1. Presenter: Dave Morgan, ChHC™, RHU ®, GBDS Senior Employee Benefits Advisor F OR T HE H UMAN R ESOURCES A SSOCIATION OF THE C ENTRAL C OAST B ACK PPACA ING E XPEDITION : A H EALTHCARE R EFORM H IKING G UIDE *This presentation is for informational purposes only and is not intended to be used for legal or tax advice. April 9, 2013 1

2.  Who am I?  Where am I going?  When do I leave?  What should I be packing?  How do I communicate the route?  Where does it lead? 2

3.  Small Groups ◦ Credit-eligible (<25 Full-time equivalents (FTE’s) & other requirements) ◦ All others  Over 50 FTE’s and/or part of ERISA controlled group may be large group for elements of ACA  Large Groups ◦ 50+ FTE’s vs. 50+ FT, 100+ FT, 200+ FT ◦ Check formula, including seasonal component, for calculating FTE’s 3

4.  Depends on who you were, are, and will be  Several paths for groups of all sizes  Though direction may not be permanent, should be chosen with consideration of the next several years 4

5.  Cancel Coverage ◦ Key: employees’ income (subsidy-eligible to 400% of federal poverty level), taxes, recruitment/retention, networks  Sponsor plan through SHOP exchange ◦ Key: credit-eligibility, employee experience, choice, taxes, compliance, community rating  Sponsor plan outside exchange ◦ Key: all of the above except credit-eligibility 5

6.  Cancel Coverage ◦ Employer Shared Responsibility, aka “Pay” option  Non-tax deductible $2,000 per FT less first 30  Nuances for ERISA controlled groups  Subsidies strong yet early mandate is weak Workers’ Compensation Recruitment/Retention, esp. if high salaries Longer term: hard to re-group, $2,000 not permanent 6

7.  Sponsor Plan o Offer ‘affordable” “minimum value” plan to “essentially all” full-time employees “affordable” = least expensive qualified plan’s required contribution for employee only coverage is less than 9.5% of household income Employee's W-2 income one of several 2014 safe harbors instead of household “minimum value” = 60% actuarial value; calculator available, yet more details to come “essentially all” = 95% of full-time employees (common law standard) 7

8.  Sponsor Plan (cont’d) o Hazards include but are not limited to the following: Employer Shared Responsibility “Play” penalty Non-tax deductible $3,000 per employee for whom your coverage was judged unaffordable and/or inadequate for exchange- 4980H(b) penalty Failure of “essentially all” measurement Watch for employee (re)classification and waiting period details 4980H(a) penalty of $2,000 per FT less 30 8

9.  Sponsor Plan (cont’d) o Nuances Subsidy disqualification disgruntlement Controlled groups and Employer Shared Responsibility When they bind and when they separate with an eye to potential changeability and liability Compliance commitment Leave the spouse behind? 9

10.  January 1 st, 2014 or other 2014 plan anniversary month if eligible for transition relief ◦ Eligibility: must have covered at least ¼ of employees on 12/27/12 or offered coverage to at least 1/3 during 2012 open enrollment ◦ Defaults to 2012 anniversary month 10

11.  Ongoing 2013 compliance ◦ Summaries of Benefits & Coverage (SBC’s) ◦ W-2 reporting of health plan(s) value for groups that issue more than 250 W-2’s ◦ Handling of Maximum Loss Ration (MLR) rebates 11

12.  New 2013 Compliance ◦ Medicare tax increase (.9%) for earnings over $200K individual/$250K joint filers ◦ Medical FSA payroll deductions limited to $2,500 ◦ New fees/taxes  For fully insured plans, backed into premiums; for self insured, specific work to be done 12

13.  Preparation for 2014 ◦ Notice of the Exchange  Postponed until late summer or early fall  Communication opportunity ◦ 90 day (not 3 months) maximum waiting period  Counted from first day of work unless specific requirements are met 13

14.  Preparation for 2014 ◦ Workforce analysis:  Full-time: 30 “hours of service” per week or 130 per month  29ers & productivity  Seasonal: no final definition, area of caution  Outliers: 1099, leased  Variable hour 14

15.  Preparation for 2014 ◦ Variable hour employee tracking  “look-back” measurement period  2013 vs. 2014  3-12 months  Administration period: up to 90 days  Stability period: at least six months but no shorter than measurement period 15

16.  Preparation for 2014 ◦ Variable hour employee tracking  New vs. ongoing employees with intersecting measurement  Work with broker to customize for business's needs and administrative simplicity 16

17.  Key to retention and recruitment value of program  Context of new competition ◦ Perceived opportunities in exchange ◦ Coverage California’s $250 million marketing budget  Transparency: your chosen path, rationale, decision process, costs  Tone: preserves morale in time of change; eases future change of path, if necessary 17

18.  Practical opportunities: ◦ Present benefits, e.g. preventive, positive but not “free” ◦ Notice of Exchange  Expand opportunity; be reasonable 18

19.  Subject to change in substance and timing ◦ Vulnerable to politics, State and Federal ◦ Sensitive to employer and employee response  Things to watch: non-discrimination rules, state based limits on self-funding, affordability “glitch”, Cadillac Tax  Uncharted Territory, so share the journey 19

20. @CAHealthReport / centerforhealthreporting.org @healthreformGPS / healthreformgps.org @PaulHouchens / @millimanhealth / healthcaretownhall.com @commonwealthfnd / commonwealthfund.org @sarahkliff / washingtonpost.com/wonkblog @KaiserFamFound / @KHNews / kff.org @CalHealthline / californiahealthline.org For any further information: Dave Morgan www.morrisgarritano.com 805-543-6887 x343 dmorgan@morrisgarritano.com Twitter: @GroupBenefitsMG 20