1. State and HE Agency Benefit Coordinators
Affordable Care Act
Issues and Impact
Presentation to the
State and HE Agency Benefit Coordinators
August 15, 2014
Patrice Steinhart & Melissa Wiseman
Benefits Administration, State of Tennessee

2. Presentation Outline Affordable Care Act (ACA) – broad strokes
Practical issues facing employers and health plan administrators
ACA Impact
TN Hours for Benefits

3. Stated Intent of the ACA
To establish a mechanism to provide for health care coverage to uninsured individuals and families at affordable rates
To provide that coverage through employer-sponsored plans or through competitive marketplaces
To help ensure that pre-existing conditions would not be a barrier to health care
To help ensure that the insurance coverage offered meets established standards

4. Affordable Care Act — Compliance Timeline
2011 Plan Year
2011
2012
2013
2014
2018
Lifetime dollar limits on Essential Health Benefits (EHB) prohibited
Preexisting Condition Exclusions Prohibited for Children under 19
Overly restrictive annual dollar limits on EHB prohibited
Extension of Adult Child Coverage to Age 26
Prohibition on Rescissions
No Cost Sharing and Coverage for Certain In-Network Preventive Health Services
Effective Appeals Process
Consumer/patient protections
Nondiscrimination requirements on fully insured plans (DELAYED)
Certain Retiree Medical Claims Reimbursable (ERRP)
Retiree Drug Plan FAS Liability Recognition
Over-the-Counter Medicines Not Reimbursable Under Health FSA, HRAs, or from HSAs Without a Prescription, Except Insulin
HSA Excise Tax Increase
Public Long-Term Care Option (CLASS Act) –No Longer Supported by HHS
Medicare Part D Discounts for Certain Drugs in “Donut Hole”
Distribution of Summary of Benefits and Coverage to Participants (Ongoing)
PCORI (Comparative Effectiveness) Fee
Quality of Care Report (delayed)
Medical Loss Ratio rebates (insured plans only)
Employer Reporting of Health Coverage on Form W-2 (due January 31, 2013)
Notice to Inform Employees of Coverage Options in Exchange
Limit of Health Care FSA Contributions to $2,500 (Indexed)
Addition of women’s preventive health requirements to No Cost Sharing and Coverage for Certain In-Network Preventive Health Services
Elimination of Deduction for Expenses Allocable to Retiree Drug Subsidy (RDS)
Individual Mandate to Purchase Insurance or Pay Penalty
State Insurance Exchanges
Employer Responsibility to Provide Affordable Minimum Essential Health Coverage***
Preexisting Conditions Exclusions Prohibited
Annual Dollar Limits on EHB Prohibited
Automatic Enrollment (DELAYED)
Limit of 90-Day Waiting Period for Coverage
Employer Reporting of Health Insurance Information to Government and Participants
Increased Cap on Rewards for Participation in Wellness Program
Cost-sharing limits for all group health plans, not just HDHPs/HSA (deductibles and OOP maximum)
Coverage of routine patient costs for participants in approved clinical trials
Transitional reinsurance contributions
Excise Tax on High-Cost Coverage
*** Applies to full time employees (e.g., 30 hours per week) and will require coverage that is affordable and satisfies a certain actuarial value to avoid the penalty.
Employer Responsibility noted in RED above

5. Plan Compliance Requirements
Extension of adult child coverage to age 26
Summary of Benefits & Coverage communication
100% coverage for preventive services
W2 reporting of the value of coverage
Elimination of pre-ex for children
Final appeals moved to Independent Review Organization
Marketplace notification
Women’s preventive services

6. Plan Compliance Requirements
Employer mandate to provide affordable minimum essential health coverage
Preexisting conditions exclusions prohibited
No annual dollar limits on essential health benefits
Limit of 90-day waiting period for coverage
Cost-sharing limits for all group health plans (deductibles and OOP maximum)

7. Employer Mandate (a.k.a. Shared Responsibility)
Requires employers with 50 or more “full time employees” to offer “affordable health coverage” that provides a “minimum actuarial value” and “minimum essential coverage” to at least 95%* of their full-time employees and their eligible dependents, or else face a penalty
Who is a “full-time employee”?
What is “affordable coverage?”
What is “minimum actuarial value”?
What is “minimum essential coverage”?
*70% in 2015

8. Health Care Reform Impact – Individual Responsibility
Individuals have a responsibility to maintain minimal essential coverage or pay a penalty that is generally based on taxable income
Payable on tax return for the year in which the penalty was incurred
Individuals on Independent and Service Contracts will evaluate their own employment status to determine if they must maintain coverage

9. Key Questions
How will we handle PT and seasonal employees and those who will not be considered FT under the ACA and who could trigger a penalty?
How will we handle PT employees who work two positions?
Are any of our PT or contractors considered to be common law employees according to IRS guidelines?
What measurement period makes sense for our organization?

10. ESR – Determining covered employees – special considerations
-Seasonal employees expected to work less than 6 months per year – not full time -Volunteers – not full time -Student work-study programs – not full time -Educational employees - not part time simply because school is closed or operating on limited schedule during summers -Adjunct faculty – final regulations allow crediting 2.25 hours of service in addition to each of hour of teaching or classroom time

11. Look-Back Measurement Safe Harbor
DETERMINING FULL-TIME EMPLOYEE STATUS
Time Periods under Proposed IRS Guidelines
Only pay 4980H penalty during stability period if required
Ongoing Employees
Standard Measurement Period 12 months to determine if full time
Admin Period up to 90 days
Stability Period 12 months
Measurement & Stability Periods repeat
New Variable Hour and Seasonal Employees
Initial Measurement Period 12 months to determine if full time
Admin Period 30 days
Stability Period 12 months
Cannot exceed 13 months for new EE
Then use the Measurement Period for Ongoing employees
Source: Congressional Research Services (CRS) based on IRS Notice Determining Full-time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage.

12. Employer Responsibility Flow Chart
Sources: Kaiser Family Foundation, Segal

13. Employer Mandate & Penalties delayed
“No Coverage Penalty” (Code section 4980H(a))
Employer does not offer Minimum Essential Coverage (“MEC”) to all eligible FTEs and eligible dependents and at least one FTE enrolls in Exchange and receives Federal subsidy
Penalty equals $2,000 per year for all FTEs (minus first 30 FTEs), regardless of whether the FTE elected employer-provided health care coverage
Applies if less than 70% of FTEs (and their eligible dependents) are offered coverage in 2015 (95% in future years) OR
“Inadequate Coverage Penalty” (Code section 4980H(b))
Employer offers MEC to FTEs but coverage is either
“Unaffordable,” or
Does not provide “minimum actuarial value” (State plans exceed this threshold)
Penalty equals $3,000 per year per each FTE who enrolls in an Exchange insurance product and receives a Federal subsidy
Not more than the No Coverage Penalty
Also applies to the excluded 5% above

14. Not Just About Insurance
Not a new employment issue - new financial risks
State of Tennessee created a working group of financial, insurance, human resource, and procurement staff to
Identify risk
Communicate this risk to relevant parties
Develop a solution to mitigate the risk going forward

15. Solutions to Mitigate Risk
Part-Time report for managers to monitor hours worked
Decision model to hire an employee, obtain independent contractor, or temporary employee
Simple questionnaire for hiring managers to determine whether to hire an employee or contractor using IRS 20 Common Law questions
Contract language for agencies to use for RFPs
Master contract that includes contractor relationships and defines employer responsibilities

16. ESR – Liability for payment
-IRS will review the credits paid to individual taxpayers -Employers will be sent notice that they may be liable for an ESR payment -Earliest notices would be issued in Employers should research and dispute liability if appropriate -Payment will be $2,000 per full time employee

17. Regs Require Employer Offered Coverage
Regulations only require that employers provide information about offers of coverage
Decision guide mailed to all eligible members
State will require proof that newly hired employees declined coverage
Using ESS is the preferred approach
Enrollment form

18. Current Eligible not Enrolled
4,000 State employees who are eligible but not enrolled
These employees will receive a letter in mid-September notifying them that they are eligible for coverage and can enroll during Open Enrollment this year.

19. Key Administrative Employer Requirements
W-2 reporting
Summary of Benefits and Coverage (SBC)
Employer Exchange-related notices
Reporting to IRS starting in 2015
Automatic enrollment (not yet issued)

20. IRS Reporting Two reporting requirements; single report: Form 1095-C
Employer-sponsored coverage provided to full-time employees
Employer-sponsored minimum essential coverage
Statements to employees notifying them of the information reported to the IRS (on for before 2/1/16)
File electronic returns to the IRS on or before 3/31/16

21. Key Questions
How will we handle PT and seasonal employees and those who will not be considered FT under the ACA and who could trigger a penalty?
How will we handle PT employees who work two positions?
Are any of our PT or contractors considered to be common law employees according to IRS guidelines?
What measurement period makes sense for our organization?

22. Questions?

23. TN Hours for Benefits Report
Standard Measurement period
Individual Measurement period