Year 11 | 1st Qtr. 2013ACA: How will it affect the Hospitality & Service Industry?Beth Mahler

Putting the Pieces TogetherDavid Goldfarb

Unintended ConsequencesAdam Gersh, Michael Homans

Healthcare ConsumerismStuart Prescotton Hospitality Professionals

Healthcare

Reform

2014

Looking Ahead...

Are

YOUready?

Page 2

Editor: Beth Mahler Graphics: Julie LeakeFOCUSED is a quarterly publication of UNIFOCUS. For more information: marketing@unifocus.com

2455 McIver | Carrollton, TX | 75006 | 972.512.5000 | www.unifocus.com

FOCUSED is always looking for compelling content. If you have a particular success story or a unique industry perspective you would like to share with our readers, as well as any other comments,

please send them to: marketing@unifocus.com

unifocus.com

06 The Affordable Care Act: How will it Affect the Hospitality & Service Industries?

03 What are your Strategies for the 2014 ACA?

Contents

Join Us | Follow Us | Share With Us | View Us

16 Putting the Pieces Together Part 1: Why Are Health Insurance Costs Always Rising... pg. 18Part 2: What Else Can You Do? pg. 21Part 3: To Pay or To Play pg. 23

10 Healthcare Reform: Unintended Consequences for Time, Payroll & Benefit

13

34

Healthcare ConsumerismWhat can your employees do to help?

Want More Information?Additional Government Websites

Page 3

In this edition of FocusED, we are taking a look at the Healthcare Law that goes

into effect in 2014. There has been and will continue to be many discussions, points of view and further clarifications issued between now and the beginning of next year...and probably beyond. We will try to give you some additional perspective and hopefully, help you better understand options, potential impact and assist in setting a road map for actions in the coming months.

We have been listening to and discussing these issues with our partners for the last several months. The overriding discussion points seem to revolve around whether hours will be adjusted to have staff work under the 30 hour requirement for payment

of benefits, or if it is more cost effective to pay the penalty or pay the employer’s portion of a compliant plan (more on this in this edition).

What I want to focus on though, is what are some of the other potential costs that can have an impact on final strategies and decisions? It seems that the cost of providing a healthcare plan are pretty straight forward and seem to be, at least from some articles in the range of $600 to over $1200 per month for an employee. I would state that this is significantly more than we pay for our plan at UniFocus, but these numbers are the ones that appear to be thrown around. With this being said, I am aware of some plans that are already being developed by the industry that will meet the

unifocus.com

2014

WhatStrategiesAC A?for the

By Mark HeymannUniFocus Chairman and CEO

Page 4

legal requirements of the law at much lower costs. And I believe it is fair to assume that with the potential of millions of people now being required to have insurance, and a desire to not have money simply be paid to the government in the form of a tax (penalty), business creativity will take hold and solutions will continue to be developed to keep more of these dollars in the private sector. Further, mun ic ipa l i t ies , who are heavily b u r d e n e d today by non-r e i m b u r s e d h e a l t h c a r e they supply, will add pressure to the market to develop cost compliant plans.

This being said, I want to turn now to some of the other issues that companies need to look into, if an organization wants to accurately assess potential total costs. To do this, we need to look at other costs of employment. One key cost is that of turnover. Numbers range from a low of $3000 to up to $10,000 as the cost of turning over an employee. The first looks at the minimum direct cost of hiring, on-boarding and training. The latter includes this plus loss of productivity, impact on customers, lost revenue and managerial follow-up until the new team member is fully contributing. This becomes even more impactful as the hospitality continues to have a turnover rate of 100% or more, in many circumstances.

Let’s start with the mid-point of this range, say $7000 and let’s also assume an employment level of 120 FTEs. Further, all the staff is fully productive. Therefore, if an organization took the approach to reduce all staff to 30 hours, the

total staff would have to increase by 40 FTEs or an increase of 33%.

(120 x 40 hours per week equals 4800 hours of

work. Reducing to 30 hours be person means 160 people are needed to

get the 4800 hours of work done.) With a turnover of 100%, a company has the initial cost of $7000 per

employee to increase its staff to 160 (40 x $7000

= $280,000) plus with the turnover, another $280,000

over the next year. This equals $560,000 in the first year and

$280,000 each year after, assuming business stays at the same levels. The first year cost then would be $4,667 per initial staff (120) member. This is

very simple math and something that needs to be considered as an organization looks to address ACA.

But this is just one part of the scenario that is relatively easy to quantify. Another consideration is whether reducing employees to 30 hours increases your turnover to

over 100%. If the present staff level of 120 begins to turnover at a higher rate, say an increase of 25%, an organization will incur an additional 40 people turning over annually considering the new staffing levels, therefore

unifocus.com

Page 5

increasing cost another $280,000 per year or $2,333 per initial 120 FTEs. That’s a total of $7000 per initial employee in the first year.

Other aspects that this model doesn’t fully account for is the impact on the personal life of the employee. If you have been working 40 hours, you probably need to continue to work 40 hours which means an employee will have to find other employment to make up for the reduced hours. Does the individual go to work for a competitor? How difficult is it to juggle two employer schedules? Can you get the staff member to work when you need them? And finally, will the changes impact the level of engagement of the staff and therefore have other negative impacts on the business. These are a few additional issues that changing hours in response to the new law may create.

In summary, the strategies that an organization looks to employ in addressing ACA and the costs associated with the act; need to be looked at holistically. It is a multi-dimensional issue that cannot be oversimplified, or if it is, it may well be at the peril of the operation.

We hope that this edition is informative and helps to clarify the issues revolving around the Affordable Care Act.

As always, Learning is a daily process.

Mark

Training: What’s the Point?

With more than 35 years of expertise in the hospitality and service industry, Mark Heymann is a founding partner and CEO of UniFocus. He is an expert in staff & strategic planning, managerial performance and measurement systems. Mark earned a B.A. in economics from Brown University and a M.S. in business from Columbia University.

Page 6

& The Hospitality and Service Industries typically employ more part-time hourly workers than companies in other industries. This means they will be more affected by key provisions in the ACA that are set to take effect in 2014.

Cost of the Impact46% of the employers in the hospitality industry expect their costs to increase by 3% or more. One-third of the industry does not yet know what the full impact will be on their businesses.

What causes the increase for Hospitality?In 2014, employers with 50 or more full-time equivalent employees will be required under ACA to extend coverage in a qualified health plan (full-time is defined as: employees working an average

Hospitalityservice industries?

The AffordAble CAre ACT:

How will it affect the

by Beth MahlerMarketing Director, UniFocus

The Affordable Care Act (ACA) will significantly impact the way the Hospitality and Service industries manage and schedule labor. Is your organization ready for the ACA? First you need to know what the changes mean for you.

unifocus.com

By Beth MahlerUniFocus Marketing Director

Page 7

of 30 or more hours per week in a month). The added costs for the hospitality sector will come from extending coverage to employees who are currently ineligible for coverage in an employer-sponsored plan. Employers that do not provide such coverage will face a penalty of $2,000 per employee, minus the first 30 employees.

What are your options?For employers in the Hospitality and Service industries, the 30-hour provision comes down to a decision between:

1. Reducing the number of hours for certain employees to less than 30 per week

2. Extending coverage to all employees working 30 or more hours per week — essentially replacing some part-time positions with full-time equivalents

3. Holding the course and pay penalties as needed.

What does Affordable Coverage mean?Under the ACA’s shared responsibility requirement, employers must offer “affordable” health coverage to their employees. Full-time employees should not be asked to pay more than 9.5% of their household income for coverage. If an employee’s contributions to

health coverage is greater than this 9.5% level the employer may be subject to a $2,000 annual penalty per full-time employee or $3,000 per full-time employee receiving tax credit.

To offer more affordable plans, with lower contributions from employees, these employers have two primary choices:

1. Reduce the employee contribution required in the current plan. This option would clearly result in higher costs for employers.

2. Add a lower-cost plan with lower contributions. This could either raise or lower cost, depending on whether the lower-cost plan was offered as an option or as a full replacement.

What about the Individual Mandate and Medicaid Expansion?When the Individual Mandate goes into effect, it requires all employees and individuals who can afford coverage to obtain it or pay a tax

Hospitality

ACA: How will it affect the Hospitality Service Industry?

Subsidy Chart

Page 8

penalty. Employers who currently have high opt-out rates could experience a significant increase in future enrollment.

Under the ACA, Medicaid will expand to include individuals with a household income less than 133% of the federal poverty level (FPL). However, some states are legally opting out of the Medicaid Expansion (including Texas, Florida, South Carolina, and Louisiana), which could impact your costs.

Preparing for ACAWhen determining strategies to comply with the ACA, Hospitality and Service organizations should consider the following questions:

1. What mix of full-time and part-time employees will create the optimal balance between healthcare costs and workforce productivity?

2. Do our current health plans meet the ACA’s standard of “affordability”?

3. What would it cost to add additional healthcare options for our workers?

4. How are the states in which we operate responding to the ACA, including the Medicaid expansion?

5. What options are available to help us navigate administration infrastructure?

6. How do we determine if we are subject to the penalty?

7. How do we determine whether we have Large Employer Status?

8. What determines the full-time status of employees and the number of FTEs?

9. How is the amount of a penalty payment calculated?

What are the next steps?Minimize your compliance risk by the monitoring and scheduling your labor with proper Labor Management Systems and Time and Attendance tools.

Begin preparing NOW to minimize the impact in 2014 by doing the following:

n Schedule and monitor work hours to meet ACA requirement

n Set weekly work hour maximums by individual employee for easy monitoring

ACA: How will it affect the Hospitality Service Industry?

Page 9

n Begin real-time com-pliance reporting of in-week employees approaching over-time

n Manage in-week adjustments for full-time, part-time, and seasonal employ-ees while ensuring projected hours are being met

n Create an accurate labor analysis for the employer-chosen look-back period and on-going monitoring

n Determine employee benefit eligibility by averaging work-week hours in your system

n Create configurable reports for govern-mental compliance reporting

n Produce an accurate labor analysis for hours worked by full-time, part-time, and seasonal employees for compliance

Please contact UniFocus if you would like to discuss opportunities to mitigate the impact of the ACA, before it goes into affect in 2014.

ACA: How will it affect the Hospitality Service Industry?

Page 10

unifocus.com

Many employers already know that if they have 50 or more full-time equivalent employees, beginning January 1, 2014, they will likely need to offer health insurance to full-time

employees or pay a penalty under the Patient Protection and Affordable Care Act (ACA). However, employers should not wait to start identifying whether employees are full-time under the ACA. This is because the implementation of the ACA will likely allow employers to take advantage of a “look back” period of up to 120-months to determine whether workers are full-time (generally defined under the ACA as an average of 30 hours per week, or at least 130 hours in a month).

The purposes of using a look back period would be to give effect to the ACA while giving employers a measure of predictability. Under the possible look-back period being considered, an employer would assess each employee’s full-time status by looking back at a period of not less than three but not more than twelve consecutive calendar

Healthcare Reform: Unintended Consequences for Time, Payroll & Benefits

Real-time ExampleFlaster/Greenberg PC4 Penn Center, 1600 JFK Blvd.,

Philadelphia, PA 19103

Phone: 215-279-9379

Email: michael.homans@flastergreenberg.com

Email: adam.gersh@flastergreenberg.com

Michael D. Homans, Attorney

Adam E. Gersh, Attorney

Page 11

months — as chosen by the employer — to determine whether the employee averaged at least 30 hours per week (or, at least 130 hours per month) during the measurement period.

Based upon the current proposal, if a given employee qualifies as a full-time employee during the measurement period, then the employee must be treated as a full-time employee during a subsequent “stability period,” regardless of the number of the employee’s hours of service

during the stability period, so long as he or she remained an employee. The stability period would be a period of at least six consecutive calendar months that follows the measurement period and is no shorter in duration than the measurement period. On the other hand, if an employee is not a full-time employee during the measurement period, the employee would be permitted to treat the employee as not a full-time employee during a stability period not to exceed the measurement period.

Unintended Consequences for Time, Payroll & Benefit

Measurement Periods With Administrative Periods

Page 12

Unintended Consequences for Time, Payroll & Benefit

Automate beyond core payroll and benefits to achieve results in order to provide a seamlessly integrated solution

n Workforce management (Time)• Notices sent to managers as employees approach 30 hours in any week• Ability of managers to see scheduled hours for all employees in order to manage hours

assigned in conjunction with liability for healthcare costs

n Database of record (Time & Payroll)• Payroll tracks of actual hours worked• Payroll send automated trigged to benefit

administration system when employee exceeds 130 hours per month

n Benefits administration Employee eligibility calculation is triggered (Benefits)• Appropriate look-back and coverage

period rules are applied• Employee is notified of eligibility

— avoiding penalty

n Reporting and reconciliation• Federal and State reporting• Reconciliation with penalty assessments

Michael D. Homans practices labor and employment law, concentrating on the litigation of workplace disputes and pre-litigation advice to employers and employees. He represents a wide range of companies, nonprofit organizations and individuals throughout Pennsylvania, New Jersey and New York. He serves as lead counsel in cases concerning wrongful termination, harassment, discrimination, retaliation, whistleblowing, non-compete agreements, wage payment and overtime, family and medical leave, and breach of contract. Mr. Homans has obtained favorable judgments and verdicts for his clients in trial and appellate courts, administrative agencies and through alternative dispute resolution. Mr. Homans also drafts and reviews employee handbooks, severance agreements, policies and contracts.

Adam E. Gersh is a member of Flaster/Greenberg’s Litigation and Labor and Employment Practice Groups. Mr. Gersh represents businesses and individuals in employment and complex business disputes in the federal and state courts of New Jersey and Pennsylvania and before federal and state administrative agencies. Mr. Gersh is the former co-chairman of the Camden County Bar Association’s Continuing Legal Education Committee and a Camden County Bar Association trustee. Mr. Gersh has lectured on limiting employer liability in the healthcare profession and moderated seminars on legal negotiation techniques and hot topics in employment law. He is also a member of the board of The Betty and Milton Katz Jewish Community Center.

WorkForce Management Integration is KEY!:Shared Responsibility Requirement Under ACA

Page 13

unifocus.com

This article will tell you how to feel better faster.

I finally gave in to having an MRI on my hip. The orthopedist told me he just couldn’t diagnose my problem without an MRI, and since I couldn’t cross my legs, I gave in. He sent me down to the business office to get scheduled where the nice lady picked up

the phone and called the imaging center. “I need to schedule an MRI for a patient”, she said. I whispered to her, “Hang on, how much is it?” “He wants to know the price”, she said. “$1500”, she told me, to which I replied, “Don’t schedule it, I’m going to check around”. “He’s going to shop around”, she said into the phone. Brief pause. “$450, Mr. Prescott, would that be OK?”

Incredible negotiating skills, don’t you think? Not! All I did was ask how much it was. And boom! She gave me the best price.

What else on earth do we buy like that? The fact is, we Americans are simply terrible at buying healthcare services. The doctor says to have a CAT Scan and we do it, no questions asked. He prescribes a name brand drug and we take it. He says come back and see me in 3 weeks and we go, even though our sprained ankle feels great and we played 3 sets of tennis after only one week.

Stewart Prescott

Founding partner of Prescott Pailet

Benefits

A Marsh & McLennan Agency LLC Company

Direct Phone: 972-770-4523

Main Number: 214-739-5442

Fax: 214-739-5625

sprescott@prescottpailet.com

www.prescottpailet.com

HealtHcare What can your employee’s do to help?

Consumerism

Page 14

Healthcare Consumerism

Could you imagine going into a store, trying on a great looking shirt and buying it, not finding out how much it costs til you got your credit card bill at the end of the month? If you bought a new washing machine and it didn’t work, would you pay Best Buy all over again to replace it? Do you go to the grocery store and toss stuff in the shopping cart without ever looking at the price, seeing if you’re getting the right grape jelly value or checking to see if it’s on sale? Are you kidding? Millions of Americans won’t ever buy anything without a coupon!

But we buy healthcare services that way, even though it’s your money, just the same. We have no idea what this stuff costs and that’s why it costs so much. The ultimate consumer, YOU, isn’t participating. We don’t use our power to hold down the cost of care, like the orthopedist MRI or grape jelly examples. This is absolutely the single greatest reason health insurance premiums increase dramatically. When claims are high, insurance premiums must be high. When claims are reduced by conscientious consumers, it leads to lower premiums.

One client, inspired by the concept of healthcare consumerism did a little internet research on her $80 combo prescription used to treat two conditions. One little Google and she discovered that the two drugs, purchased separately, were available at COSTCO for $4 each. She called her doctor to see if he felt it was OK. She was thrilled to save $850 per year on that one RX, with her doctors blessing, just by taking two pills instead of one. Plus, she got one of those delicious COSTCO hot dogs on her way out. (Disclaimer: This article is about healthcare, not health).

Ten Tips That Will Keep You

Healthy!

1. Don’t smoke.

2. Avoid over-exposure to the sun.

3. Reduce your stress level.

4. Know your cholesterol and blood sugar levels and have them checked regularly.

5. Get at least 30 minutes of exercise five days a week.

6. Cut down on sugar and white flour, and drink more green tea.

7. Get your annual medical checkups

8. Maintain a healthy weight

9. Get enough sleep.

10. Know your family history and how it may affect your health and wellness.

Your Health...It’s Up to You!

Page 15

Healthcare Consumerism

I recently read a study that says that patients are reluctant to ask questions about the care they’re receiving, for fear their doctor will feel they’re challenging their expertise. To that I say, you’re the customer. Challenge the doctor. He/She actually wants you to know what’s going on with you medically, and for you to understand what the course of treatment will do. It’s widely reported that patients that are involved in their care, get much better outcomes, and for a lot less money.

There are definitely other issues that cause health insurance premiums to go up. Those are for another article. But for now, we American consumers can make a difference. It is in OUR control. We just all need to become better consumers of healthcare. And when we do, we’ll keep our own money in our own pocket. We’ll not rush for treatment without thinking it through and we’ll pay less for medical services, when we do decide to buy them. And doing any of that means claims go down.

Ask good and many questions of your provider. We know so much more about our own bodies and information is so easily accessible on the internet. Research and trust your instincts. Stay away from the emergency room, except in a real emergency! Try generic drugs. Make healthcare purchases as knowledgeable consumers.

Saving money will make you feel better...faster!

Stuart is a founding partner of Prescott Pailet Benefits, having entered the insurance business in 1985, and is a highly regarded interpreter of healthcare legislation, trends and market changes. He was an early champion of using health savings accounts to lower premium costs, which has been essential to the growth and development of Prescott Pailet Benefits and is known as a strong advocate of and speaker about healthcare consumerism. He has served on the coveted Advisory Councils for Aetna, Humana, and Assurant, and has contributed to Prescott Pailet’s ‘elite’ status among pre-eminent brokers, affording their business clients concierge service attention and competitive rates. His special appetite is small to medium sized companies, as he particularly enjoys the opportunity to make long term business relationships.

Page 16

unifocus.com

Page 17

Putting the Pieces Together

Putting the

Pieces Together

Digital Benefit Advisors, a division of digital insurancePhone: 972.241.0044dgoldfarb@digitalbenefitadvisors.comwww.digitalbenefitadvisors.com

By David Goldfarb

Managing Principal, Digital Benefit Advisors

Page 18

Why Are Health Insurance Costs Always Rising…

...and Is There a Solution?

Putting the Pieces Together

Putting the Pieces Together — Part 1

Page 19

High Tech is High Cost

Exponential advances in technology have undoubtedly changed the world we live in today. Nowhere is this more apparent than the high tech world of medicine. In the past decade, major innovations, such as minimally invasive and robotic surgeries are now com-mon procedures, and what used to be con-sidered rare and perilous operations, such as organ transplants, are no longer uncommon and far less dangerous. There have been many improvements in healthcare, but all come with higher costs. Every day there are breakthroughs that allow more lives to be saved and the qual-ity of other lives to be improved. We all share in the cost of developing these breakthroughs.

Inflation

About one-third of rising costs is inflation. Medical care is not immune to it. Across the United States the cost of goods and services is rising as the inflation rate rises to meet higher labor costs, professional fees and operating overhead.

The Aging Population

The cost of treating people over the age of 65 is four or more times higher than the cost of treating the rest of the population.

Uncompensated Care

The cost of providing healthcare for those who will not or cannot pay is rising dramatically. As uninsured numbers continue to climb, there is an increase in the cost of uncompensated care to hospitals, which in turn shifts the burden of “indigent” care to those who have private insurance.

Chronic Illnesses and Drug Costs

New treatments to help people with chronic illnesses, like AIDS and cancer, are making a huge difference in helping people live longer and even defeat their diseases. Two examples of breakthrough cancer drugs are Herceptin (targets a type of breast cancer characterized by a specific cancer gene, called HER-2, an estimated 25 percent of women with breast cancer, will respond to Herceptin even when other powerful chemotherapy drugs have failed) and Gleevec (targets a genetic mutation that causes cancer cells to grow and multiply in patients with a variety of cancers, including chronic myeloid leukemia or stomach cancer). But the treatments add costs to the insurance system.

n A full one-year course of Herceptin treatment costs approximately $70,000.

Health insurance premiums and costs are rising. Why? There are no simple answers, but there are agreed upon explanations: primarily rising physician, hospital and related medical costs.

Putting the Pieces Together

Page 20

n The cost of Gleevac ranges from approximately $32,000 to $98,000 a year

Heroic efforts

In America, we go to extraordinary means to save lives that other countries would let expire. In Britain, for example, the national healthcare system has denied transplant surgery, blood dialysis and other expensive treatments for patients over a certain age or

those who are in poor health. In the United States, pharmaceutical companies claim they need to charge higher rates for new drugs because of higher research and development investment costs, along with the costs of testing and the approval process.

Fewer Hospital Admissions

As more people are treated in outpatient settings, hospitals must spread their brick and

Putting the Pieces Together

Page 21

Putting the Pieces Together

mortar costs over fewer patients. Hospitals have started to compensate by charging more when one is in the hospital.

Social Ills Drive Up Costs

Emergency rooms - one of the most expensive treatment options - report more than a million admissions from assaults every year. Thousands of drug-exposed babies are born every year that require extraordinarily high costs. Teenage girls are more likely to have premature births and other complications. These social problems contribute to higher medical costs.

Life Style Influences

With an epidemic rise in obesity and inactivity – causing various illness; diabetes, heart disease,

strokes, and leads to major structural conditions such as back, knee and hip issues.

Physicians Litigated

Malpractice insurance costs billions for physicians and providers. Unnecessary tests, performed solely to protect doctors from liability, add to the exploding costs of “defensive medicine.” These costs are then passed on through higher physician and hospital bills.

Despite the numerous reasons for rising health-care costs, there are other options employers can do to cut costs without cutting corners.

Putting the Pieces Together — Part 2

What Else Can You Do? n Employers need to invest extra time

preparing for open enrollment, specifically focusing on how they communicate benefits to employees (and their spouses); look at using different types of technology as a medium to reach some of the different generations of employees at the organization (i.e. web-based messaging, social media, apps, etc.)

n Employers want to ensure all employees have access to tools to make them better consumers of healthcare

n Employers need to look at manageable wellness initiatives that can be implemented

n Employers could strongly consider incorporating some type of consumer-driven health plan into their benefits package such as an HSA, HRA, and/or FSA (i.e. Health Savings Accounts, Health Reimbursement Arrangements, Flexible Spending Accounts)

n Employers want to consider partnering with a benefits consulting firm who understands their specific needs and vision to tailor the most appropriate benefits program

Page 22

Putting the Pieces Together

Page 23

For Many Employers, the Answer is not Simple…

The answers to both questions are correct depending on an employ-er’s unique needs and what they are trying to accomplish.

There are several key concepts within the ACA that employers, especially in the hospitality industry, should be aware of as it can have significant cost implications for 2014 and beyond.

n How to Determine Employee Status n How to Determine Company Status n How to determine the Penalty

Starting in 2014, large employers, generally those with at least 50 full-time employees will be subject to the employer shared responsibility

(“pay or play”) requirements under ACA (Affordable Care Act). If these employers do not offer affordable health insurance that provides a minimum level of coverage to their full-time employees, they may be subject to a penalty if at least one full-time employee receives a subsidy or partial subsidy for purchasing individual coverage through one of the new health insurance exchanges.

Timeline for Compliance - The “pay or play” requirements generally go into effect on January 1, 2014. Employers will use information about the employees during the 2013 year to determine whether they have enough employees to be subject to the requirements in 2014. A company’s status will be determined based on the number of employees it employed during the prior year.

To calculate potential liability for a penalty, large employers must determine each employee’s full-time status. An employee is considered full-time for a month if he or she

Putting the Pieces Together

To Pay To

or

PlayWhich Pieces Go Where?

Putting the Pieces Together — Part 3

Page 24

Putting the Pieces Together

averages at least 30 hours of service per week (or 130 hours per month). As an alternative to a month-by-month calculation, at least through 2014, employers may use a look-back method for determining in advance if an employee is to be treated as full-time, based on the employee’s hours of service during a previous period. This section outlines the steps for utilizing this look-back period.

Transitional relief is available for certain employers sponsoring health plans that operate on a fiscal year (not the calendar year), as well as for employers who are close to the 50 full-time employee threshold in 2013.

How to Determine Employee Status

The Look Back PeriodLarge employers that use the look-back method for ongoing employees may also use this method for determining the full-time status of new variable hour employees and seasonal employees.

Standard Measurement Period (SMP): period of time to be used to look back and measure an employee’s hours of service

Administrative Period (AP): an additional 90 days between the measurement period and the stability period, to determine which employees are eligible for coverage and to notify and enroll employees.

Stability Period (SP): period employee is treated as full-time based on hours of service (if hours are eligible) after the standard measurement period and any administrative period.

Initial Measurement Period (IMP): for new employees is to be between 3 and 12 consecutive months and may begin on any date between the employee’s start date and the first day of the first calendar month following the start date.

Employers using the look-back method need to begin their measurement periods in 2013 to have corresponding stability periods for 2014.

However, employers intending to adopt a 12-month measurement period (and in turn a 12-month Stability period) will face time constraints. Solely for purposes of stability periods beginning in 2014, employers may adopt a transition measurement period shorter than 12 months (but no less than 6 months) and that begins no later than July 1, 2013 and ends no earlier than 90 days before the first day of the plan year starting on or after Jan. 1, 2014 (90 days being the maximum permissible Administrative period.

Determine Status of Full-time Employees and Full-time Equivalents

1. Calculate the number of full-time employees (including seasonal employees) for each calendar month in the previous calendar year.a. A full-time employee for any month

is an employee who is employed, on average, at least 30 hours of service per week or 130 hours per month

b. Hours of service include when an employee is paid or entitled to payment when no work is performed (I.e.; vacation, sick leave, etc.).

2. Calculate the number of full-time equivalents (FTE’s), including seasonal employees, for each calendar month in the previous calendar year.

Page 25

Putting the Pieces Together

To determine the number of FTEs for a calendar month:a. Calculate the total hours of service (but

no more than 120 hours of service for any employee) for all employees who were not full-time for that month.

b. Divide the total hours of service by 120 and record this number (including any fractions) and this is the number of FTEs for the calendar month.

Determine Status of Ongoing Employees

1. Choose the period of time that will be used to look back and measure an employee’s hours of service, this is the Standard Measurement Period. a. The measurement period is a defined

period between 3 and 12 consecutive calendar months

b. An employer may apply different periods for the following categories of employees:

i. Salaried versus hourly employees

ii. Employees in different states

iii. Collectively bargained versus non-collectively barged employees

iv. Collectively bargained employees covered by separated contracts

2. Determine whether the employee averaged at least 30 hours of service per week (130 hours per month) during the standard measurement period.

Hours of service include hours for which an employee is paid or entitled to payment.

For employees not paid on an hourly basis, employers may use a days- or

Page 26

Putting the Pieces Together

weeks-worked equivalency, where an employee is credited with 8 hours of service per day (or 40 hours per week) for each day (or week) the employee is credited with at least one hour of service.

Special rules apply for teachers and other employees of educational institutions, as well as employees who are rehired or resume services after special periods of unpaid leave (e.g., FMLA).

Administrative Period: Utilize up to an additional 90 days between the measurement period and the stability period, to determine which employees are eligible for coverage and to notify and enroll employees. The Administrative period must overlap with the prior stability period so ongoing employees enrolled in coverage continue to be covered.

3. Treat the employee as full-time (if hours are eligible) for a certain amount of time after the standard measurement period and any administrative period, based on the hours of service during the measurement period—this is the Stability period.

Employees determined to be full-time based on the measurement

period are treated as full-time during a Stability Period of at least 6 consecutive calendar months, no shorter than the Standard Measurement Period (regardless of the number of hours of service during the stability period).

Employees who did not work full-time during the measurement period may be treated as not full-time for a Stability Period that is no longer than the associated Standard Measurement Period.

How to Determine Status of New Employees: Variable and Seasonal

A new employee is considered a variable hour employee at the start date if that the employee is reasonably expected to be employed on average less than 30 hours per week.

As the law does not address how the term “seasonal employee” might be defined for purposes other than the determination of large employer status, employers may use a reasonable, good faith interpretation of seasonal employee through 2014. As a reference:

A new seasonal employee is an employee who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including seasonal workers covered by 29 C.F.R. § 500.20(s)(1) and retail workers employed exclusively during holiday seasons.

1. Choose an Initial Measurement Period to measure the new employee’s hours and determine if the employee averaged at least 30 hours of service per week.a. The Initial Measurement Period is to be

between 3 and 12 consecutive months, may begin on any date between the

Page 27

Putting the Pieces Together

employee’s start date and the first day of the first calendar month following the start date.

b. Calculate a new employee’s hours of service using the same rules that apply for ongoing employees.

Utilize administrative period before start of the stability period

a. The Administrative period may not exceed 90 days total, including all time between the start date and the date the employee is first offered coverage

b. The Initial measurement period and the administrative period combined cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the employee’s start date.

2. Depending on the employee’s hours of service during the initial measurement period, treat the employee as full-time (or not) during the Stability Period that follows.a. Treat employees determined to be

employed on average at least 30 hours of service per weeks as full-time during the same mea-sure of Stability Period utilized for ongoing employ-ees.

b. Employees that do not aver-age at least 30 hours per week may be treated as not full-time for a stability period not more than one month longer than the initial measure-ment period. The Stability period may not exceed

the remainder of the standard mea-surement period (plus any associated Administrative periods) in which the ini-tial measurement period ends.

3. Once a new variable hour or seasonal employee has been employed for an entire Standard Measurement Period, test the employee again for full-time status.a. Test the employee for full-time status

beginning with the employer’s Standard Measurement Period, at the same time and under the same conditions as it applies to other ongoing employees.

*If an employee is determined not to be full-time during the Initial Measurement Period but is then determined to be full-time during the overlapping period or immediately following the Standard Measurement Period, he/she must be treated as full-time for the entire Stability Period corresponding to that Standard Measurement Period (even if that Stability Period begins before the end of the Stability Period associated with the Initial Measurement Period).

Page 28

Putting the Pieces Together

Penalties for Employers Not Offering Affordable Coverage Under the ACA

Page 29

Putting the Pieces Together

Penalties for Employers Not Offering Affordable Coverage Under the ACA

Page 30

Putting the Pieces Together

How to Determine Company Status1. Add the number of full-time employees

and FTEs for each of the 12 months in thepreceding calendar year and record thetotal

To determine coverage for 2014, an employer may use any 6-consecutive-month period in 2013 to measure whether it has 50 full-time employees.

2. Divide the total sum by 12. This is theaverage number of the employer’s full-timeemployees for the previous calendar year.

3. If the number of full-time employees is lessthan 50, the employer is not subject to the“pay or play” rules.

4. If the number of full-time employees is 50 ormore, the employer is subject to the “payor play” rules unless the seasonal employeeexception applies.

An employer that exceeds 50 full-time employees for 120 days or less during the previous calendar year is not subject to “pay or play” for the current year if the employees in excess of 50 during that period were seasonal employees.

FULL TIME EMPLOYEE + FULL TIME EQUIVALENTS = >50 = LARGE EMPLOYER STATUS

Companies that have a common owner or are otherwise related generally are combined to determine if they employ an equivalent of at least 50 full-time employees. If the combined total meets the threshold, each company is subject to the “pay or play” rules, even those that individually do not employ enough employees to meet the threshold. (The rules for combining related employers do not apply when determining if an employer owes a penalty or the amount of any penalty.)

How to Determine the Penalty1. Employers not offering coverage to at least

95% of full-time employees are subject topenalty.

The penalty for a large employer who does not offer coverage during the

calendar year to at least 95% of its full-time employees (and, after 2014, their dependents) where at least one full-time

employee is certified to receive a premium tax credit or cost-sharing

reduction (subsidy) is calculated as follows:

Number of Full-Time Employees MINUS first 30 MULTIPLIED by $2000 EQUALS Penalty of $_____

Page 31

Putting the Pieces Together

Example: A large employer employs 100 full-time employees in each calendar month of 2014 and does not provide an employer-sponsored health plan. At least one of the employer’s full-time employees is certified to receive a premium tax credit or cost-sharing reduction (subsidy). The employer is subject to a penalty equal to 70 x $2,000 (100 full-time employees minus 30 and then multiplied by $2,000) = $140,000 for 2014.

2. Employers offering coverage that is not affordable or does not provide minimum value are subject to penalty.

For a large employer that offers coverage to at least 95% of its full-time employees (and, after 2014, the dependents of those employees) but has one or more full-time employees who is certified to receive a premium tax credit, or has a cost-sharing reduction for purchasing insurance through a Health Insurance Exchange, the penalty payment is computed separately for each month as follows:

Number of Full-Time Employees Receiving Subsidy MULTIPLIED by 1/12 of $3000 = Penalty (the lesser of the amount calculated or the amount that would be owed if the employer did not offer coverage)

Example: A large employer employs 100 full-time employees in each calendar month of

2014 and provides an employer-sponsored health plan to these employees. Five full-time employees of the employer are certified to receive a premium tax credit (subsidy) during each month in 2014. The employer is subject to a penalty equal to 5 x 1/12 of $3,000 = $1,250 x 12 months = $15,000 (the lesser of $15,000 and $140,000) for 2014

An employer that offers coverage to a new full-time employee (an employee reasonably expected at the start date to be employed on average at least 30 hours per week or 130 hours per month) at or before the end of the first 3 calendar months of employment is not liable for a penalty for not offering coverage to the employee during that time.

For an employer that offers coverage for some months but not others during the year, the payment is computed separately for each month for which coverage was not offered.

Page 32

The penalty amount for the month equals the number of full-time employees for the month (minus up to 30) multiplied by 1/12 of $2,000.

Do not count as full-time those employees (a) who are new full-time employees during their first 3 months of employment, (b) who are new variable hour or new seasonal employees during the months of that employee’s Initial measurement period and associated administrative period, or (c) who were offered the opportunity to enroll in coverage under an eligible employer-sponsored plan that satisfied minimum value and met one or more of the affordability safe harbors.

For calendar years after 2014, penalty amounts will be adjusted for inflation.

3. If your company offers coverage, and an employee opts out, then what?

This depends on two primary factors: Is it affordable and does it cover the essentials?

A. Is the plan “affordable”?

B. Does the plan cover “essential health benefits” --- 10 categories, listed below:

a. Ambulatory patient servicesb. Emergency servicesc. Hospitalizationd. Maternity and newborn caree. Mental health and substance use

disorderf. Prescription drugsg. Rehabilitative and habilitative servicesh. Laboratoryi. Preventive and wellnessj. Pediatric services

The technical answer: The law states that coverage will be deemed “affordable” only if the cost of lowest-level employee-

only coverage does not exceed 9.5% of an employee’s W-2 wages. This calculation is done on an individual basis, but it does not require that overall premiums be set individually. An employer can set the premium contribution rate at a number that satisfies the 9.5% rule for the lowest-paid F-T employee and would be compliant for everyone.

Alternatively, premium could be set so each employee electing coverage has the same percentage. The percentage contribution could be set for all employees to take the same percentage as long as that percentage was set at less than or equal to 9.5%. Keep in mind that the plan being unaffordable for one does not make it unaffordable for all.

Also, penalties would be due only on each unaffordable person who actually gets exchange coverage with a subsidy or credit.

Finally, employees who buy coverage higher than the lowest-tier individual plan are not subject to the 9.5% test -- as long as they had the option to get that individual coverage at no more than 9.5% of W-2 wages.

David Goldfarb, was founder and president of DSG Benefits Group, an independent boutique employee benefits consulting and brokerage firm. DSG Benefits Group was established in 2004, and grew exponentially, working with hundreds of employers, insuring tens of thousands of employees, and licensed in over 30 states. David has been nationally recognized as a visionary in employee benefits. In July 2012, David was asked to assume the role of Managing Principal and become part of Digital Benefit Advisors (DBA), a subsidiary of Digital Insurance, the nation’s leading employee benefits platform specializing in benefits management for mid-sized businesses. Is your organization ready for the ACA?

Putting the Pieces Together

Page 33

Putting the Pieces Together

Page 34

Additional Government websites that might be of interest to you:

The White House

n http://www.whitehouse.gov/healthreform

n http://www.whitehouse.gov/healthreform/relief-for-americans-and-

businesses#employers

Health Care

n http://www.healthcare.gov/

n http://www.healthcare.gov/using-insurance/employers/large-business/

n http://www.healthcare.gov/using-insurance/employers/small-business/index.html

Answers USA Government

n http://www.usa.gov/index.shtml

n http://search.usa.gov/search?utf8=%E2%9C%93&sc=0&query=health+care+act&m=&affiliat

e=usagov&commit=Search

Want

InformatIon?More

Page 35

More US Small Business Administration

n http://www.sba.gov/healthcare

United States Department of Labor

n http://www.dol.gov/ebsa/healthreform/

Internal Revenue Service

n http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions

Begin to prepare NOW to minimize the impact LATER!

2455 McIver LaneCarrollton, TX 75006972.512.5000

Are

AC A ?for the

YOUready