95
Affordable Care Act Update 2014 Conference Forum
Affordable Care Act
Update
2014 Conference Forum
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Disclaimer
The material in this update is provided
as general information and education.
It should not be construed as, and does not
constitute, legal advice nor accounting, tax,
or other professional advice or services on
any specific matter, nor does this message
create an attorney-client relationship.
Readers should consult with their counsel or
other professional advisor before acting on any
information contained in this presentation.
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Agenda
• UMC Question: Who Is the Employer of Clergy?
• Employer Shared Responsibility
• Employer Reporting and Certification
• Affordability
• Other Reporting Requirements
• Account-Based Plans and Excepted Benefits
• Fees, Taxes and Coming Attractions
• ACA* Major Reforms—2014 — Exchanges for Individuals, Tax Credits, Exchanges for Employers
• Conference Strategies
• General Board of Pension and Health Benefits Efforts
* ACA: Affordable Care Act (Patient Protection and Affordable Care Act, PPACA)
Who Is the Employer?
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UMC Clergy Employer
• IRS Final Rule for ACA Employer Shared
Responsibility Provision (February 12, 2014)
— Did not directly respond to Church Alliance (UMC)
question on “Who is the employer”
• Church Alliance comment letter to Proposed Rule
for Employer Shared Responsibility
(March 18, 2013) — Sought application of “pay or play rule” at
local level (i.e., local church) in all denominations
— Urged “good faith” standard
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IRS Standard (for Now)
Churches [e.g., UMC local churches] and
conventions and associations of churches
[e.g., annual conferences, denominations]
may use a “reasonable, good faith interpretation”
of [the Tax Code] to determine who is an “applicable
large employer” under the Employer Mandate.
Treating appointed clergy as “employee” of local
church that pays their salary and issues their W-2
should be reasonable, good faith interpretation
1
Treating local churches as separate employers from
the conference and from each other (generally)
seems reasonable, good faith interpretation
2
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UMC Clergy Employer
• Clergy: Self-employed
for FICA/SECA purposes
(per statute)
• Tax Court case:
Weber v. Commissioner — UMC clergy: “employees”
for income tax purposes
— Applied “common-law standard”
— Court declined to decide whether local church of annual conference was “employer”
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UMC Clergy Employer
Common-Law Test
• Plurality of 20 factors point to local church
• Key factors: “Day-to-day control of method,
manner and means of the work”
ACA Notice Employer is local church
W-2 Reporting
(once applied) Local church
Employer Shared
Responsibility
Reasonable, good faith argument
for local church
Employee Coverage
Reporting
Reasonable, good faith argument
for local church
Employer Shared Responsibility
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Also called “Employer Mandate”
or “pay or play” rule
Employer Shared Responsibility
Effective Date:
• Statute: January 1,2014
• July 2013 Delay January 1, 2015
• New delay for some employers—2016
Applies only to large employers
• Applicable large employer
averages 50 or more full-time
equivalent employees (FTEEs)
Small employers
(<50 FTEEs)—
exempt
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UMC Impact
• Employer Shared Responsibility Rule
should not apply to most UMC local churches
• However, each annual conference
will likely have a few to a few dozen
local churches subject to the Rule
— E.g., 3 to 12 in Indiana; 50+ in Oklahoma
• Many annual conference offices
will be affected
• General agencies affected
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Final Rule Highlights
Mid-sized employers (50–99 FTEEs)
Delay January 1, 2016
Certification required: employer must certify to IRS
• No layoffs to avoid 100 FTEEs in 2014
• No benefits cutbacks 2014-2015
Large employers (100+ FTEEs)
Transition rules easier compliance for 2015
• Cover 70% of FTEs in health plan
– 2016: Cover 95% of FTEs
• Deduct 80 FTEs from “no coverage” penalty in 2015
– 2016: Deduct 30 FTEs
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Counting Employees Employer Shared Responsibility Rule
Is an employer subject to the rule in 2015?
Counting to 50 (or 100) in 2014
Employee Type Rule or Accommodation
Full-time employees (FTEs) 30 hours/week (130 hours/month)
Part-time employees (PTEs)
(< 30 hours/week )
Added to FTE count to determine:
Is employer subject to Rule?
Aggregate monthly hours worked ÷ 120
(no employee counted >120 hours)
Paid-leave employees
(vacation, jury duty,
disability, leaves of absence)
Added to FTE count to determine:
Is employer subject to Rule?
“Seasonal Workers”
Employer not subject to Employer Mandate
(“Rule”) if exceeds 50 FTEEs solely due to seasonal
employees for less than 120 days of a year
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Counting to 50 (or 100) Part-Time Employees
• Count for 6 months (2014 only) to 12 months
— To determine if Rule applies in 2015
• Determining full-time equivalent
part-time employees
— Aggregate hours worked per week
No more than 120 hours per month
— Divide by 120 hours
• Add to full-time employee count
• Fractions are counted; but rounded down
at year-end
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Employer Aggregation
Local Churches
• Day care centers
• Schools and
after-school programs
• Summer camps
“Controlled Group” rules of Code §414(c) apply—
“lumping together” closely affiliated employers
Annual Conferences
• Summer camps
• Agencies, boards, etc.
• Foundations
• Possibly also: schools, hospitals,
retirement homes over which
conference may have control
for board appointments
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Employer Aggregation
Common control exists where:
• Organizations share EIN*
• Organizations share 80% of board members/trustees
• One organization provides 80% of operating funds
for another
• Organizations share some common management
* EIN: Employer identification number
Rule for churches “reasonable good faith interpretation”
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Employer Offer of Coverage
• Large employers must provide
“affordable coverage” with “minimum value” to:
— Full-time employees (FTEs) (30+ hours/week)
Includes employees on paid leave
Excludes certain seasonal employees
Excludes part-time employees
— Dependent children (up to age 26) of FTEs
— … Or else pay a penalty
• Spouse coverage not required
Small employers: Exempt
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Offer of Coverage
“Large” Applicable Large Employer
(100+ FTEEs) • Offer coverage to 70% of FTEs in 2015
• Offer coverage to 95% of FTEs in 2016
“Mid-sized” Applicable Large Employers
(50–99 FTEEs) • 2015: not required to offer coverage
(must certify to IRS)
• 2016: offer coverage to 95% of FTEs
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Seasonal Employees
• Counting to 50: Employer with
over 50 FTEEs only due to
“seasonal workers” for 4 months
(120 days) or fewer not applicable
large employer
• Offering Coverage: Seasonal employee
= reasonably expected to work
6 months or fewer, and work begins
the same time each year
(e.g., summer or Christmastime)
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Variable-Hour Employees
Employer cannot determine if employee
is reasonably expected to work 30 hours
per week or more (may be expected to
work 30 or more hours some weeks and
not others, or may be unknown)
• Measurement Period 3 to 12 months
• Administration Period 90 days or less
• Stability Period 6 to 12 months,
(at least as long as Measurement Period)
— Exception for 2014:
First Measurement Period can be
shorter than first Stability Period
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Penalties
No Coverage At least one FTE qualifies
for PTC*
Penalty 2015 = $2,000 per FTE
(minus first 80 FTEs)
Penalty 2016 = $2,000 per FTE
(minus first 30 FTEs)
Inadequate Coverage Employer offers coverage
and at least one FTE
qualifies for a PTC
Penalty = $3,000 per FTE
receiving a PTC
(limited to “no coverage” penalty)
Penalties adjusted for inflation after 2014
Part-time employees count toward determining applicability
of the rule—but not counted for penalty accrued.
* PTC: premium tax credit
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No Penalty
Do you have more than 80 FT (2015)
or 30 (2016) FT employees?
Pay monthly penalty, lesser of:
1/12 x $2,000 x (number of FT employees — 80 or 30)
1/12 x $3,000 x (number of FT employees receiving credits
for exchange coverage)
Are any of your FT employees
receiving PTC for exchange coverage?
Pay monthly penalty
1/12 x $2,000 x [number of
FT employees — (80) or (30)] Do you provide health insurance?
Are you a large employer? At least 50 FT equivalent workers
Including FT (30+ hours/week) and PT workers (prorated)
Excluding seasonal workers (up to 120 days per year)
Yes
Yes
Yes
Yes
No
No
No
No
Employer Reporting/Certification
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Employer Coverage Reporting
Applicable large employers* must report covered
full-time employees (FTEs) to IRS (Code §6056)
* Applicable large employer: 50+ full-time equivalent employees
This reporting is an employer responsibility. General Board or CBOP
will likely not perform this reporting for churches.
Required for 2015 calendar year
• Even if not subject to Employer Mandate until 2016
Provide statement to each covered FTE by January 31, 2016
Submit Form 1095-C for each covered FTE
(with single Form 1094-C) by February 28, 2016
• March 31, 2016 (if filed electronically)
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Employer Certification (2015)
Related to new delay for mid-sized employers (50-99 FTEEs)
Certification required for 2015
(with 2015 reporting of covered FTEs)
Employer has 50–99 FTEEs in 2014
Has not cut staff to have fewer than 100 FTEEs
(February 9 — December 31, 2014)
Has not/will not drop or “reduce” health coverage
(February 9, 2014 — December 31, 2015)
Final Rule published March 5, 2014.
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Employer Coverage Reporting
§6056 Report must include:
Name, address, EIN* of employer
Contact person at employer
Certification that employer offered coverage
to FTEs and dependent children
FTEs for each month
FTEs’ share of premium of lowest-cost plan
Name, address, TIN* (SSN*) of each FTE
* EIN: Employer identification number; TIN: taxpayer identification number;
SSN: Social Security number
Affordability
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Three “Affordability” Rules Employee’s Cost for Premium
ACA has several definitions of “affordable”
<9.5% of MAGI for individual coverage
• Employer avoids employer mandate penalty (“pay or play”)
• Safe Harbor: <9.5% of W-2 wages (known to employer)
for individual coverage
>8% of MAGI for individual coverage
• Employee avoids individual mandate penalty
• Determined separately for spouse, dependent children
>9.5.% of MAGI for individual coverage
• Employer plan is unaffordable
• Employee is eligible for PTC!
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Individual Mandate
Affordability Exemption
• If individual cannot find
coverage anywhere
(employer or Marketplace)
that costs less than 8% of
MAGI, then:
— Exempt from individual
mandate penalty
• Determined separately
for families/dependents
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Tax Credit Eligibility
• Employee’s required contribution (share of premium)
for self-only (individual) coverage under employer plan
cannot exceed 9.5% of household income* (MAGI)
— If employee contribution exceeds 9.5% of MAGI, can opt out;
choose exchange coverage and PTC
• Dependent coverage affordability “glitch”
— Cost to cover dependents “affordable” as long as it does not
cost the employee more than 9.5% of MAGI to cover self-only
* MAGI: Modified adjusted gross income
Note: Employers often have no information about employees’
household income
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Affordability Safe Harbors
W-2 Wages: Employee contribution for self-only coverage
in lowest-cost plan is less than 9.5% of W-2 wages
Rate of Pay: For any month, employee share of
monthly cost for self-only coverage in lowest-cost plan
is less than 9.5% of 130 hours multiplied
by employee’s hourly rate of pay
FPL*: For any month, employee share of monthly cost
of self-only coverage of lowest-cost plan
is less than 9.5% of 1/12 of FPL for a single individual
Safe harbors for affordability
under Employer Shared Responsibility Rule
* FPL: Federal poverty level
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Conference Affordability Approaches
Clergy (employee) contribution for self-only coverage
Of conference minimum salary
Similar to “rate of pay” safe harbor
Of federal poverty level (FPL)
for 2014
9.5% of $11,670 = $92.39 per month
Other Reporting Requirements
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Reporting Health Coverage
Minimum essential coverage (MEC) reporting (Code
§6055)
General Board (for HealthFlex) or CBOP
(plan administrator of self-insured annual
conference plan) should be able to report
for all plan participants and dependents
Insurance company will perform §6055 Reporting
for fully-insured plans
This reporting is a Plan responsibility.
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Reporting Health Coverage
Required for 2015 coverage (annually thereafter)
Plan must submit Form 1095-B (if only Plan is
reporting) or Form 1095-C (if jointly filing under
§6056 Employer Reporting Rule) to IRS
— By February 28, 2016
— Or March 31, 2016 (e-file)
Plan must provide statement to covered
individuals by January 31, 2016
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Reporting Health Coverage
§6055 Report must include:
* TIN: Taxpayer identification number; SSN: Social Security number
Name of each person with MEC
Name of “responsible person” (primary participant)
TIN* (SSN)* of each covered person
Calendar months each person was covered
Name, address, EIN of reporting entity
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W-2 Reporting
Employers required to report value
of health coverage on employees’ W-2s
• January 2013 on secular, large employer W-2s
• Temporary exemption remains for: — Employers in church plans
(unless church plan is subject to ERISA)
— Small employers (fewer than 250 W-2s)
— Multi-employer (union) plans
• IRS may end the exemption upon 6 months’ notice
— No earlier than 2014 (more likely for 2015 tax year)
Account-Based Plans
and Excepted Benefits
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Health Reimbursement Arrangements
IRS Notice 2013-54: restrictions on
health reimbursement arrangements (HRAs)
• No “stand-alone” HRAs for active employees
• HRAs allowed if “integrated” — Will allow establishment of “private exchanges”
— Prohibits combining HRAs with public exchanges
• Stand-alone HRAs allowed for “retiree-only” plans — However, no PTC* for those retirees
(i.e., no “double dip”)
* PTC: premium tax credit
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Employer Payment Plans
Overrules 1961 IRS rule (Rev. Rul. 61-146) that
allowed employers to reimburse premiums paid
for individual health insurance policies on a
tax-favored basis (“employer payment plans”)
• Many local churches relied on this practice
• Lay employees; Deacons; Part-time clergy
• Individual policies (through exchanges or in
private market) can only be paid with taxable income!
Marketplace plans cannot be paid tax-free by: • Employer, or
• Through cafeteria plan pre-tax (other than SHOP)
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Flexible Spending Accounts (FSAs)
• FSAs are permissible if they qualify
as “excepted benefits”
(not subject to ACA Market Reforms)
• FSA qualified if:
— Offered with an employer group health plan
— Contributions do not exceed 2x
employee salary deferral
FSAs should not be offered to employees who are
not offered group health plan coverage.
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Excepted Benefits
• Separate insurance policy—if insured; or
• Separate contract and participant’s separate
election—if self-funded
“Excepted benefits” plans
Vision plans
Dental plans
Employee assistance programs (EAPs)
Wrap-around plans (new—December 23 regulations)
Stand-alone HRAs—if limited to excepted benefits
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Excepted Benefits
Excepted benefits plans are not subject
to ACA Market Reforms
• E.g., no annual limits, no lifetime limits,
preventive services, essential health benefits
PROS Employees covered in excepted benefits plans
are eligible for premium tax credit
CONS Excepted benefits coverage does not satisfy
the individual mandate
Fees, Taxes and New Guidance
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PCORI* Fee
• Applies to plan years ending after October 1, 2012
and before October 1, 2019
• Increased to $2 per covered life for 2013
— Paid by July 31, 2014
• Increases with inflation in future years
• IRS Form 720 with payment
• CBOPs (or HealthFlex) pay PCORI fee for self-insured
plans (active plans, Medicare plans, retiree HRAs)
• Insurers pay PCORI fee for fully-insured plans
* PCORI: Patient-Centered Outcomes Research Institute
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Reinsurance Program Fee
• Temporary 2014-2016 — Funds reinsurance pool for Marketplace plans
• Applies to annual conference health plans — Exceptions:
— (1) Not applied to covered lives for whom Medicare is primary;
— (2) not applied to coverage that is not major medical coverage
or “excepted benefits”
• Plan responsible for fee for self-insured plans
• Insurer responsible for fee for fully-insured plans
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Reinsurance Program Fee
November 15: Head count to HHS*
December 15: Invoice from HHS
January 15: 1st Installment due
* HHS: U.S. Department of Health and Human Services
2014 2015
Timeline
December:
2nd Installment due
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Reinsurance Fee Final Rule
• 2014 Fee = $63 per covered life
• Two installments for 2014
— January 15, 2015 ($52.50 per life)
— December 2015 ($10.50 per life)
• Lower for 2015 ($44)—(Unofficial estimate for 2016: $25**)
— January 15, 2016 ($33 per life)
— December 2016 ($11 per life)
** Estimate
• Possible exemption in 2015 and 2016 for
“plans that are self-insured and self-administered” — I.e., Plan does not use a TPA to adjudicate, adjust,
settle claims or enroll participants
— Unclear whether there are any such plans
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Excise Tax Penalties
• Code §4980D — Applies to church plans
— $100/day per “affected individual”—
accumulates quickly
• Plan/employer violations of ACA — SBC*, no pre-existing condition exclusion,
no annual/lifetime limits, preventive health coverage,
health plan reporting, claims and appeals,
patient protections
* SBC: summary of benefits and coverage (standardized)
These are already in effect
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Non-Discrimination Rule
• Highly compensated employee (HCE)
defined differently than for retirement plans — 5 highest-paid officers, or
— Highest-paid 25% of all employees
Every employer has HCEs
• Penalties for non-compliance are different — Self-funded: Benefits of HCE become taxable
— Insured: Excise tax ($100/day per HCE), civil money penalty,
or a civil action to compel nondiscrimination
• Enforcement of Section 105(h): “on hold”
pending further IRS guidance
• Strange legislative and regulatory history…
August 2014 (Est.)
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Cadillac Plan Tax
Applies to fully-insured and self-funded plans
Assessed on the “cost of coverage”
for plans in excess of certain thresholds
40% excise tax on plan’s cost in excess of:
• $10,200 for individual coverage
• $27,500 for family coverage
Increased threshold for plans that cover pre-Medicare retirees
or high-risk jobs
• $1,650 individual or $3,450 family
Adjusted for inflation (CPI)+1% (2018-2020); CPI only after 2020
52
Cadillac Plan Tax
• Waiting for regulations to define “cost” — Premium cost for fully-insured plans
— “COBRA cost” for self-insured plans
— Plus: FSA/HRA/HSA* contributions
• General Board/Church Alliance advocating
for church plans — “Actuarial value” vs. premium cost vs. church contribution
— age demographics
• Conferences should already be planning
for containing costs by 2018
* FSA: flexible spending account; HRA: health reimbursement account;
HSA: health savings account
ACA Major Reforms—2014
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Reminder—ACA 2014
• Individual Mandate — Individual insurance market reforms
• Health Insurance Marketplace (“exchanges”) — Government assistance for
modest income premium tax credits (PTCs)
• Employer Shared Responsibility Rule — “Pay or play” or “Employer Mandate”
— January 2015 (100+ FTEEs) or January 2016 (50-99)
• Expanded Medicaid (some states)
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ACA Enrollment
Kentucky: A “Red State” success
ACA Enrollments: 300,000+
• Marketplace QHPs: 60,000
• Expanded Medicaid: 240,000
As of March 14, 2014 Open enrollment period:
>90% lapsed
ACA expanded enrollment 8.3 – 11.1 million
Expanded Medicaid enrollees 4.4 - 6.1 million
Marketplaces enrollees 3.9 - 5.0 million
Exchanges (Marketplaces)
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Status of State Exchanges December 2013
State Exchange No State Exchange (Federal Exchange))
Partnership Exchange Split Exchange
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Exchange Plans
Actuarial Value 58-62% 68-72% 78-82% 88-92% ≥ 60%
Covered Services
Essential health benefits and preventive
services
Essential health benefits and preventive
services
Essential health benefits and preventive
services
Essential health benefits and preventive
services
Preventive services (need not cover Essential Health
Benefits)
Essential Health Benefits
No annual limits No annual limits No annual limits No annual limits No annual limits (on covered EHBs)
2014 Deductible Maximums
$2,000 Individual $4,000 Family
$2,000 Individual $4,000 Family
$2,000 Individual $4,000 Family
$2,000 Individual $4,000 Family None
2014 Out-of-Pocket
Maximums
$6,350 Individual $12,700 Family
$6,350 Individual $12,700 Family
$6,350 Individual $12,700 Family
$6,350 Individual $12,700 Family
$6,350 Individual $12,700 Family
Silver plan used to determine any government subsidies through the exchange
Bronze Silver Gold Platinum Group Plans
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Market Reforms—Premiums
• Guaranteed issue/renewal
• No pre-existing condition exclusions
• Community-rating: Premium rate variation limits — Age: 3:1 (age 21 to 64)
— Tobacco use: 1.5:1
— Family size
— Geography (regional cost factors)
— States can vary these factors
Example: New York and Vermont use pure community rating
“Rate shock” for young (healthy) “Rate joy” for older (less healthy)
Tax Credits
62
Premium Tax Credits
• Exchange plan premiums subsidized with federal assistance:
— Premium tax credit (PTC)
— Individuals and families with household income* between 100-400% of federal poverty level (FPL)
• State and federal exchanges eligible for PTCs
• Subject to ongoing federal court litigation challenge
* Household income = modified adjusted gross income (MAGI)
63
% FPL Single Family of 2 Family of 3 Family of 4
100% $11,670 $15,730 $19,790 $23,580
138% $16,105 $21,707 $27,310 $32,540
150% $17,505 $23,595 $29,685 $35,370
200% $23,340 $31,460 $39,580 $47,160
250% $29,175 $39,325 $49,475 $58,950
300% $35,010 $47,190 $59,370 $70,740
400% $46,680 $62,920 $79,160 $94,320
>400% $46,681 $62,921 $79,161 $94,321
PTC Eligibility: % of FPL (2014)
For families/households with more than 4 persons,
add $4,020 for each additional person.
Household Income (MAGI)
64
MAGI (Code §36B)
• Modified adjusted gross income (MAGI)
— Taxpayer’s adjusted gross income (AGI) (Code §62)
— Form 1040 line 37 (last line of Page 1)
• Increased by:
— Foreign income
— Tax-exempt interest
— Non-taxed Social Security benefits
• Clergy housing/parsonage not included
• Employee 401(k)/403(b)/FSA contributions reduce MAGI
• Certain “above-the-line” deductions reduce MAGI
65
PTC Eligibility Requirements
Two main requirements*
(Both required to be “PTC-eligible”)
MAGI
• Between 100% and 400% of federal poverty level (FPL)
Inadequate or no employer coverage
• No employer coverage
• Employer coverage is less than “minimum value”
• Employer coverage is not “affordable” to employee
* Other requirements include not being:
1) incarcerated
2) covered by Medicare, Medicaid or other govt. coverage: CHIP, TRICARE, etc.
3) married, filing separately
66
PTC Impact on Premium
State Bronze Plan
w/o PTC
Bronze Plan
with PTC
Silver Plan
w/o PTC
Silver Plan
with PTC
CA $586 $58 $796 $268*
IN $782 $128 $922 $268
NY $616 $104 $780 $268
OH $554 $44 $778 $268
OR $516 $129 $628 $268
TX $370 $115 $528 $268
VA $532 $10 $790 $268
Clergyperson age 50; spouse age 50; MAGI $40,000
* Equal to 8.05% of MAGI
Exchanges for Employers (SHOP)
68
Exchanges for Employers
Small employers can adopt
exchange plans as their
“employer-provided coverage” • 2014-2015: Small employers with
fewer than 100 FTEs — States can limit SHOP to employers
with fewer than 50 FTEs
• 2016: Small employers with
fewer than 100 FTEs
• 2017 and beyond: States can expand SHOP
to employers with fewer than 250 FTEs
Small Business Health Options Program (SHOP)
69
SHOP Characteristics
• Employer offers coverage to all full-time employees
• Some have 70% enrollment requirement
• No premium tax credits (PTCs) for employees — PTCs available only through exchanges for individuals
• Employees may have choice of plans*
• SHOP will aggregate premiums for employers
• SHOP can now create a “composite premium” for ER
• Employer contributions toward coverage—nontaxable
• Can be coupled with cafeteria plan — Employees can pay their contributions on pre-tax basis
* Delayed to 2015 in federally-facilitated exchanges; some states are ready
70
SHOP Characteristics
• Available only through SHOP in 2014 and beyond
• Up to 50% of premiums—for-profit employers
• Up to 35% of premiums—tax-exempt employers
— Refundable credit for tax-exempt small employers
• Phases out
— As number of employees approaches 25
— As average wages approach $50,000
Small Business Health Care Tax Credit continues
for employers in SHOP (up to 2 years after 2014)
Conference Strategies
72
Conference Strategies
Considerations
• Book of Discipline ¶639.7
• Judicial Council Decisions 674, 866, 935 and 1014
• ACA Employer Shared Responsibility Rule
• State’s (or states’) embrace of ACA
• Appointment process and itineracy concerns
• Equity of health coverage
• Tax implications
• Unintended consequences (e.g., increased DAC)
73
Conference Strategies Status Quo
PROS
Mandatory plan for clergy possible
Maintains ease of appointment
No “disruptive change” for covered participants
CONS
Forgoes cost savings in exchange plans with tax credits
May cause more tension with local churches
(seeking cost savings)
Plan costs continue to rise
New ACA burdens (fees, reporting, taxes, etc.)
74
Conference Strategies Baby Steps
• Encourage Marketplace enrollment for continuation (COBRA)
participants and clergy on unpaid leaves
(where the conference plan is costly)
• Allow access to Marketplace for pre-65 retirees—
purchase with non-taxed employer dollars or federal PTC
— “Retiree-only” stand-alone HRAs allowed,
but PTC not allowed
• Change dependent coverage eligibility
PROS
Some cost savings related to certain beneficiaries
Conference/church/clergy familiarization with marketplaces
CONS Cost savings of PTCs not fully realized
Some administrative complexities
75
Dependent Coverage Factors
• If spouse, dependent children (or both) are offered
employer coverage (i.e., are eligible to enroll); and
• If cost for employee-only (individual) coverage
is less than 9.5% of MAGI
— Then: spouse and dependents—not eligible for PTC
Rule applies even if cost to employee
for covering spouse/dependents is very high
• Applicable large employers (50+ FTEEs) must offer
coverage to dependent children up to age 26
Even without PTC, full premium exchange coverage
may be less costly than conference coverage
76
Dependent Coverage Options “UPS” Option
Conference ceases covering spouses
and dependents at conference/plan level
PROS
No spouses or dependents would have affordable coverage
PTCs available for many families, based on MAGI
(cost savings to clergy/churches/conferences)
CONS
Equity concern for families that do not qualify for PTCs
(MAGI too high)
• They pay full premium on exchange with after-tax $
• Compensation may have to be increased
77
Conference Strategies Private Exchange Option
PROS
Clergy remain in uniform plan
Mandatory plan for clergy possible
Defined contribution approach may reduce liabilities
Socializes participants to consumer approach
(i.e., ACA Marketplaces)
May be fully-insured or self-funded (if through GBOPHB)
CONS
Forgoes premium tax credits
Affordability may still shift some to ACA Marketplaces
Some regulatory uncertainty remains
Some administrative burden
(e.g., collecting marginal premium)
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Conference Strategies Affordability Option
• Maintain required full-time clergy coverage,
but increase required individual contributions…
• Clergy for whom coverage is not “affordable”
(e.g., costs exceeds 9.5% of MAGI) seek exchange coverage
PROS
Captures savings of premium tax credits
to low-paid clergy and families
May be able to support clergy in Marketplaces with
“excepted benefits” and other wrap-around coverage
CONS
May create appointment frictions and equity concerns
May require way to offset increased health plan
premium contribution for clergy remaining in the plan
• Other nontaxable benefits
• Taxable compensation
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Conference Strategies Local Church Option
• Allow local churches to “opt out” of conference plan
(for full-time clergy)…
• Clergy at churches opting out no employer coverage
PROS Lower-paid can seek exchange coverage and tax credits
CONS
Appointment frictions and equity concerns
Disruptions to conference plan “risk pool”
• Diminution in size
• Change in risk profile
Problem for churches with multiple clergy?
• Some would want to remain in the plan; some would not
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Dependent Coverage Options Local Church Option
Conference allows local churches
to “adopt” conference plan for clergy-only
PROS
Each local church chooses whether to adopt
clergy-only coverage or clergy-plus-family coverage
through the conference
Potential to maximize cost savings
CONS Administrative burden for conference
New appointment friction?
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Conference Strategies Exit Option
Terminate health plan entirely
PROS
Significantly reduce conference administrative costs
Rely on Marketplaces for individuals—most local churches
Rely on SHOP1 for applicable large employers in conference
(e.g., large churches, conference office)
CONS
Increase taxable salary for some or all
• Unintended consequences Increases CAC and DAC; increases
CRSP-DC2, CPP3 and UMPIP4 contributions based on compensation • Unintended distortions Uniform salary increases may have
disparate impacts for single v. married v. family; PTC eligibility
Add/increase other non-taxable benefits (UMPIP, UMLifeOptions)
1 SHOP: Small Business Health Options Program 2 CRSP-DC: Clergy Retirement Security Program-Defined Contribution 3 CPP: Comprehensive Protection Plan 4 UMPIP: United Methodist Personal Investment Plan
Church Alliance Efforts
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Church Alliance Efforts
• Church Health Plan Act of 2013
— Introduced in Senate as S. 1164 by
Senators Mark Pryor (D-AR) and Chris Coons (D-DE)
— Amends ACA to make PTCs available to participants
in denominational church health plans
— Seeking GOP co-sponsor
— Could result in a UMC-Exchange with PTCs
• Regulatory Efforts
— Comment Letters
www.church-alliance.org
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Health Plan Considerations
Plan Coverage
Remain “all in” with group health plan
Split population: some in group health plan,
some move to public exchange
Move “all in” to public exchange
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Strategic Health Plan Considerations
• Consumerism and participant responsibility
• Mirroring public exchange “metal” plans
— Avoid “Cadillac” plan excise tax (2018)
— Prepare for separate populations
— “Soft landing” for exchange-bound population
• Excepted benefit “wraparound” offerings
— Wellness, vision, dental, etc.
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Other Strategic Considerations • Need “unaffordable coverage” to qualify for
premium tax credits—shift contributions
• Funding offset may vary by: reason,
population (e.g. HRA vs. salary increase)
— Offset premium contribution increase
— Offset public exchange premium costs
May vary by: salary, family size, age,
coverage tier, service years, geography, etc.
Minimize appointment tensions
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Private Exchanges: Potential Future Opportunity
Participants
Plan Sponsor
“Gold” “Bronze” “Silver”
Private Exchange Plan Choices
or
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Private Exchanges Potential Benefits
Plan Sponsor
• Defined contribution cost containment
and sustainability
• Parallels for managing two groups (public and
private exchanges) for ease of appointments
Participant
• Chooses own “right-sized” coverage
• Potential opportunity for HRA savings
for future years or retiree health coverage
Both • Pricing efficiencies
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• Different than retiree “connector” model
• HealthFlex researching (2016 at
earliest possible)
• Key considerations: — Participant and plan sponsor
decision support
— Collect incremental “overage”
from participants/churches
Private Exchanges Early Research Findings
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Plan Sponsor Decision Supports and Next Steps
• Web resources—by audience, year
• Materials and consultations:
— HCR Impact Overview
— Population analysis financial modeling
• Strategy considerations, FAQ, toolkits, as needed
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© 2014 General Board of Pension and Health Benefits
of The United Methodist Church, Incorporated in Illinois.
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1-800-851-2201
www.gbobphb.org
Conference Radars
