Decoding the Affordable Care Act An Employer’s Translation By: Al Holifield Holifield & Associates, PLLC 11907 Kingston Pike Suite 201 Knoxville, TN 379234

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  • Slide 1
  • Decoding the Affordable Care Act An Employers Translation By: Al Holifield Holifield & Associates, PLLC 11907 Kingston Pike Suite 201 Knoxville, TN 379234 aholifield@hapc-law.com Phone: (865) 566-0115 Fax: (865) 566-0119
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  • Exchanges Essential Health Benefits (EHB) to include: 1.Ambulatory patient services; 2.Emergency services; 3.Hospitalization; 4.Maternity and newborn care; 5.Mental health and substance use disorder services, including behavioral health treatment; 6.Prescription drugs; 7.Rehabilitative and habilitative services and devices; 8.Laboratory services; 9.Preventive and wellness services and chronic disease management; and 10.Pediatric services, including oral and vision care
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  • Exchanges Prior to 2016, small employers are employers with 100 or less employees but states may limit to 50 employees or less Prior to 2017, only small employers (100 employees or fewer) can participate Starting in 2017 and thereafter, states may allow all employers to participate
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  • Exchanges Initial open enrollment period for the 2014 benefit year: October 1, 2013 through March 31, 2014 For benefit years in 2015 or later, the annual open enrollment period will be from October 15th through December 7th of the prior year Special enrollment provisions will be included
  • Slide 5
  • The Metals Exchanges to Offer Four Levels of Coverage: Bronze (60%) Silver (70%) Gold (80%) Platinum (90%) And: a catastrophic plan for individuals under 30 Insurers may offer separate health plan products outside of an Exchange, but they are prohibited from offering rates for those health plan products that are lower than those offered within the Exchange Exchanges
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  • Employers must issue notices to new employees with information about the Exchanges within 14 days of hire What employers are included? Any employer covered by the FLSA Hospitals, schools, and institutions of higher learning Governmental employers at the federal, state, and local level Who receives notice? All full time and part time employees Dependents do not receive a notice Notice to Employees
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  • The existence of the Exchange; Contact information and description of services offered on the Exchange; A statement that the individual may be eligible for a premium tax credit if the employee purchases a qualified plan on the Exchange A statement that if the employee purchases a qualified plan on the Exchange, the employee may lose the employer contribution to any health benefit plan offered by the employer and all or a portion of employer contributions may be excluded from federal income What Must Be Included in the Notice?
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  • Becomes effective on the first day of the plan year on or after January 1, 2015 unless employer meets new IRS transition relief requirements to delay mandate until January 1, 2016 See E-Alert IRS Issues Transitional Relief that Delays Employer Mandate Again. Guidance released August 31, 2012 is effective through 2014 90 days means 90 days within the first day they are eligible If employees can elect within 90 days but fail to elect within 90 days it is not a violation Employer may use a reasonable period to determine eligibility if (a) period is not designed to avoid the 90 day period limitation, (b) individual becomes eligible within 90 days of being assessed eligible or, if earlier, within 13 months of start date (plus the days to the first day of the next calendar month if the employees start date is the middle of the month) Pay-or-Play Mandates: 90-Day Waiting Period Requirement
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  • In 2015, the pay-or-play mandate requires employers of 50 full time employees or more that do not meet the new transition relief requirements delaying the mandate to 2016 to offer quality, affordable health insurance coverage to full time employees and their dependents (no spouses) Full time employees: those employees working on average 30 hours or more per week Failure to offer such coverage may subject the employer to a penalty for a given month if a full time employee receives a federal premium tax credit or cost-sharing reduction and is enrolled in coverage through a health insurance exchange Employer Pay-or-Play Mandate
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  • Nationwide Mutual Insurance Company v. Darden 503 U.S. 318, 112 S.Ct. 1344 (1992) Who is an Employee?
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  • Anyone who is not an Employee. Who is an Independent Contractor?
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  • For these purposes only, full time employees are determined by taking the sum of the employers full time employees (using a 30 hour per week standard) and the number determined by dividing the hours of service of employees who are not full time employees by 120 (full-time equivalents). When is an Employer Subject to Pay-or-Play?
  • Slide 13
  • Examples: Employer employs 40 full time employees and 20 part- time employees who each work 60 hours per month. 50 FTE: 40 + (20 60 120) = 50 Employer employs 35 full time employees and 20 part- time employees who each work 96 hours per month 51 FTE: 35 + (20 96 120) = 51 When is an Employer Subject to Pay-or-Play?
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  • Seasonal Employees Special rule for seasonal employees Seasonal workers are those who perform labor or services on a seasonal basis as defined by the DOL and retail workers employed exclusively during holiday seasons When is an Employer Subject to Pay-or-Play?
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  • Employers who opt out of providing benefits Employers who do not provide health coverage to all full time employees (and their dependents (no spouses)) are penalized If at least one full time employee (30+ hrs/wk or 130+ hrs/mo) is eligible for, or receives, a tax credit and enrolls in exchange coverage, the employer is subject to an annual penalty of $2,000 all full time employees (except for the first 30) Penalty is assessed monthly (i.e., $167.67 per full time employee per month) What are the Pay-or-Play Penalties?
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  • Example 1: No full time employee receives a tax credit No penalty assessed Example 2: One or more full time employees receive a tax credit The annual penalty is calculated by taking the number of full time employees minus 30, multiplied by $2,000 If there are 50 full time employees, the penalty would not vary if only one employee or all 50 employees received the credit; the employers annual penalty would be (50-30) $2,000 = $40,000 What are the Pay-or-Play Penalties?
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  • Employers who provide unaffordable coverage Coverage is affordable only if the premium for single coverage under the employers lowest cost plan with at least a 60% actuarial value does not exceed 9.5% of household income (or W-2 wages) Annual penalty is the lesser of $3,000 for each full time employee who receives a tax credit and enrolls in exchange coverage, or $2,000 multiplied by all full time employees (subtracting first 30) Penalty is assessed monthly (i.e., $250 per subsidy- receiving full time employee per month) What are the Pay-or-Play Penalties?
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  • Example 1: No full time employee receives a tax credit No penalty assessed Example 2: One or more full time employees receive a tax credit For an employer with 50 full time employees, annual penalty is the lesser of: The number of full time employees minus 30, multiplied by $2,000, or The number of full time employees who receive tax credits multiplied by $3,000 Assuming 10 full time employees received tax credits, the potential annual penalty on the employer would be $30,000 However, if the employer had 30 full time employees who received tax credits, then the potential annual penalty on the employer would be capped at $40,000 (20 employees $2,000) rather than $90,000 as calculated (30 employees $3,000) What are the Pay-or-Play Penalties?
  • Slide 19
  • Notice of Proposed Rulemaking (IRS), 78 Fed. Reg. 217 (01/02/13) Shared Responsibility for Employers Regarding Health Coverage Notice of Proposed Rulemaking (IRS), 78 Fed. Reg. 7314 (02/01/13) - Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage Proposed Rules (HHS/CMS), 78 Fed. Reg. 7348 (02/01/13) Exchange Functions; Eligibility for Exemptions (shared responsibility payment); Miscellaneous Minimum Essential Coverage Provisions Proposed Rules (IRS), 78 Fed. Reg. 16445 (03/15/13) Shared Responsibility for Employers Regarding Health Coverage; Correction Notice 2011-36 Definitions of employee, employer, hours of service Notice 2011-72 - Affordability of coverage Notice 2012-17 Determining full time employee Notice 2012-58 Interim guidance Determining Full Time Employee Status for Purposes of the Pay-or-Play Tax
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  • An employer elects to use a 6-month measurement period and a 6-month stability period for purposes of determining its full time employees The first measurement period runs from January 1, 2014 through June 30, 2014 and the associated stability period runs from July 1, 2014 through December 31, 2014 Example of Full Time Employee Status
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  • A Variable Hour Employee (new employees only) On start date, it cannot be determined whether employee is expected to work on average at least 30 hours per week Initial Measurement Period of between 3 and 12 months Assess average during Initial Measurement Period Assessment is then used for stability period that is th