Tennessee Association of School Business Officials · dependents to avoid penalties • Coverage...

Wednesday, September 16, 2015 Tennessee Association of School Business Officials

Healthcare Reform

Health Care Reform

•  Enacted in March 2010 •  Makes significant changes to health care system •  Implemented over several years

Affordable Care Act

•  Health care providers •  Government programs •  Health insurance issuers •  Employers/plan sponsors •  Individuals

Provisions that impact:

Most employers that offer health plans are impacted in some way

Key Elements

Key Elements of the Affordable Care Act •  Benefit Changes

–  Preventive Care, Dependent child eligibility, lifetime maximum and other benefits were increased

•  The Individual Mandate –  Each individual is responsible for purchasing health insurance coverage beginning

2014. For those who qualify, government premium subsidies are available.

•  The Health Insurance Marketplace –  A new way to find quality health coverage

–  Can help if you don’t have coverage now or if you have it but want to look at other options

•  The Affordable Care Act’s Patients’ Bill of Rights –  The ACA offers new rights and protections that make coverage fairer and easier to

understand

The Individual Mandate

The Individual Mandate •  Requires most people to have “minimum essential coverage” health

insurance

•  Beginning in 2014, most individuals must either have health insurance that meets minimum standards of coverage or pay a penalty when filing tax returns

•  Minimum essential coverage is defined as: –  Any Marketplace plan, or any individual insurance plan you already have

–  Medicaid

–  Medicare

–  The Children’s Health Insurance Program (CHIP)

–  TRICARE and other veterans health care programs

–  Peace Corps Volunteer plans

How Much is the Tax Penalty? •  The annual tax penalty for not having minimum essential coverage

depends on the age and number of dependents in your household.

•  The penalty is the greater of a flat dollar amount per individual or a percentage of the individual’s taxable income.

$695 per adult and $347.50 for each child (up to $2,085 for families), or 2.5% of income, which ever is greater

$325 per adult and $162.50 for each child (up to $975 for families), or 2% of income, which ever is greater

$95 per adult and $47.50 for each child (up to $285 for families), or 1% of income, which ever is greater

2014

2015

2016 & Beyond

The Affordable Care Act’s Patients’ Bill of Rights •  The Patients’ Bill of Rights is designed to summarize health

coverage protections embedded within the ACA. Protections include:

–  No pre-existing condition exclusions

–  No arbitrary rescissions of insurance coverage

–  No lifetime dollar limits on coverage

–  Restricting annual dollar limits on coverage

–  Allowing participant choice of a health care provider

–  Granting access to emergency services

Employer Responsibility

Employer Shared Responsibility Rules (Pay or Play)

•  No requirement to offer coverage •  Can get tax credits for providing coverage

Small Employers (fewer than 50 FT/FTE employees)

•  Must offer coverage to FT employees and dependents to avoid penalties

•  Coverage must be affordable and provide minimum value

•  Penalties were delayed until 2015; additional one-year delay applied for ERs with 50-99 full-time Ees – 1/1/16

Large Employers (50+ FT/FTE employees)

Employer penalties triggered if any full-time employee receives subsidized coverage in an Exchange

Avoiding Penalties Offer coverage to FT employees and dependents that:

Is affordable

•  Employee’s contribution for self-only coverage does not exceed 9.5% of income

•  Safe harbors for what income and premium amount to use

Provides minimum

value

•  Plan covers at least 60% of costs on average

•  MV calculator or design-based checklists

ACA – Penalties •  Employer Mandate – Pay or Play?

•  Employers that fail to offer coverage to all FT employees… Fine is $2,000 per ALL full-time employees (excludes first 30 employees)

•  Employers that offer coverage to substantially all FT employees (and dependents) but coverage is unaffordable does not meet minimum value…

Fine is $3,000 for each employee who receives subsidized

2015 Employers with over 100 FTE’s

must comply

2016 Employers with over 50 FTE’s must comply

How many part-time

employees can we have?

ACA – Additional Cost Impact •  Several New Taxes & Fees

•  Shift to Self-funding to avoid some of the ACA taxes and fees:

Types of Coverage Impacted

Reform Measure Individual Fully Insured Self-Funded Stop Loss

Transitional Reinsurance Contribution Fee X X

Annual Health Insurance Tax X X

Fee for Carrier Exchange Participation X

Cadillac Tax (Starts in 2018) X X

PCORI Fee X X X

Risk Adjustment Program X X

Sources: HHS.gov; IRS.gov; 2016 Notice of Benefit and Payment Parameters, Final Rule

“Substantially All” Full-Time Employee Percentage

•  Employers must offer coverage to at least 95% of full-time employees to avoid largest penalties

Proposed rule:

•  Percentage requirement phased in over 2 years •  2015: must offer coverage to 70% of full-time employees •  2016 and beyond: offer coverage to 95% of full-time

employees

Final rule:

Employers still exposed to lesser penalties if coverage is not offered to all full-time employees

Full-time vs. Full-time Equivalent

•  Counted for large employer determination • Must be offered coverage (along with dependents) to avoid

penalties

Full-time employees

•  Counted as a fraction for large employer determination •  Do not have to be offered coverage

Full-time equivalent employees

•  Special rules apply for large employer determination •  Special rules apply for offering coverage (along with variable

hour employees)

Seasonal employees

Full-Time Employee

With respect to a calendar month

An employee who is employed on average at least 30 hours of service per week

130 hours of service in a calendar month = the monthly equivalent of 30 hours of service/week

Exceptions for Educational Organizations

•  The proposed regs address teachers and other employees of educational organizations separately

•  In essence, if they are full-time during the active portions of the academic year, they’ll be considered full-time

•  Traditional breaks in the academic year, (holidays, spring breaks, etc) are often periods of paid leave and the employee will be credited with hours of service accordingly

•  This section currently only addresses employees of educational organizations, yet comments are invited on whether there are other similar industries that also need special consideration

Problems for Educational Organizations

ACA presents a series of unique problems for educational organizations in several classifications of employees. Below are just a few of the employees who may require the organization to address in their plan offerings addressing both minimum value and affordability of coverage:

•  Substitute Teachers

•  Cafeteria Workers

•  Staff Employees

Look-back Measurement Method

•  May be used for new variable hour and seasonal employees if used for ongoing employees

•  Employers may not use the look-back measurement method for variable hour/seasonal employees and use monthly measurement method for employees with predictable schedules

•  Rules protect full-time status for employees transferring between positions using different methods

Measurement Period

Administrative Period

Stability Period

Section 6055 and 6056 Reporting

Repor&ngrulesapplyto:

• Providersofminimumessen&alcoverage(6055)

• Applicablelargeemployers(6056)

• Rulesdonotapplytosmallemployerswithinsuredcoverage

Repor&ngen&&esmust:

• Fileinforma&onreturnswiththeIRS

• Providestatementstoeitherfull-&meemployees(6056)or

• Providestatementstocoveredindividuals(6055)

Purposeofrepor&ng:

• HelpIRSadministeremployerandindividualsharedresponsibilityrules

• DeterminewhetheranemployeeiseligibleforapremiumtaxcreditforExchangecoverage

• Showcompliancewiththeindividualmandate

Self-funded plan sponsors that are ALEs must report under both sections, but will use a combined reporting method

Deadlines

•  Rules effective for 2015 coverage

–  2015 coverage information will be reported in 2016

–  Employers must collect information during 2015

•  Annual deadlines:

–  Individual statements due by Jan. 31

–  IRS returns due by Feb. 28 (March 31 if filed electronically)

Section 6055 & 6056 Reporting

ALEs sponsoring self-insured plans

Form1095-C:PartI,PartIIandPartIII

Form1094-C

ALEs sponsoring insured plans

Form1095-C:PartIandPartIIonly

Form1094-C

Non-ALEs sponsoring self-insured plans

Form1094-B

Form1095-B

Non-ALEssponsoringinsuredplansarenotrequiredtoreportundereitherSec&on6055orSec&on6056

Penalties •  Penalties for violations of reporting requirements

−  $100 per violation, up to $1.5M per year −  May be increased or decreased, depending on circumstances

•  Short-term relief from penalties −  Available for reporting related to 2015 coverage −  IF reporting entity shows good faith effort to comply −  Applies to incorrect/incomplete information reported or other failures due to

reasonable cause

Start early on your

renewals

Use the best

Consultant

Invest in systems to

provide necessary

reports

Go Cautiously in to Self-Funding

Prepare for

network “noise”

1 2 3 4 5

Future Considerations

Form 1095- C

Form 1095-B

Into the Weeds

One School System’s Response Metro Nashville Public Schools

Determine who are full-time and full-time employees

•  Issue – We classify employees as benefit or non-benefit eligible

–  Benefit Eligible: Regularly scheduled employees who work over 20 hours per week (better than ACA 30 hour requirement)

–  Non-Eligible: Temporary (substitutes) regardless of number of hours worked. Some of these employees will be considered eligible if average over 30 hours per week

Tracking employees for availability of coverage

•  Dropping all payroll files into our online enrollment vendor – Benefit Express (BE).

•  Using a 12-month measurement period

•  Crediting 10-month employees with summer service

•  Determine how many employees in the non-benefit class meets the 30-hour ACA definition of full-time employee, combine with benefit eligible population.

•  Determine the percentage of all employees (per ACA definition) are provided coverage. If > 95% for 2016, continue business as usual. Potential penalty for failure - > $20 million

Keeping up with our substitutes

•  We will keep on ongoing tally on the number of employees offered healthcare & the number of substitutes who meet ACA requirement that are not being offered coverage

–  Updated per payroll period (every 2 weeks)

–  BE will track when substitutes reach eligibility status and lose eligibility status

–  If our % reaches close to 5%, MNPS will have to decide to either:

•  Limit substitute weekly hours to less than 30 hours per week (we already have a sub shortage)

•  Provide coverage to those who are eligible

•  Outsource sub’s to a third party

Confirm plans meet minimum coverage, value and affordability definitions

•  Utilized actuary and TPA (Cigna) to insure plan meets minimum coverage.

•  Used consultant to determine that based on existing premiums, any employee with a household income of less than $19,700 annually would be below the affordability threshold

•  Looked at our payroll files and determined that 1375 support employees may be below threshold (primarily cafeteria workers).

•  Requested lower cost option, but didn’t get one – waiting to find out the impact of the penalty. $3,000 for each employee who purchased subsidized coverage on the exchange.

Preparing for IRS Reporting

•  Provided online enrollment vendor with eligibility data weekly via census file

•  BE controlled and stored enrollment data

•  Addend it with support staff eligibility and enrollment data – annual file to show coverage and eligibility per month for employees and dependents

•  BE to aggregate data then complete the 1095 and 1094 forms on our behalf and send to individuals and IRS

Who Are You Responsible to Report?

•  for each employee who was a full-time employee for any month of the calendar year

•  If you sponsor a self-insured plan, you must file Form 1095-C for each employee who enrolls in the self-insured health coverage or enrolls a family member in the coverage, regardless of whether the employee is a full-time employee for any month of the calendar year.

•  For a self-insured group health plan maintained by a single employer, the plan sponsor is the employer. For a plan maintained by more than one employer that is not a multiemployer plan (as defined in ERISA) the plan sponsor is each participating employer.

•  If you are part of a self-funded plan – you report employee and dependent coverage. If you have fully-insured coverage – you only have to report the employee.

Some Notes From the State

Are You Ready for the Questions?

Thank you!