Cut through the Clutter: 2014 Compliance Update

Cut through the Clutter:

Understanding the latest compliance updates

April 2014

1

Cut through the Clutter: Understanding the latest compliance updates Sally Wineman, JD

Area Senior Vice President, Compliance Counsel

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™


Timeline

© 2014 GALLAGHER BENEFIT SERVICES, INC.

6/23/10 9/23/10 1/1/12 6/28/12 2014 2015 2016 2018

• Cadillac Tax

• W-2 Reporting

• SBC

• ERRP

• High Risk Pool

• Patient Protections

• Supreme

Court Ruling

• Large Employer Mandate

• Reporting

• Revenue

• Marketplace Opens

• Individual Mandate

• Small Employer

Mandate



April 2014

2


2014 Plans • New! Health FSA Carryover- $500

• W-2 Reporting on value of health coverage continues

• Automatic Enrollment (delayed beyond 2014)

• Nondiscrimination (delayed pending guidance)

• Wellness program incentive increase

• Women’s contraceptive coverage

• 2014 Patient Protections

– No waiting periods longer than 90 days unless variable employee

• New! Orientation period

– Elimination of Pre-existing Condition Exclusions for all adults

– No Annual Limits for Essential Benefits

– Grandfathered plans: No exception for coverage up to age 26 on other employer plan

– Non-grandfathered plans: Limits to out of pocket maximums ($6,350/$12,700)

– Non-grandfathered plans: Cannot deny participation in a clinical trial

– Small employer plans: Limits on deductibles


Repealed


PPACA Notices

• Marketplace notice

• Updated Summary of Benefits

& Coverage (SBC)

• Wellness program reasonable

alternative

• Grandfathered status notice

• Contraceptive coverage self-

certification

• HIPAA Certificate of Creditable

Coverage – through 2014

• New COBRA General Election Notice




April 2014

3


• Minimum Essential Coverage (MEC) Reporting

(Section 6055)

– Lets individuals and the IRS know if an employer is

providing minimum essential coverage and if an

individual satisfied the individual mandate for the

preceding calendar year

• Employer Mandate Reporting (Section 6056)

– Lets individuals and the IRS know if an employer is

complying with the employer mandate, minimum

value and affordability

Employer Reporting



MEC Reporting (Section 6055)


2015

Calendar

Year

Reporting

2016 Report

Are you required to

report?

• Self-funded only

• All size employers

• Not TPA

What year do you

report on?

When do you report?

• Each member of controlled group

reports separately

• To Employees – Jan 31

• To IRS – Feb 28 (March 31 if e-file)

To Enrolled Employees:

Individualized statements • ≥50 FTEs: Form 1095-C

• <50 FTEs: Form 1095-B

To IRS:

Each employee

statement • ≥50 FTEs: Form 1095-C

• <50 FTEs: Form 1095-B

To IRS:

Transmittal report • ≥50 FTEs: Form 1094-C

• <50 FTEs: Form 1094-B

2014 MEC

Reporting



April 2014

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Employer Mandate Reporting

(Section 6056)


2015

Calendar

Year

Reporting

2016 Report

Are you required to

report?

• FTE – include equivalents

• Controlled group – add all FTEs

• ≥50 FTEs only

• Fully-insured and self funded

What year do you

report on?

• Any year ≥50 FTEs

• No delay for employers

50-99 FTEs

When do you report?

• Each member of controlled group

reports separately

• To Employees – Jan 31

• To IRS – Feb 28 (March 31 if e-file)

To Full-Time Employees:

Individualized statements Form 1095-C

To IRS:

Each employee

statement Form 1095-C

To IRS:

Transmittal report Form 1094-C

2014 Employer

Mandate


Taxes & Fees


Purpose Cost Timeframe Responsible Party

Patient-Centered

Outcomes Research

Institute Fee

(“PCORI” or

“CER” fee)

Supports research of effective

and efficient medical prevention,

treatment and care options

$2 annually per covered life ($1 per member

for the policies/plans ending before 10/1/13);

adjusted annually for inflation

• 2013 through 2019; does not

apply to plan/policy years ending

after 9/30/19

• Fee due once per year by 7/31

(for plan year ending in

proceeding calendar year)

• Insurers of fully insured plans, included

in premium cost

• Sponsors of self-insured plans

Transitional

Reinsurance

Assessment Fee

Helps stabilize premiums in

individual market as new high-

cost individuals begin to access

health insurance

$63 annually ($5.25/month) per covered life

for the first year, $44 in 2015 (confirmed)

and estimated to be $26 in 2016

• 2014 through 2016 paid on an

annual basis

• Must report covered lives to

HHS by 11/15 of each year

• Insurers of fully insured plans, included

in premium cost

• Sponsors of self-insured plans; may be

collected and remitted by TPA

• Does not apply to self-insured, self

administered plans for 2015 and 2016

Health Insurer Fee Supports cost of healthcare

reform

Amount will vary for each insurer based on

its relative market share of U.S. health

insurance business; estimates range from 1-

3% of premium

Begins in 2014 and will be ongoing • Insurers of fully insured plans, included

in premium cost

• Does not apply to self-insured plans

Marketplace

(Exchange) Fees

States will either set up State

Marketplaces to help individuals

and small businesses buy health

insurance, or use the Federal

Marketplace; fees used to

support Marketplace

administration

State Marketplaces to be determined and

will vary by state; Federal Marketplace is

3.5% user fee on premiums sold

State Marketplace to be

determined and will vary by state;

Federal Marketplace to be paid

monthly by insurer beginning in

2014

• Some states will assess fees across

only those participating in the

Marketplace while others will assess

across all policies written in and out of

the Marketplace

• Insurers of policies sold by Federal

Marketplace

High-cost Health

Insurance Tax

(Cadillac Tax)

Supports cost of healthcare

reform and encourages reduction

of medical costs

Excise tax of 40% on plan costs that exceed

defined thresholds

Begins in 2018 and will be ongoing • Insurers of fully insured plans, included

in premium cost

• Sponsors/Administrators of self-

insured plans

Additional

Medicare Tax &

Unearned Income

Tax

Supports cost of Medicare

program 0.9% additional Medicare tax on

compensation in excess of $200,000

single/$250,000 married filing jointly

3.8% tax on unearned income for taxpayers

with modified adjusted gross incomes over

$200,000 single/$250,000 married

Begins in 2013 and will be ongoing

Begins in 2013 and will be ongoing

• Individual tax-payers; employer must

withhold if employee’s wages or

compensation exceeds $200,000; no

employer match

• Individual tax-payers



April 2014

5


PCORI Fee – Due July 31


Plan Year^ IRS Form 5500

Due Date# Amount Due

IRS Form 720

Due Date with Payment

2/1/2012 - 1/31/2013 8/31/2013

$1 per number

of covered lives+ per year

July 31, 2014

3/1/2012 - 2/28/2013 9/30/2013

4/1/2012 - 3/31/2013 10/31/2013

5/1/2012 - 4/30/2013 11/30/2013

6/1/2012 - 5/31/2013 12/31/2013

7/1/2012 - 6/30/2013 1/31/2014

8/1/2012 - 7/31/2013 2/28/2014

9/1/2012 - 8/31/2013 3/31/2014

10/1/2012 - 9/30/2013 4/30/2014

11/1/2012 - 10/31/2013 5/31/2014

$2 per number

of covered lives+ per year 12/1/2012 - 11/30/2013 6/30/2014

1/1/2013 - 12/31/2013 7/31/2014

^ The fee is imposed for each plan year ending on or after October 1, 2012, and before October 1, 2019. # The 5500 method for determining average number of lives may not be used if Form 5500 is filed later than the Form 720 due date. + Includes each covered individual; eg. employee, spouse, domestic partner, children, COBRA participants, retirees, etc.


Transitional Reinsurance Fee • 2014 through 2016, paid on annual basis

• $63 annually per covered life for the first year – $44 in 2015

– Estimated $26 in 2016

• Must report covered lives to HHS by 11/15 each year – Insurers of fully insured plans: Included in premium cost

– Sponsors of self-insured plans: May be collected and remitted by TPA

– Does not apply to self-insured, self administered plans for 2015 and 2016

• Paid in 2 installments – Early January 2015 ($52.50)

– Late 2015 ($10.50)




April 2014

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“Cadillac” Tax - 2018


COBRA Rate ≥ $10,200 for individual or

$27,500 for family

Special Provisions

• High risk

professions

• Early retirees

• Age & gender

= 40% of plan value that

exceeds threshold

Excise Tax


Penalty

Individual Mandate

Exception

Minimum

Essential

Coverage

Premium

Assistance

400% FPL

$45,960 (single)

$94,200 (family of 4)



April 2014

7


Premium Assistance

• Premium assistance available to lower cost of

coverage for those <400% FPL


Expanded

Medicaid

Cost

Sharing

Federal Poverty

Level

Annual Income:

Individual

Annual Income:

Family of Four

100% $11,490 $23,550

138% $15,856 $32,499

250% $28,725 $58,875

300% $34,470 $70,650

400% $45,960 $94,200


The Marketplace


Gold Plan

Bronze Plan

Silver Plan

Platinum Plan

Catastrophic Plan Large Group

Individuals

Small Group

?

Government

Subsidy

Providers



April 2014

8


Connect for Health Colorado


• 277,149 enrolled as of 4/1

– 158,521 in Medicaid

• 59% of enrollees received premium assistance

• Next open enrollment:

– Nov 15, 2014 – Feb 15, 2015


Premium Assistance

• Most individuals who are eligible for employer-

sponsored coverage will not be eligible to receive

premium assistance

• Unless:

– Low value plan (less than 60% minimum value)

– Unaffordable (employee-only contribution is greater

than 9.5% of income*)


*Proposed regulations



April 2014

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Employer Mandate for 2015


No penalty applies!

Lesser of:

•$3,000 per FTE receiving tax

credit*

Or

•$2,000 per FTE (minus first 80)

$2,000 penalty per FTE (minus

first 80) if at least one FTE

receives the tax credit

No penalty applies!

Is coverage affordable?

Plan provides minimum

required value?

Offer MEC to 70% of

FTEs (and dependents)?

^ May be eligible for delay to 2016 if 50-99 FTEs and meet requirements.

* Only applies to FTEs with household incomes of 400% of FPL or less

Have at least 50 FTEs?^


When do penalties apply?

• ^Must meet requirements for delay- not automatic

• *Must meet eligibility requirements for transition rule – not automatic

• Use monthly average count of employees to determine large

employer status

– May use any 6 month period in calendar 2014 for 2015


Employer Size Calendar Year Plan Non-Calendar Year Plan

0-49 FTEs N/A N/A

50-99 FTEs January 1, 2016^ 1st day of 2016 plan year*

100+ FTEs January 1, 2015 1st day of 2015 plan year*



April 2014

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Transition Rules • Transition rule available for non-calendar year plans

• Transition rule available for employers with 50-99 FTE employees

– Not automatic

– Flowcharts available at www.ajghealthcarereform.com

– Newsletters Healthcare Reform Update, March 3, 2014



Employer Mandate for 2015


No penalty applies!

Lesser of:

•$3,000 per FTE receiving tax

credit*

Or

•$2,000 per FTE (minus first 80)


first 80) if at least one FTE


No penalty applies!

Is coverage affordable?

Plan provides minimum

required value?

Offer MEC to 70% of


^ May be eligible for delay to 2016 if 50-99 FTEs and meet requirements.

* Only applies to FTEs with household incomes of 400% of FPL or less

Have at least 50 FTEs?^



April 2014

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Full-Time Employees

• Effective January 1, 2015

– May be eligible for delay until 2016 if 50-99 FTEs – not automatic

• Count FTE working 30 hpw or more

• Also calculate full-time equivalent employees

– Any employee hours worked under 30 hpw (but no more than 120 hours per month)

– (PT hours worked) / 120 = Full time equivalents

• Add together full-time plus full-time equivalent employees

• Count all employees in a controlled group during preceding calendar year

• Excludes:

– Sole proprietor

– Leased employees

– Partners

– 2% S corp shareholder

– Foreign employees (maybe)

No penalty applies! Have at least 50 FTEs?^



Additional Relief in 2015

• Offer employee + dependent coverage

– Does not include spouse

– New! Does not include foster children or step-children

• Offer coverage to “substantially all” full-time employees

– 95% of FTEs (70% for 2015)

• Provide effective opportunity to accept or decline coverage

• Member by member company assessment

– Not on a controlled group basis

– Controlled group must share the 30 FTE (80 for 2015) exclusion pro-

rata

• Minimum essential coverage © 2014 GALLAGHER BENEFIT SERVICES, INC.


first 80 )̂ if at least one FTE


Offer MEC to 70%* of


* 95% in 2016 and beyond

^ 30 in 2016 and beyond



April 2014

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Full Time for Penalty Calculation • Who is an employee? Common law definition

• Who is full-time?

– Worked an average of at least 30 hours/week (130/month)

• Calculate hours worked:

– Hourly Employees - actual hours worked plus PTO

– Non-Hourly Employees – three options:

• Actual hours worked plus PTO

• Days worked equivalent (8 hours per day)

• Weeks worked equivalent (40 hours per week)

• Look-Back Method

– New variable hour or seasonal employees

– Ongoing variable hour employees

– Part-time employees

• Monthly Measurement Method

– No penalty if offer coverage by 1st day of 4th month



Employee Categories


• Offer affordable, minimum value employee + dependent child coverage

• Offer coverage within 90 days or pay penalty

Full-Time Employee (30+ hpw)

• Use measurement/lookback period to monitor eligibility

• No penalty applies if remain part-time

Part-Time Employee (<30 hpw)

• Six months or less which begins in same part of year each year

• May use measurement/lookback period to determine eligibility

• Offer coverage no later than 13 (+fraction) months from hire date or pay penalty

Seasonal Employee (30+ hpw)

• Can’t be determined that the employee is reasonably expected to work 30 hpw

• May use measurement/lookback period to determine eligibility

• Offer coverage no later than 13 (+fraction) months from hire date or pay penalty

New Variable Employee (30+ hpw)

• May use measurement/lookback period to determine eligibility (no longer than 12 months)

• Offer coverage at end of admin period or pay penalty

Ongoing Variable Employee (30+ hpw)



April 2014

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Variable Hour and Seasonal Employees

• New! Who is variable?

– Is employee replacing FT employee or non-FT employee?

– Have ongoing employees in same/comparable position varied above/below average of 30 hours of service per week?

– Was job advertised, communicated, or documented as requiring hours of service that would average 30 or more/less?


• New! Who is seasonal?

– Employee in position for which customary annual

employment is 6 months or less

– Begins in the same time of year each year (e.g.,

summer or winter)


FTE Special Status Clarifications • New! Short-term and high-turnover employees

– Must offer coverage to short-term hires reasonably expected to work a full-time schedule by the first day of the fourth full month after hire (or risk paying a penalty)

• New! Unique hours of service (e.g. adjunct faculty, layover or on-call hours)

– Must use reasonable method of crediting hours

• New! Volunteers

– Hours of service as bona fide volunteer do not count

• New! Student interns

– If full-time interns are unpaid, hours not counted as hour of service

• New! International employees

– May treat as terminated if position anticipated to continue indefinitely or at least 12 months, and substantially all compensation treated as foreign-sourced income




April 2014

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Measurement/Stability Safe Harbor


Standard Measurement Period

Standard

Administrative

Period

Standard Stability Period

Ongoing employees

• Look-back at hours worked by variable hour employee to determine eligibility for coverage

• Employer choose length from 3 to 12 months

• Coverage remains available regardless of hours worked during stability period

• Full time employees

• Cannot be shorter than the standard measurement period

• Must be at least 6 months

• Non full time employees

• Stability period cannot be longer than the standard measurement period

• Count hours, offer & enroll in coverage

• Maximum length of 90 days

• Cannot reduce or lengthen the measurement or stability period

• Overlaps with prior stability period

• New! Short transitional 6-month measurement period for 2015

• Monthly measurement period – “weekly rule” to accommodate payroll periods


Ongoing Full-Time Employee


2013

Plan Year

2014

Plan Year

1st Stability Period

Jan 1, 2015-Dec 31, 2015

2nd Stability Period

Jan 1, 2016-Dec 31, 2016

1st Standard

Measurement Period

(6-Month Transition Relief)

Apr 15, 2014-Oct 14, 2014

1st Administrative Period

(≤90 days)

Oct 15, 2014-Dec 31, 2014

2nd Standard Measurement Period

(≤12 months)

Oct 15, 2014-Oct 14, 2015

2nd Administrative Period

(≤90 days)

Oct 15, 2015-Dec 31, 2015

• Meets hpw

requirements during 1st

Standard Measurement

Period

• Employee offered

coverage Jan 1, 2015



April 2014

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Measurement/Stability Safe Harbor


Initial Measurement Period

Initial

Administrative

Period

Initial Stability Period

New employees *Combined length of initial measurement period and the administrative period cannot be longer

than 13 and a fraction months from employee’s hire date

• Look-back at hours worked by variable hour employee to determine eligibility for coverage

• A period of 3 to 12 months*

• Coverage remains available regardless of hours worked during stability period

• Full time employees

• Must be at least 6 months

• Cannot be shorter than the initial measurement period

• Cannot be shorter than the standard stability period for ongoing employees

• Non full time employees

• Stability period cannot be more than 1 month longer than the initial measurement period

• Count hours, offer & enroll in coverage

• Maximum length of 90 days*


Break in Service/Leaves of Absence

• New! Breaks longer than 13 weeks (26 weeks for schools)

– Treat as a new employee

• Breaks shorter than 13 weeks

– Treat as continuing employee with same status for the remainder of the stability period

– Treat measurement period as if did not have a break in service (counting zero hours during break)

• Optional – Rule of Parity

– Use for breaks between 4-13 weeks

– Can treat as new employee if the break period is longer than immediately preceding employment period


Initial Employment = 9 weeks Employee terminates

Break in Service = 12 weeks Employee rehired. Break in service longer than

initial employment.

Employer can:

1) Treat as continuing employee, or

2) Treat as new employee



April 2014

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Special Unpaid Leave

• Special unpaid leave

– FMLA

– USERRA/military leave

– Jury duty

• Credit hours as:

1. Hours worked ÷ # of weeks

worked (disregarding LOA weeks);

or

2. Average weekly hours used for

LOA weeks



What’s to come?

• Employer Reporting

• Automatic Enrollment rules

• Nondiscrimination rules

• Health Plan Identification number

• HIPAA standard transaction certification

• 2018 Cadillac Tax

2015 Open Enrollment for Marketplaces:

Nov. 15, 2014 – Feb. 15, 2015




April 2014

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Other Compliance Topics


• Dental or vision excepted if:

– Limited in scope; and either:

1) Separate policy, certificate or contract of insurance

or

2) Not an integral part of GHP

– Right to waive dental or vision benefit; AND

– Additional contribution required (eliminated) New!

• Employee Assistance Program (EAP) excepted if: • Does not provide significant medical benefits

• Not coordinated with other group health benefits

• No employee contribution allowed

• No cost sharing under EAP

Excepted Benefits




April 2014

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Excepted Benefits • Health FSAs excepted if:

– Major medical group coverage available to employee

– Maximum annual benefit (employee and employer FSA contribution) cannot exceed 2x the employee’s election (or, if greater, the employee’s election, plus $500)

• HRA – no general exception

– If only reimburse limited-scope dental or vision

– Exception from annual limit and preventive services mandate if “integrated” HRA

• Must offer other non-excepted group health plan

• Employee must be enrolled in another non-excepted group health plan

• HRA only available to employee enrolled in other group health plan

• Must be able to permanently opt out and waive future HRA reimbursements



• Defense of Marriage Act (DOMA) –

– Section 3 declared unconstitutional by Supreme Court in

Windsor decision on June 26, 2013

– “Spouse”, “marriage”, “husband” and “wife” will include

spouses of the same-sex, if legally married under state or

federal law

– Place of celebration controls the definition of spouse, not

place of residence

– “Marriage” does not include domestic partnership or civil

union under state law

• Colorado:

– Recognize same-sex civil unions since May 1, 2013

– Allow joint filing for state income tax as of 2014 tax years

DOMA




April 2014

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DOMA Issues • Fully-insured plans

• Self funded plans

• Proof of relationship?

• Federal tax issues

– Legally married same-sex spouse recognized as “spouse” for tax purposes, regardless of state of residence

– Effective September 16, 2013

• FMLA

• COBRA

• HIPAA Special Enrollment

• HSA

• Section 125 Cafeteria Plan



Questions? ajghealthcarereform.com




April 2014

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Thank you!

Business

Cut through the Clutter: 2014 Compliance Update