13. The Solution: Mandates • Enforced through tax penalties • Individual Mandate • All individuals must purchase coverage • Unless provided coverage by Medicare or Medicaid, or employer • Employer Mandate • All “large” employers must offer coverage to all “full-time” employees

14. The Employer Mandate • Generally • Special Rules for Part-time and Adjunct Employees • Examples of other College Policies

15. Employer Mandate: Generally • Under ACA, “large” employers must offer subsidized coverage to all “full-time” employees • “large” = more than 50 FTE employees • “full-time” = working 30 or more hours per week for 120 days or more per year, based on “actual hours worked”

16. Employer Mandate: Generally • Employers who do not offer affordable coverage – and who have at least one employee who qualifies for a subsidy on the exchange – pay a fine • Known as “play or pay” • Fine is $2,000 for each full time employee • $11,200,000 for TCSG

17. Who Counts as an “Employer” • Internal Revenue Code Sec. 414: "all employees of trade[s] or business[es] …which are under common control" are to be treated as employed by a single employer • For non-profits and governmental entities, ownership = right to control • Can be parent-subsidiary, brother-sister, or “affiliated service group” relationship • Look at other HR procedures, how money comes to colleges, other aspects of management

18. Who Counts as an “Employer” • ACA Presumption in favor of common control – TCSG State Board • Most State community college systems implementing single policy • “anti-abuse” rule – can’t circumvent law • All part time hours worked within TCSG must be combined for purposes of determining healthcare eligibility

19. How to determine if an employee is full time for purposes of ACA? • Salaried, full-time employees: no change • Hourly employees: determine hours worked based on timesheets • Non-salaried, non-hourly, adjunct, or other employees: special rules for determining hours worked

20. Special Rules for Part-time and Adjunct Employees

21. Who is “full time?” • If ≥ 30 hours/week, must offercoverage • Employee full-time status determined by averaging hours over a “look-back” period of no less than three and no more than 12 months • No “zeroing out” hours for “employment break periods” of at least four consecutive weeks

22. How to determine hours worked? • Regulations offer three options: • “Days worked” equivalency • Any work done in a day  credit 8 hours • “Weeks worked” equivalency • Any work done in a week  credit 40 hours • Actual hours worked • This method requires employers to take administrative and prep time into consideration

23. Prep and Administrative Time • Prep and administrative time • Preamble to regulations (Sec. II.B.4) for “Employees compensated on a commission basis, adjunct faculty, transportation employees and analogous employment positions” • Specifically addresses adjunct faculty at college level

24. Prep and Administrative Time • Employers “must use a reasonable method for crediting hours of service that is consistent with the purposes of section 4980H. It would not be reasonable in the case of an adjunct faculty member to take into account only classroom or other instruction time and not other hours that are necessary to perform the employee’s duties, such as class preparation time.”

25. How to Credit Prep/Admin Time? • Options: • Timesheets tracking all hours, including prep and class time • “Percentage” system based on comparing credits taught by adjuncts to credits taught by full-time faculty (over 75% = more than 30 hours/week) • Crediting hours based on ratio of credit hours to actual hours worked (e.g. 1:2 or 1:3) • Most colleges using a form of this system

26. Special Considerations • “Anti-abuse” efforts • Need to be able to show that policy is “reasonable” and goal is not to manipulate hour crediting to escape mandate • Policies cannot violate/supercede pension obligations under ERISA • Collective Bargaining • If employees are subject to collective bargaining contracts, must meet those obligations • Some adjunct faculty have discussed unionizing as a way to push for coverage

27. Special Considerations • Employee & Community Relations - PR • Carefully consider the impact of reducing hours of adjuncts • Potential impact on pay, health insurance status, and morale • May make retention of qualified staff more difficult • News coverage of policies can reflect negatively on institutions if they result in staff losing hours/money • Generally • Federal agencies under this administration will always examine policies with a view toward providing more, not less, insurance coverage • All policies/regulations are still subject to change

28. Deadlines

29. Deadlines • Employer mandate will be enforced beginning January 2015 • Before that date, need: • Measurement period (3-12 months) • Employee hours measured to determine if employer must offer coverage • Administrative period (optional) • Used for administrative tasks like determining who is an eligible full-time employee and providing applicable enrollment materials • May not exceed 90 days or result in any gaps in coverage

30. TCSG Proposed Periods • Initial Look-Back: June 1 – Oct 15, 2014 • Regular Look-Back: Oct 16 – Oct 15 • Administrative: Oct 16 – Dec 31 • Stability: Jan – Dec

31. Summary and Clarifications

32. All Part Time Impacted • Includes coaches, adult ed teachers, continuing ed teachers, lab assistants, tutors, FWS, etc. • All employees who average 30 hours or more during Look-Back Period must be offered healthcare during fall Open Enrollment • If employee declines coverage but experiences a Qualifying Event later, employee can add coverage at that time • Retirees

33. Plan for ACA Policies and Procedures • Approve system-wide method for adjunct hours – Jan PC • Write Policy based on Jan PC – electronic vote in Feb • Present Policy to March SB to lay on table 30 days • Present revised and new Procedures at March PC • Vote on Policy at May SB

34. Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.