1. Healthcare Reform: What Employers Need to Know September 18, 2013
First slide is simply function, name, title
Kara M. Craig, Staff Counsel
Advancing HR Strategies to Build Organizational Success
© 2013 Washington Employers. All rights reserved

2. PPACA: Affordable Care Act (ACA)
The goal of ACA is to improve the quality of healthcare and lower healthcare costs
Biggest regulatory change since the FLSA was passed in 1938
Many requirements become mandatory in 2014
Large Employers have until 2015 to consider “Play or Pay” strategy
The stated goals for the ACA are to improve the quality of healthcare and lower healthcare costs.
It is the biggest regulatory change since the Fair Labor Standards Act was passed in And, although the argument about the law is ongoing, it is the law of the land.
We want to share with you the number of requirements that become effective for your 2014 benefits plan year. One requirement delayed until 2015 is the employer responsibility provision, giving employers an additional year to consider their total rewards strategy and to make the changes each sees is necessary.

3. ACA Timeline March 23, 2010: Signed into law by President Obama
June 28, 2012: Supreme Court ruled it was constitutional
October 1, 2013: Healthcare Exchanges Operational
January 1, 2014: Majority of provisions become effective
January 1, 2015: Employer Mandate effective
January 1, 2018: Beginning of Cadillac tax
Still putting the pieces of a moving target together… implementation of portions of ACA delayed 19 times since 2010 and last minute guidance being issued daily
PPACA = Patient Protection and Affordable Care Act
Goal: Quality Affordable Health Care for All Americans
March 23, 2010: Signed into law by President Obama
June 28, 2012: Supreme Court ruled it was constitutional
January 2014: Majority of provisions become effective
January 2015: Employer Mandate effective
January 2018: Beginning of Cadillac tax

4. What Is The ACA? GOALS: Broaden marketplace
Establish standard health plan
Guarantee coverage
Allow for comparison shopping
Free preventative care
Federal subsidies to low income citizens
The most significant government expansion and regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in The aim is to increase the rate of health insurance coverage for Americans and reducing the overall costs of health care. It provides a number of mechanisms—including mandates, subsidies, and tax credits—to employers and individuals to increase the coverage rate.

5. Key Provisions
Essential Health Benefits: 10 benefits that must be included in every healthcare plan
Minimum Value: Plan must pay at least 60% of costs
Affordable Coverage; no more than 9.5% annual income
Dependents covered to Age 26
No exclusions due to pre-existing conditions
Guaranteed Coverage / Renewability
Annual and Lifetime Coverage Caps Eliminated
Essential Health Benefits: 10 benefits that must be included
Minimum Value: Plan must pay at least 60% of costs
Affordable Coverage
Dependents Covered to Age 26
Guaranteed Issue: No exclusions due to pre-existing conditions
Guaranteed Coverage / Renewability

6. Key Provisions Maximum 90-Day Waiting Period
Health Insurance Exchanges Established
Play or Pay: Large employers (more than 50 employees) must offer healthcare benefits to full-time employees
Individual Mandate: Everyone must have health insurance
Small Business Tax Credit
Shared Responsibility
Wellness Incentives
Annual and Lifetime Coverage Caps Eliminated
Maximum 90 Day Waiting Period
Health Insurance Exchanges Established
Play or Pay: Large employers (more than 50 employees) must offer healthcare benefits to full-time employees
Individual Mandate: Everyone must have health insurance
Shared Responsibility
Wellness Incentives

7. Program Overview How the ACA’s Goals are Accomplished:
Reform insurance markets
Establish new state-based exchanges
Impose Individual and Employer Mandates
Impose new taxes/“shared responsibility”
Reporting and disclosure requirements

8. Reform Insurance Market
Subtitle Sample
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© 2013, Washington Employers. All rights reserved

9. Reform Insurance Market Already Implemented
Dependents can stay on parent’s coverage to age 26
Lifetime maximums eliminated for “essential health” benefits
Premiums cannot be raised due to health condition change
Children under age 19 cannot be denied coverage for pre-existing conditions

10. Reform Insurance Market What is coming?
Qualified Health Plan – “QHP”
10 Essential Benefits
Ambulatory patient services
Emergency Services
Hospitalization
Maternity and newborn care
Mental health and substance abuse disorders
Prescription drugs
Rehabilitative services and devices
Laboratory Services
Preventive, wellness and chronic disease management services
Pediatric services, including oral and vision care

11. Reform Insurance Market What is coming
Health Savings Account (HSA) and Flexible Spending Account (FSA) limits
High deductible limits on small employers (less than 50 FTEs)
$2,000 (individual)
$4,000 (family)
Elimination of annual limits on Essential Benefits
Elimination of 90+ day enrollment waiting periods
Full time defined as 30 or more hours per week (130 hrs/mo.) for ACA calculations
Clear and understandable Summary of Benefit Coverage “SBC”

12. Establish New State-based Health Exchanges
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© 2013, Washington Employers. All rights reserved

13. Health Exchange What is it?
ONLINE one-stop marketplace to comparison shop and buy healthcare coverage
Objective: Drive lower prices
Each state will have one
Operational by October 1, 2013
Self-sustaining by 2015 through individual assessments or user fees

14. Health Exchange Who can use the Exchange?
2014 – individuals and small employers (< 50 FTEs)
2016 – employers (less than 100 FTEs)
2017 – all employers

15. Health Exchange What is provided?
Plans with at least 60% minimum actuarial value (plan’s share of total allowed costs of benefits provided under the plan must be at least 60 percent of such costs)
4 health plan levels in metal rankings:
Bronze = 60% coverage of total allowed plan costs
Silver = 70% coverage of total allowed plan costs
Gold = 80% coverage of total allowed plan costs
Platinum = 90% coverage of total allowed plan costs

16. Health Exchange Adequate and Affordable
Those employed with “60%” health plan and “affordable” premium typically would not go to exchange
Affordable – costs no more than 9.5% of household income
Example: Single minimum wage earner makes $9.19 per hour. $9.19 x 130 hours (FT) = $1, per month. $1, x .095 = $
“Affordable” if employee’s premium costs less than $ per month.
But see W-2

17. Health Exchange Washington State
WA State: Washington Healthplanfinder
Currently 7 insurers approved, offering 35 plans; awaiting federal certification of 8 additional plans
Two sides to exchange: Individual and Employer (SHOP – Small Business Health Options Program)
Open enrollment is 10/1/13 for 1/1/14 coverage

18. Health Exchange Individual Side
Individual Subsidies available to low income (between 133% and 400%) of federal poverty level
Must purchase coverage through exchange to receive
2013 Federal Poverty Level

19. Health Exchange Small Employer Side
Small Business Health Options Program (SHOP) - one plan available at this time
Kaiser Family Health Plan of NW
Online assistance, call center, office of navigator or broker
Can only buy for full-time employees, not part-time
Small Business Tax Credit in 2014
Small Employer = Less than 25 FTEs
Pay average wages less than $50,000
Pay at least 50% of premium
Maximum 50% credit; 35% for tax-exempt small employers

20. Health Exchange Small Employer Side
Full 50% credit given to employers with less than 11 FTEs and pays average wages less than $25,000 (excludes owner)
Must enroll in exchange to qualify for tax credit
Only available 2014 and 2015
Can carry the credit back or forward to other tax years
Can claim a business expense deduction for the premiums in excess of the credit

21. Health Exchange Notices
ACA states that all employers SHALL provide all their employees by Oct. 1 of each year, and all new employees at the time of hire, a written notice informing them of the following:
Information about government-run health care exchanges, including services provided and how employees may contact an exchange to request assistance.
If employer does not offer a “60%” plan, workers may be eligible for a premium tax credit if they purchase a qualified health plan through an exchange.
Employees who purchase a plan through an exchange may lose their employer’s contribution. All or a portion of this contribution may be excluded from income for federal income tax purposes.
The PPACA has a $100-a-day penalty for noncompliance; BUT, as of September 13, 2013 the DOL has said, “there is no fine or penalty under the law for failing to provide the notice.”

22. Mandates Subtitle Sample
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© 2013, Washington Employers. All rights reserved

23. Mandates Individual
Must buy at least “60%” minimum value coverage in or out of the exchange or pay penalty
Exemptions:
Religious grounds
Native Americans
Incarcerated
Undocumented immigrants
Gap in coverage for less than 3 months in a year
Coverage costs more than 8% of income or below FPL

24. Mandates Employer Small Employer – NO MANDATE
Large Employer must offer to 95% of its full-time employees (and their dependents) at least “60%” coverage AND it must be “affordable;” otherwise pay penalty.
Large Employer = 50 or more Full-Time-Equivalents (FTEs)
Full-time Employee = 30 hours or more per week
Monthly Full-time Equivalent = 130 hours
Part-time employees counted in fractional units to determine if large employer. Total hours worked divided by 120 hours.

25. Mandates Employer
Seasonal (non-leased) employees counted if they work more than 120 days in calendar year; 6 month look-back.
Headcount excludes:
Leased (temp) employees
Sole proprietor
Independent contractors
Partners in partnership
2% “S” Corporation shareholders
Employees working outside the U.S.

26. Mandates Employer Measurement Periods
Standard Measurement Period – to determine who is a full-time employee; up to 12 months; use for ongoing
Initial Measurement Period: between 3–12 months; use for variable and seasonal employees
Stability Period: at least 6 consecutive calendar months, same length as Standard Measurement Period
Administrative Period: up to 90 days between measurement and stability period; use for eligibility determination, employee notification and enrollment
Here are the definitions of each type of measurement period:
Standard Measurement Period: up to 12 months; use for ongoing employees
Initial Measurement Period: between 3 – 12 months; use for variable and seasonal employees
Stability Period: at least six consecutive calendar months, same length as Standard Measurement Period
Administrative Period: up to 90 days between measurement and stability period; use for eligibility determination, employee notification and enrollment
Still with me? Let’s do a calculation next….

27. Mandates Employer Grandfathered Plans:
Plan must have been in existence in 2010
Part of collective bargaining agreement
Still required to make additional changes for 2014:
Offer dependent coverage through age 26
Eliminate annual aggregate benefit limits
Eliminate pre-existing condition limitations
Waiting period no greater than 90 days
May elect to comply with all ACA requirements
Can lose grandfathered status
Only about 10% of all healthcare plans in existence in 2010 are still grandfathered.
How many in this room? How many don’t know?
Next: The changes that would cause you to lose grandfathered status

28. Mandates Employer A Word about COBRA…
All COBRA provisions (including notifications) remain intact
Don’t assume COBRA will go away
COBRA coverage may cost less than plans in the Exchange
COBRA useful if more than 3 month gap that would incur an individual penalty
COBRA is better option if annual deductible already met
Dependent COBRA coverage up to 36 months, or age 29 after losing dependent eligibility at age 26
And just a few words about how this all affects COBRA:
All provisions (including notifications) remain intact
Don’t assume COBRA will go away
COBRA coverage may cost less than in the Exchange
COBRA useful if more than 3 month gap that would incur an individual penalty
COBRA is better option if already met annual deductible – example: if employee is laid off in September
Dependent COBRA coverage up to 36 months, or age 29 after losing dependent eligibility at age 26

29. New Taxes or “Shared Responsibility”
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30. New Taxes – Shared Responsibility Individual
Individual Penalty per year, whichever is greater:
$95 per person or 1% of household income
$325 per person or 2% of household income
2016 & beyond - $695 per person or 2.5% of household income
For each dependent under 18 penalty is half
Paid as a federal tax liability on income tax return
Individuals who fail to pay not subject to criminal penalties or prosecution, property liens or levies

31. New Taxes – Shared Responsibility Family
Family Penalty per year, whichever is greater:
$285 per family or 1% of household income
$975 per family or 2% of household income
2016 & beyond - $2,085 per family or 2.5% of household income
Family Penalty capped at 3 times Individual Penalty.
Example: Married couple with 2 children under 18, a single parent with 4 children under 18 and larger families all subject to same flat dollar maximum amount
The distinction is higher incomes pay higher penalties

32. New Taxes – Shared Responsibility Large Employer
Large employer shared responsibility penalties and reporting requirements delayed until 2015
Must still comply with all other 2014 ACA provisions
Large Employer Penalties if employer-offered coverage:
Is not affordable;
Is not offered to 95% or more of eligible employees; or
Does not meet minimum value (at least 60% of healthcare costs covered or “bronze” plan)
Delay for large employer shared responsibility penalties until 2015
Reporting requirement for whether healthcare coverage was offered also delayed until 2015
Per the IRS: Voluntary reporting in 2014 is encouraged
Must still comply with all other 2014 ACA provisions: ideal for taking a strategic look at all your benefits

33. New Taxes – Shared Responsibility Large Employer
Two Levels of “Play or Pay”
Do Not Play at All
Offer no health coverage
Penalty Calculation: Number of FTEs – first 30 x $2,000
Example: Company has 70 employees and decides not to offer coverage.
(70 – 30 = 40) 40 x $2,000 = $80,000 per year

34. New Taxes – Shared Responsibility Large Employer
Second Level of “Play or Pay”
Do Not Play by the Rules
Offer less than “60%” coverage AND an employee goes to Exchange and receives subsidy
Offer “60%” coverage, but plan is not “affordable” AND an employee goes to Exchange and receives subsidy
Penalty Calculation:
Number of FTEs receiving subsidy times $3,000

35. New Taxes – Shared Responsibility Large Employer
“Adequate” AND “Affordable” Example:
Company has 70 employees. It offers 60% minimum value coverage, but the employee-only premium cost is greater than 9.5% of W-2 income for 10 employees and all seek coverage through the exchange and receive a subsidy.
10 x $3,000 = $30,000 per year

36. New Taxes Insurers
Cadillac Tax coming in 2018 – tax on rich benefit plans
PCORI Fee (Patient-Centered Outcomes Research Institute) to fund research on improving health care delivery
Reinsurance Program Fee to help stabilize individual market premiums (offset risk of high cost enrollees)

37. Reporting and Disclosure
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38. Reporting and Disclosure Employers
So far….
Effective 2015 Tax Year
Report cost of coverage under an employer-sponsored group health plan on an employee’s W-2 in Box 12.
Amount is not taxed; reporting is for informational purposes only, to show employees the value of their health care benefits.
Large Employers must identify FTEs covered and report cost of benefits on Section 6056 Form – guidance to be issued.

39. Summary of 2014 Key Provisions
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40. 2014 Provisions Summary
Essential Health Benefits: 10 benefits that must be included with no annual limits (still may have visit limits)
Minimum Value: Plan must pay at least 60% of costs
Affordable Coverage (no more than 9.5% of income)
Dependents covered to age 26
Guaranteed issue, coverage and renewability: No exclusions due to pre-existing conditions
High deductible plans for small employers cannot exceed $2,000/$4,000

41. 2014 Provisions Summary Annual and Lifetime Coverage Caps Eliminated
Maximum 90-Day Waiting Period
Play or Pay: Large employers (more than 50 employees) must offer healthcare benefits to full-time employees
Shared Responsibility
Increase in small business tax credits (SHOP)
Individual Mandate: Everyone must have health insurance
Wellness Incentives

42. Employers: What To Do Now
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© 2013, Washington Employers. All rights reserved

43. What To Do Now Employers
Calculate FTEs for 2013
For under 50 FTEs – check out the exchange or continue as usual
For under 25 FTEs – look into tax credit for if using exchange
For 50 FTEs and over
If provide affordable health care, continue as usual. Adjust full-time definition and waiting periods by end of 2014

44. What To Do Now Employers
If new rules result in cost increases for over 50 employers:
Ask for “Play or Pay” analysis from broker
Consider cost stabilization measures:
Restrict part-timers to 29 hours per week or move part-timers (eg. 30 to 34 hours) to represent 5% of workforce. (Use safe harbor rule).
Offer coverage only to “hard to replace” workforce. Remaining use exchange and you pay penalty.
Offer more than one level of coverage, based on job categories. Example: 60% for part-time and variable workforce and 80% for full-time.

45. What To Do Now Employers
Vary employer contribution levels by income level to avoid “unaffordable” penalty.
Allow lower-income employees to receive subsidies from the exchange and pay penalty.
Increase deductibles, modify plan reimbursement levels or increase employee contributions.
Cut work hours below 30? Be aware ERISA (Sec. 510) makes it unlawful to interfere with employee entitlements under employee benefit plan.

46. What To Do Now Employers
Stop providing health coverage and gross up salaries and pay penalty.
Caution: Employer and employee will no longer receive tax exemption on benefit costs.
Stop health coverage and pay penalties.
Only 6% of employers surveyed in 2012 planned to drop coverage; 9% in retail/hospitality industry. (Mercer Survey of 1,203 employers)
Caution: Employer and employee no longer will receive tax benefits.
Fallout: Can you still compete in the labor market?

47. What To Expect Employees
A more expensive price tag 
More options for coverage 
Consumer-driven health plans vs. HMOs
Programs that promote health awareness and education 
More incentive opportunities for exhibiting healthy behaviors 
New eligibility rules 
Personal responsibility!

48. What To Do Now Communication
Once you make your decisions related to ACA compliance and healthcare, communicate with your employees:
Model Exchange Notice
Mandated Plan Documents
Current Benefits Offerings
2014 Changes to Benefits Offerings
Possible 2015 Changes (if known)
WHY Changes Are Being Made
Model Exchange Notice: Must distribute by October 1, 2013 (just over six weeks from now!) Model employee notice handout in your packet.
Must issue to all employees
Must issue to new hires within 14 days of hire
Notice explains:
- Existence of exchange (WA Healthplanfinder)
- Description of services
- Manner in which employee makes contact for help
Clear and understandable Summary of Benefit Coverage “SBC”
- Only 4 double sided pages, 12 point font or larger
- Goal is to provide side by side comparison
- Provided by insurance companies

49. Resources For More Information:
Washington Healthplanfinder: wahbexchange.org
Kaiser Family Foundation: kff.org
U.S. Department of Health & Human Services: healthcare.gov
For More Information:

50. Questions? How to Reach Me: Kara M. Craig Staff Counsel
Washington Employers
Direct Line: (206)
Here is my contact information if you want to reach me with questions, etc. I am very active on LinkedIn, so please feel free to connect with me! And I will be here after we are finished if you have a question.

51. Washington Employers Overview of Services