ACA: Creating a Safe Harbor Medical Plan to Immunize Your ... · HSA Plan COBRA Rates Non-Participant Wellness Participant Wellness 30% Penalty Achiever Score Score 0-71 71-100 Employee

-1- ACA 2015: Ready, Set, Comply

Bottom Line Driven Health Benefits Planning

ACA: Creating a Safe Harbor Medical Plan to Immunize Your Plan From Penalties

Jeffery A. Schultz Phone: 262.207.1999 ext. 112

Email: [email protected] Vice President, BeneCo of Wisconsin

Innovation. Dedication. Knowledge. Purpose. Integrity. Vision. Talent. Results.

mailto:[email protected]


Who We Are

BeneCo of Wisconsin, Inc.:

A member of The Benefit Companies, a privately held company.

Have been providing insurance and employee benefits consulting since 1971.

A full service benefits firm serving over 1,200 companies and organizations ranging from 10 to 50,000 employees.

Headquartered in Brookfield, WI with additional Wisconsin offices in Green Bay, and Plymouth.


Jeff Schultz Vice President BeneCo of Wisconsin 262-207-1999 ext 112 [email protected]

Justin Andaloro Manager of Marketing & Communications BeneCo of Wisconsin 262-207-1999 ext 114 [email protected]

To Register for upcoming webinars: http://www.benefitsinc.com/beneco-wisconsin/aca-webinars/

Who We Are



https://www.linkedin.com/pub/jeff-schultz/2/184/402

https://www.linkedin.com/pub/justin-andaloro/7/bb0/827


Today’s Topics

What it means to be affordable

Implications for not being affordable

Measuring Affordability

Strategies to become Affordable

Implementing a Safe Harbor Plan


Ground rules

Some questions may fall under

Haven't read

Haven't heard

Guidance not released

Just don’t know…


Common Affordability Challenges

Wellness premium differentials

Low paid work force with high premium costs

The loss of premium share in lowering employee premiums under the thresholds

Potential increase in plan participation if you lower the premium to be “affordable”


Employer Affordability

What is Affordable

An employer must offer a plan that meets minimum value where the employee’s single only contribution does not exceed 9.5% of that employee’s household income

Affordability originally intended to be measured on household income.

Safe harbors were provided to measure on an employee only level

Federal Poverty Line Safe Harbor

W-2 Wages Safe Harbor

Rate of pay Safe Harbor


Which premium to use to determine affordability

Premium is measured at 9.5% of income for SINGLE coverage

Measured on the lowest cost single plan that meets minimum actuarial value.

Assumes that employees do not achieve the wellness requirements, regardless of their achievement status.


Which Premium to Determine Affordability?

Monthly Premiums

HSA Plan COBRA Rates Non-Participant Wellness

Participant Wellness Achiever 30% Penalty

Score Score

0-71 71-100 Employee $600 $300 $180 $120

Employee + Spouse $1,050 $525 $315 $210 Employee + Child(ren) $900 $450 $270 $180

Family $1,300 $650 $390 $260

PPO Plan COBRA Rates Non-Participant Wellness

Participant Wellness Achiever 30% Penalty

Score Score

0-71 71-100 Employee $750 $375 $225 $150

Employee + Spouse $1,313 $534 $394 $140 Employee + Child(ren) $1,125 $458 $338 $120

Family $1,625 $658 $488 $170


The Safe Harbors

Affordability originally intended to be measured on household income.

Safe harbors were provided to measure on an employee only level



Rate of pay Safe Harbor



2015 FPL is $11,770 for a single

Assume all employees earn 100% of poverty level

Calculate contribution against the $11,770 FPL

Employers can set their premium at $93.17 regardless of employee’s income and be considered affordable.

$11,770 X 9.5% =$1118.15 or $93.17 Per Month Employee Premium is $300 per month. FAIL



Uses the employee’s W-2 income (box1) for the current year.

Does not include pre-tax contributions for 401(k) or cafeteria plans.

Employee earning $30,000 has $3600 of pretax contributions. W-2 Box 1 = $30,000-$3,600 = $26,400

$26,400 X 9.5% =$2,508 or $209.00 Per Month Employee Premium is $300 per month. FAIL


Rate of Pay Safe Harbor

Allows plan sponsors to measure using an employee’s rate of pay wages.

Hourly Employee measured using 130 hours per month (Even if working 170) and hourly rate. For an hourly employee @ $8.25 per hour

Salaried Employee: Use annual wages and divide by 12.

For an employee earning $30,000 per year

$8.25 X 130 =$1,072 X 9.5% = $101.89 Employee Premium is $300 per month. FAIL

$30,000 / 12 = $2,500 X 9.5% = $237.50 Employee Premium is $300 per month. FAIL


Employer Affordability

Penalties for not being affordable:

Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000 x FTEs (less 30 FTEs)

Example: Employer has 200 employees. The plan is unaffordable for 40 employees. 20 of them go to the exchange and receive a subsidy (premium tax credit).

The employer will pay $60,000 in non-tax deducible penalties under 4980h(b).

20 subsidies X $3,000 Penalty = $60,000


Strategies to Consider if Unaffordable

Roll the dice

Lower your current premium to be affordable for your lowest paid employee that works 30 hours per week

Provide pay increases to the lowest paid employees to create affordability

Lower, change or eliminate wellness incentives

Shift premium costs from single to family plan

Offer an additional plan option that meets ACA requirements.

There is no right answer. Strategy is impacted entirely by employee make-up and culture and philosophy.


Information You May Need To Make A Decision

Lowest hourly rate; ie $8.25 per hour

Lowest monthly salary rate; ie $2,000 per month

Your breakeven affordability amount; ie $101.89

Which affordability safe harbor you will use

The number of employees that are unaffordable

The propensity for your employees to go get subsidies

The make up of your population? Tipped employees, commissioned, Hourly, Salaried?

Your corporate philosophy on paying penalties


Roll the Dice

Those employers that have a handful of employees for which their benefits are unaffordable, may consider rolling the dice on penalties.

Considerations:

How many employees are unaffordable?

What is the propensity for my employees to get subsidies?

What is my corporate philosophy on paying penalties

If wellness is the only reason for unaffordability, are the premium incentive high enough to keep the engaged members on the plan.


Lower the Premium To Be Affordable

Some employers may only be slightly unaffordable for their lowest paid employees.

Need to do the math.

Affordable Premium

For Lowest Paid Employer Single

Premium Premium

Difference # of Single

Plans Cost to be

Affordable # of Penalty Equivalents

Scenario #1 $101.89 $105.00 $3.11 200 $7,464

2

Scenario #2 $101.89 $125.00 $23.11 200 $55,464

18

Scenario #3 $101.89 $300.00 $198.11 200 $475,464

158


Provide Pay Increases to Lowest Paid Employees

Some employers may only be slightly unaffordable for their lowest paid employees.

Need to do the math.

Rate of Pay # of Employees / Rate Affordability

Breakeven Provide pay Increase to:

Cost to be Affordable

# of Penalty Equivalents

$8.25 3 $10.25 $10.25 $9,360 3

$10.00 22 $10.25 $10.25 $8,580 3

$12.00 8 $10.25 - - -

Salaried 138 $10.25 - - -


Lower, Change or Eliminate Wellness Incentives

Example: This employer offers an affordable plan for employees making over $9.47 per hour without wellness incentives.

Monthly Premiums

HSA Plan Non-Participant

Wellness Participant

Employee $300 $117

Employee + Spouse $525 $205

Employee + Child(ren) $450 $176

Family $650 $254

Affordable for an employee @ $9.47 per hour


Shift Premium Costs from Single to Family

Monthly Premiums

Current COBRA Rates Employee % Employee Premium # Enrolled Employer Spend

Employee $600 20.0% $120 88 $42,240

Employee + Spouse $1,050 20.0% $210 21 $17,640

Employee + Child(ren) $900 20.0% $180 9 $6,480

Family $1,300 20.0% $260 82 $85,280

$151,640

Adjusted COBRA Rates Employee % Employee Premium # Enrolled Employer Spend

Employee $600 16.5% $99 88 $44,088

Employee + Spouse $1,050 21.4% $224 21 $17,342

Employee + Child(ren) $900 21.4% $192 9 $6,371

Family $1,300 21.4% $278 82 $83,840

$151,641


Offer an Additional Plan Design “Safe Harbor Plan”

The intention of this plan would be to meet both affordability requirements.

Typical plan features:

Only offered to singles and dependent children at COBRA rates. No Spouses

No wellness incentives or disincentives

Typically plan design is far less attractive than traditional plan offerings.


Two Medical Plan Options Plan Option 1 Plan Option 2 In-Network Benefits Shown PPO Plan Safe Harbor Plan

Individual Medical Deductible $1,500 $4,000

Family Medical Deductible $3,000 $8,000

Co-Insurance % (Plan/Member) 80% / 20% 80% / 20%

Single Medical Out-of Pocket Limit $3,000 $6,350

Family Medical Out-of Pocket Limit $6,000 $12,700

RX Plan Summary

Tier 1 $7 Deductible /Coinsurance

Tier 2 30% with $30 Min, $75 Max Deductible /Coinsurance

Tier 3 45% with $45 Min, $100 Max Deductible /Coinsurance

Wellness Incentives Wellness Incentives Available No Wellness Incentives Available

Eligibility Employee, Spouse & Child Dependents Employee & Child Dependents Only

“Safe Harbor Plan” Plan Design


Making the Plan Affordable

Options:

Federal Poverty Level Safe Harbor

Level set at lowest wage that works 30 hours per week or more. Ie, $8.25

9.4% of rate of pay income

9.4% of box 1 W-2 Earnings


Why 9.4% of Rate of Pay Income?

By charging 9.4% of income, the plan would maximize the premium dollars from the employees while remaining affordable and encouraging fewer employees to elect this plan.

Lowest Premium to be Affordable $101.88

Average 9.4% of all Singles Ees $152.39

Average 9.4% Premium of likely Ees $122.21

FPL Safe Harbor $93.17


How is 9.4% of Rate of Pay Income Calculated?

Example for Hourly earning $8.25 per hour using the Rate of Pay Safe Harbor:

$8.25 X 130 Hours = $1,072.50 Monthly Earnings 9.4% X $1,072.50 = $100.80

This hourly employee would pay $100.80 for their monthly premium.

Example for a Salaried Employee earning $30,000 per year or $2,500 per month $2,500 X 9.4% = $235 This salaried employee would pay $235 per month for their monthly premium.


Making the Plan Affordable

Monthly Premiums

HSA Plan Non-Participant Wellness

Participant

Wellness Achiever 30% Penalty

Score Score

0-71 71-100

Employee $300 $180 $120

Employee + Spouse $525 $315 $210

Employee + Child(ren) $450 $270 $180

Family $650 $390 $260

Safe Harbor Plan Non-Participant Wellness

Participant

Wellness Achiever

Score Score

0-71 71-100

Employee 9.4% of Wages

Employee + Spouse N/A

Employee + Child(ren) 9.4% of Wages + $335

Family N/A


Who is likely to consider this plan election?

Rate of Pay Monthly Rate of Pay

Income Safe Harbor Plan

Premium HSA Plan Wellness Non-

Participant HSA Plan Wellness

Participant HSA Plan Wellness

Achiever

$8.25 $1,073 $100.82 $300.00 $180.00 $120.00 $8.50 $1,105 $103.87 $300.00 $180.00 $120.00 $9.00 $1,170 $109.98 $300.00 $180.00 $120.00

$10.00 $1,300 $122.20 $300.00 $180.00 $120.00 $11.00 $1,430 $134.42 $300.00 $180.00 $120.00 $12.00 $1,560 $146.64 $300.00 $180.00 $120.00 $13.00 $1,690 $158.86 $300.00 $180.00 $120.00 $14.00 $1,820 $171.08 $300.00 $180.00 $120.00 $15.00 $1,950 $183.30 $300.00 $180.00 $120.00 $16.00 $2,080 $195.52 $300.00 $180.00 $120.00 $17.00 $2,210 $207.74 $300.00 $180.00 $120.00 $18.00 $2,340 $219.96 $300.00 $180.00 $120.00 $19.00 $2,470 $232.18 $300.00 $180.00 $120.00 $20.00 $2,600 $244.40 $300.00 $180.00 $120.00 $21.00 $2,730 $256.62 $300.00 $180.00 $120.00 $22.00 $2,860 $268.84 $300.00 $180.00 $120.00 $23.00 $2,990 $281.06 $300.00 $180.00 $120.00 $24.00 $3,120 $293.28 $300.00 $180.00 $120.00 $25.00 $3,250 $305.50 $300.00 $180.00 $120.00


Plan Sponsor Considerations for Safe Harbor Plan

How many eligibles are not electing coverage today?

How many may plan participants and non-plan participants elect Safe Harbor Plan?

What does that mean in terms of lost premium dollars?

Is that still less than paying penalties?

How much differential can you create in plan design offerings?

How will you communicate with employee population?


Educate leadership on ACA challenges

Get leadership on the same page

Develop objectives

Set 3-5 year strategy

Leverage ACA to your advantage

Execute

Measure and manage

What do we do now?


Pulling it all together creating a long term plan ABC Co Health Insurance Pro forma March 2014

2013 2014 2015 2016 2017 2018 Plan Design

Ded 1000/3000 1250/3750 1250/3750 1500/4500 1500/4500 2000/6000 Coins 90/70 90/70 90/70 90/70 90/70 90/70 OOP 2000/6000 2500/7500 2500/7500 3000/9000 3000/9000 4000/12000

Estimated Actuarial Value

84% 80% 80% 80% 80% 75% Employee Contributions

15% 15% 20% 23% 25% 25%

Wellness Incentives 5% 10% 10% 10% 10% 10%

Cost Total cost $3,080,250 $3,385,760 $3,588,906 $3,876,019 $4,186,100 $4,437,266

Employer Cost $3,080,250 $3,047,184 $3,230,015 $3,294,616 $3,558,185 $3,549,813 % Change -1.1% 6.0% 2.0% 8.0% -0.2%

Employee Cost $0 $338,576 $358,891 $581,403 $627,915 $887,453

% Change 6.0% 62.0% 8.0% 41.3% Number of covered employees 452 452 452 452 452 452 Cost per employee per year $6,845 $7,491 $7,940 $8,575 $9,261 $9,817

% Change 9.4% 6.0% 8.0% 8.0% 6.0% COBRA Rates Monthly

8%/6% Single $401 $425 $451 $487 $526 $557 Family $1,040 $1,102 $1,169 $1,262 $1,363 $1,445

Annualized

Single $4,812 $5,101 $5,407 $5,839 $6,306 $6,685 Family $12,480 $13,229 $14,023 $15,144 $16,356 $17,337

Cadillac Tax

Threshold Single $10,200 Family $27,500

Excise tax $0 $0 $0 $0 $0 $0


Noise around repeal, replace, defund, etc.

King vs. Burwell

Numerous legal challenges

Bills on 30 hour rule

Subsides for federal exchange purchase

Budget issues

Full speed ahead

Time to comply


We are grateful AM 620 WTMJ has asked BeneCo to host a radio series to educate listeners on how best to tackle the ins and outs of the Affordable Care Act (ACA). Focused primarily on educating: Business Owners, CEO's, CFO's and HR professionals; we will help them determine if ACA is a "Top 3" or "Top 30" business priority. Tune in to hear us discuss critical ACA challenges to business. Last WTMJ episode aired Saturday March 7th. For that podcast or others: http://www.benefitsinc.com/beneco-wisconsin/podcast-request/

BeneCo’s Radio Series


To Register: http://www.benefitsinc.com/beneco-wisconsin/aca-webinars/

Topic Date Time

Strategic Rx Spend Management 7/15/2015 10:30-11:30

When Does it Make Sense For My Plan to Pay Penalties? 8/12/2015 10:30-11:30

Anthem CEO Larry Schrieber: TBD 9/23/2015 10:00-11:00

Wellness with Results, Simplified / Guest: Wisconsin Athletic Club 10/21/2015 10:00-11:00

BeneCo’s Webinars


Archived Webinars

Website: http://www.benefitsinc.com/beneco-wisconsin/beneco-archived-webinars/


Short videos on benefits topics of the week.

Delivered once per week Examples:

Wellness and the EEOC What to do about Seasonal

Employees? Private Exchanges Stoploss Contracts and Coverage

under the Stability Period

Check out our website for the most recent and archived versions http://www.benefitsinc.com/beneco-wisconsin/aca-strategy-minutes/

BeneCo’s Strategy Minutes

http://www.benefitsinc.com/beneco-wisconsin/aca-strategy-minutes/








ACA Impact Study

ACA Impact Study How will ACA impact my organization? What do I need to plan for?

Free initial consultation Fee for service basis based on plan complexity ACA Sustainability Analysis How do I create a long term sustainable ACA cost strategy and

still comply? Fee for service basis based on plan complexity


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Jeff Schultz Vice President BeneCo of Wisconsin 262-207-1999 ext 112 [email protected]

Justin Andaloro Manager of Marketing & Communications BeneCo of Wisconsin 262-207-1999 ext 114 [email protected]

For Follow up Information or Questions

To Register for upcoming webinars: http://www.benefitsinc.com/beneco-wisconsin/aca-webinars/



https://www.linkedin.com/pub/jeff-schultz/2/184/402

https://www.linkedin.com/pub/justin-andaloro/7/bb0/827


Questions?

Documents

ACA: Creating a Safe Harbor Medical Plan to Immunize Your ... · HSA Plan COBRA Rates Non-Participant Wellness Participant Wellness 30% Penalty Achiever Score Score 0-71 71-100 Employee