Looking for a Life Vest?November 20th, 2014

@thomasharte

Agenda: Looking for a Life Vest?

Health Care Reform:

• What’s new with ACA??

• Provisions Already in Effect

• Preparing for Health Care Reform

• Primary Issues of Concern– Pay or Play– Compliance– Defining and Calculating Employees

• Strategies for Employers

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Disk: Reference Documents

Compliance:

• 5500 Filing

• Exchange Notice Cover Letter

• Large Employer Reporting

• Model Notice I

• Model Notice II

• Top Audit Omissions

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Employer Notices:

• CHIPRA Spanish / English

• Combined Notice

• Newborn & Mothers

• Women’s Cancer

PPACA:

• Factors Affecting Premium

• Marketplace & FAQ’s

• Provider Fee

• Employer Mandate

• PCORI

Health Care Reform

What is your concern?What don’t you understand?

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What’s NEW with HealthCare Reform?

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Supreme Court

• November 7th, 2014 – Announcement by the Court

• King v. Burwell (DC Court)– RULING: Subsidy ONLY allowed where State has set up a State Exchange

• 2015 Docket

• 37 States (including NH) – MAY be prohibited

• What are the “triggers” for a penalty??– Unaffordable or does not meet minimum value AND– Employee receives a SUBSIDY

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EmployerMandate

Subsidy

Genesis of the Supreme Court Case

• Lawsuits challenging the subsidies in States that did NOT establish their ownexchange – i.e. States with a Federally Facilitated Marketplace (FFM)

– Maine and New Hampshire (partnership)– 17 State Marketplaces– 7 Partnership Marketplaces– 27 Federally Facilitated Marketplaces

• July 22nd, 2014 – Two Federal Appeals Courts– King v. Burwell, 4th Circuit Court – unanimously upheld the availability of subsidies– Halbig v. Burwell, DC Circuit Court - 2 to 1, declared the ACA clearly restricts the subsidies

• September 4th, 2014 – DC Circuit Court Agreed to Reconsider – resulting in theinitial ruling to be vacated AND removing the inconsistency between the courts.

• November 7th, 2014 – Supreme Court Announcement

• December 17th, 2014 – Scheduled date for re-hearing @ D.C. District Court

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Why is the Court Case Important?

• If the issuance of subsidies is considered illegal in States that did not create theirown Marketplace:

– Individuals:• Will not be able to receive subsidies• The Federal Government MAY be required to collect subsidies ALREADY paid• The individual mandate would fall apart• The pre-existing condition portion of the law would be removed

– Employers:• One trigger for the Employer Mandate is the Subsidy• The employer Mandate would be forced to be removed• Employers would not be subject to any penalty

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Question #1

If an employer cancels their group healthplan but reimburses the employees for

premiums to pay health insurance on theexchange – does that satisfy market

reforms??

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Employer Payment Plans

• NO!!

• Employer compensation to employees to purchase health insurance are referred toas - “Employer Payment Plans”

• This compensation arrangement is considered “group health plans” BUT does NOTsatisfy market reforms

Why is this important?• Penalties of $100 / day per applicable employee = $36,000 per year per applicable

employee

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$36,000 per employee penalty???

• Tax imposed on Plan Sponsor (employer)– Excludes Government Employers

• Reported on IRS Form 8928 (Return of Certain Excise Taxes)

• $100 per individual, per day for violation of any of the following:

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Coverage for Adult Children to Age 26 Non-Discrimination Rules (delayed)No lifetime or annual limits onessential benefits

Limits on cost sharing

No Pre-Existing Conditions Coverage for approved clinical trialsPreventive Health Services @ $0.00 Essential Health BenefitsPROVIDE Summary Benefits Coverage 90 Day Waiting Period

Employer Reporting

• WHY Employer Reporting (according to the Federal Government)?– Provide transparency of health coverage and costs

– Provide government with information to administer mandates• Employer Shared Responsibility• Individual Mandate

• Section 6055: health insurance issues, Self Insured health plan sponsors,government agencies, and any other entity that provides minimum essential coverage

• Section 6056: Applicable Large Employers (ALE’s) that are subject to “Pay orPlay”

• Effective Date: 2015 (First returns will be due in 2016 for coverage provided in 2015)

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TYPE OFREPORTING

AFFECTEDEMPLOYERS

REQUIREDINFORMATION Forms EFFECTIVE

DATE

Code §6055—Reporting of healthcoverage by healthinsurance issuersand sponsors ofself-insured plans

Employers withself-insured healthplans

Information on eachindividual providedwith coverage (helpsthe IRS administerthe ACA’s individualmandate)

1094-B:Transmittal AND

1095-B (non-ALE)or 1095-C (ALE’s) Delayed until

2015

The firstreturns willbe due in2016 forcoverage

provided in2015

Code §6056—Applicable largeemployer (ALE)health coveragereporting

Applicable largeemployers (thosewith at least 50full-timeemployees,including full-timeequivalents)

Terms andconditions of healthplan coverageoffered to full-timeemployees (helpsthe IRS administerthe ACA’s employersharedresponsibilitypenalty)

1094-C:Transmittal

1095-C:EmployeeStatement

Employer Reporting: Section 6056

• WHO is an Applicable Large Employer? Employers with at least 50 FullTime Equivalent (FTE’s) Employees

• Reporting is only required on Full Time employees• Filling Deadline? No later than February 28th (March 31st if filed

electronically) of the year immediately following the calendar year.– Electronic is mandatory for employers > 250 Full time employees

• Employee Statements: Must be furnished annually to full timeemployees on or before January 31st of the year following thecalendar year.

• Non-Calendar Year Plans? No option for alternative filing date

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Employer Reporting: Medium Sized Employers

• Medium Sized Employers? Must comply – No Delay!!!• Must Certify on 6056:

– Employs between 50 and fewer than 100 employees during 2014 (yes,2014)

– Between February 9, 2014 and December 31, 2014 they did not reducethe size of the workforce or overall hours of service for employees

– In 2015, the Company did not eliminate or materially reduce healthcoverage from February 9th, 2014

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Employer Reporting: Information

• Employer name, address, and EIN• Name / Telephone Number for contact person• Calendar year• Certification that full time employees were given the opportunity to

enroll in minimum essential coverage (MEC)• Months during the year that MEC was available

• EACH full time employee’s share of the LOWEST cost monthlypremium for self only coverage

• Number of full time employees during each month

• Name, address and Tax Identification Number (TIN) for eachFull time Employee

• Any other information required by the IRS

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Employer Reporting

• July 24, 2014 – DRAFT Versions of forms– SELF FUNDED (6055)

• Form 1094-B: Transmittal of Health Coverage Information Returns• Form 1095-B and 1095-C: Health Coverage

– FULLY INSURED (6056)• Form 1094-C: Transmittal of Employer Provided Health Insurance

Offer and Coverage Information Return• Form 1095-C: Employer Provided Health Insurance Offer and

Coverage

• HRA’s and H.S.A.’s are excluded from reporting!!

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Adjustments in 2015

• 2015 Out of Pocket Limit: $6,600 / $13,200 ($6,350 / $12,700 in 2014)

• Individual Mandate:– 2014: $95 or 1.00% of income (up to national average of BRONZE premium)

• 2014 Bronze Plan Premium is $2,448 single / $12,240 family (Question 2)

– 2015: $325 or 2.00% of income (up to national average of BRONZE premium)

• PCORI: (due by July 31st up to plan years to 9.30.19 – Form 720)– $2.00 (Plan years 10.1.13 to 10.1.14)– $2.08 (plan years 10.1.14 to 10.1.15)

• Affordability Guideline: 9.56% of Household Income (9.50% in 2014)

• Flexible Spending Accounts: $2,550

• Health Savings Account Contributions:– 2015 Annual Contribution: $3,350 / $6,650 ($3,300 / $6,550 for 2014)– 2015 Deductible: $1,300 / $2,600 ($1,250 / $2,500 for 2014)

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Planning for Cadillac Tax

• Beginning in 2018 – PERMANENT Tax

• Expected to generate $80,000,000,0000 (Billion!!) over 10 years• Includes EMLOYEE and EMPLOYER Contributions

• 40% EXCISE TAX on high cost group health coverage

• Some of the EXCLUSIONS include: Disability, Dental, , Vision, liability, andworker’s compensation

• Limits (Higher Limits apply to high risk occupations)– $10,200 for Individual– $27,500

• WHO PAYS?– Insured: Employer calculates / Insurer Pays– Self Funded: Employers Calculate / Employer Pays

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Calculating the Cadillac Tax

• Employer Sample Group: 50 Single / 50 Family

• NOT TAX DEDUCTIBLE!!

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Type of Coverage Single FamilyHealth Plan Premium $10,000 $25,000FSA Contributions $2,500 $2,500HRA Contributions $2,000 $2,000TOTAL $14,500 $29,500Limit $10,200 $27,500Excess $4,300 $2,000TAX (40% of Excess) $1,720 per Single $800 per FamilySubtotal $86,000 $40,000TOTAL TAX $126,000

Provisions to Date

• Dependents to Age 26

• Summary of Benefits and Coverage *

• Medical Loss Ratio:– 85% for Large Group– 80% for Small Group

• W2 Reporting *

• Preventive Care Services

• No pre-existing conditions for Children (under 18)

• Flexible Spending Account Maximum of $2,500 (now $2,550) for HealthCare

– Plan years beginning after January 1, 2013– BY THE WAY - $500 Rollover Benefit for FSA only

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Individual Mandate

• Jan. 1, 2014: Individuals must enroll in coverage or pay a penalty

• Penalty amount: Greater of $ amount or a % of income– 2014 = $95 or 1%– 2015 = $325 or 2%– 2016 = $695 or 2.5%

• Example: $30,000 single employee:– 2014 = $95 or $300– 2015 = $325 or $600– 2016 = $695 or $750

• Maximum Penalty: National Average for BRONZE plan

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Summary of Benefits and Coverage

• Simple and concise explanation of benefits– Applies to GF and non-GF plans

• Model template and guidance available– Instructions, Sample language, and Uniform glossary of terms

• Final guidance specifies compliance deadlines– Original deadline was March 23, 2012

• Health plans to enrollees:– Open enrollment: 1st day of the 1st open

enrollment period that begins after 9.23.12– Annual Open enrollment– Upon Application and Prior to Effective Date

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What Else to Worry About?

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W2 Reporting

• Does not change the tax rules for health coverage – coverage is still NOTtaxable

• Employers must report aggregate cost of group health plan coverage oneach employee’s Form W-2

• Mandatory for 2012 tax year (W-2 Forms provided in January 2013)

• For small employers (filed fewer than 250 W-2 Forms last year), reportingrequirement is delayed until further guidance issued

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W2 Reporting

• What must be reported?

• Total cost of employer-sponsored health coverage

• Group health plan coverage to includes insured and self-funded plans

• Total cost = employer portion + employee portion

• Report in box 12 with code “DD”

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PCORI

• Patient-Centered Outcomes Research Institute• Created to improve informed health decisions• Research funded by a fee paid by insurers and plan sponsors of self-funded

plans

• Effective date• Plan years ending after Sept. 30, 2012• Does not apply for plan years ending after Sept. 30, 2019• For calendar year plans – apply for 2012-2018 plan years

• Amount of fee:• $1 per covered life – WHAT ABOUT THE DOUBLE DIP?• Increases to $2• Indexed for CPI

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60 Day Notice of Material Modification

• Material modifications not in connection with renewal must bedescribed in a summary of material modifications (SMM) or an updatedSBC

• Material modification:• Enhancement of covered benefits or services• Material reduction in covered benefits or services• More stringent requirements for receipt of benefits

• Must be provided at least 60 days BEFORE modification becomeseffective

• ESPECIALLY important for early (December) or early (January) planchanges!!!

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Calculating the Number of Employees

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Employeecategory

How is this category of employeeused to DETERMINE “large

employer”?

Once an employer is determined tobe a large employer, could the

employer be SUBJECT TO A PENALTYif this type of employee received a

premium credit?

Full-time Counted as one employee, basedon a 30-hour or more work week Yes

Part-time

Pro-rated (calculated by taking thehours worked by part-time

employees in a month divided by120)

No

Seasonal Not counted, for those workingless than 6 months in a year

Yes, for the month in which theseasonal worker is full-time

TemporaryAgency

Generally, counted as working forthe temporary agency (except for

those workers who areindependent contractors)

Yes, for those counted as working forthe temporary agency

Calculating the Number of Employees: EXAMPLE

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Employeecategory Number of Employees Full Time Equivalent (FTE)

Full-time 40 (30 or more hours) 40

Part-time 25 (Total monthly hours of 2,166) 18

Seasonal 20 (less than 120 days in a year) 0

TemporaryAgency 0 0

TOTAL 58

Employer Pay or Plan

• Large employers subject to “Pay or Play” rule– Offer coverage of a certain quality or possibly

pay a penalty

• Applies to employers with 50 or more full-time equivalent employees in prior calendaryear

– FT employee: Employed for an average of atleast 30 hours of service per week

• Penalties apply if:– Employer does not provide coverage to all FT

employees and any FT employee getssubsidized coverage through exchange OR

– Employer does provide coverage and any FTemployee still gets subsidized coveragethrough exchange

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BELOW THE LINEDEDUCTION!!

Employer Penalties

Employers that do NOT offer coverage to all full-timeemployees:– $2,000 per full-time employee

– Excludes first 30 employees (80 for 2015 for employers

Employers that offer coverage:– $3,000 for each employee that receives subsidized coverage through an

exchange

– Capped at $2,000 per full-time employee (excluding first 30 employees)

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Employer Requirements: Pay or Play

Affordability safe harbors• Three different safe harbors for determining affordability

– W-2 income– rate of pay, and– federal poverty line

Waiting periods• Cannot exceed 90 days• No penalty for employees in waiting period• Offer of Coverage:

– 2015 – must offer coverage to 70% of Full Time Employees– 2016 and beyond – must offer coverage to 95% of Full Time Employees

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Penalty Flowchart:Do you have at least 50

FTE’s?Do you have at least 50

FTE’s?

Penalty: 1/12 x $2,000 x # FullTime Employees - 30

Penalty: 1/12 x $2,000 x # FullTime Employees - 30

Penalty: lesser of 1/12 x $2,000 x #Full time employees - 30

or1/12 x $3,000 x # full time employees

receiving subsidy

Penalty: lesser of 1/12 x $2,000 x #Full time employees - 30

or1/12 x $3,000 x # full time employees

receiving subsidy

Do you provide healthinsurance?

Do you provide healthinsurance?

Do you have more than 30(80) Full Time Employees?Do you have more than 30(80) Full Time Employees?

Are any of your FULL TIMEemployees receiving a

subsidy?

Are any of your FULL TIMEemployees receiving a

subsidy?

No

No

No

YesNo

Large Employer Shared Responsibility (ESR)

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When?• The ESR requirement takes effect on 1/1/14*

Who & How Determined?• Employers having 50 or more full-time employees (FTE’s) or a combination of FTE’s

and part-time employees (delayed to 1/1/16 for 50 to 99).• In 2014, Employers, using employment information from 2013, must average the

number of employees across the months in the year (delayed to 1/1/15).

Who & How Determined?• Offer FTE’s and their dependents employer sponsored coverage that is “affordable”

and provides “minimum value.”– Affordable Coverage: Employee’s share of premium cannot exceed 9.5% of

Employee’s annual income.– Minimum Value: Cover at least 60% of the total allowed cost of benefits that

are expected to be incurred under the plan.

Notification of ESR Penalty

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How?• IRS will contact employers to inform them of potential liability and provide

opportunity for response. If Employer Shared Responsibility liability isconfirmed, IRS will send notice and demand for payment.

When?• After the employees’ individual tax returns are due claiming premium tax

credits and after the due date employers must file the information returnsidentifying their FTE’s and describing any coverage offered.

Transitional Relief

December 27th, 2012

• Provides RELIEF to employers additional time to ensure affordability andminimum value

• Fiscal Year vs. Calendar Year Plans

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Look Back Periods: Transition Measurement Period

To Determine Employee Status: Full time or Part Time

• Employers may adopt a Transition Measurement Period– Shorter than 12 months, but not less than 3 month long; AND– Begins no later than July 1, 2013 and ends no earlier than 90 days before

the first day of the first plan year beginning after January 1, 2014– EXAMPLE:

• Renewal Date of July 1, 2014• Allowed Period:

– Longest: April 1st, 2013 to March 31st, 2014– Shortest: January 1st, 2014 to March 31st, 2014

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Look Back Periods: Standard Measurement Period

For Ongoing Employees: Full time or Part Time

• Employers will establish a Standard Measurement Period (SMP)– 3 to 12 consecutive calendar months – Chosen by Employer– Did employee average 30 hours per week?– Minor adjustments are allowed to SMP to accommodate payroll frequency– If employee is considered FULL TIME – the employee will be considered full

time for a set period – Referred to as a Stability Period• MUST be at least 3 months AND• MUST be as long as the SMP

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Exchange Subsidy

Primary Rule:– Employee SUBSIDY triggers employer penalties

To be eligible for a subsidy…– #1: Employee is not offered coverage

• Not eligible for government programs (like Medicaid)• Must meet income requirements (less than 400% of FPL)

– #2: Employee who is offered coverage• Not enrolled in employer’s plan• Not eligible for government programs (like Medicaid)• Meet income requirements (less than 400% of FPL)• Employer’s coverage is unaffordable (greater than 9.5% of income) or not of

minimum value (covers less than 60% of cost of benefits)

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Exchange Notice

• Affected Groups: Employers with more than $500,000 in Sales

• Must provide all employees with a written notice of the Exchange / Marketplace

• Notice is available online (on disk)

• May be provided by 1st Class Mail or Electronically (if DOL requirements are met)

• Must provide the following content:– Existence of the Exchange– MAY be eligible for tax credit or cost sharing reduction– Inform employees that they MAY lose employer contribution– Contact information for the Exchange– Explanation of appeal rights

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Exchange Notice

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Employer Reporting

Employers will have to report certain information abouthealth coverage to the government and individuals

Applies to:• “Applicable large employers” – generally, employers with at least 50 full-

time equivalent employees

• Applies to coverage offered after Jan. 1, 2014

• First returns to be filed in 2015

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Employer Reporting

Employer Data:

• Employer identifying information

• Whether employer offers health coverage to FT employees and dependents

• Number of Full Time employees for each month

• Length of any waiting period

• Monthly premium for lowest-cost option in each enrollment category

• Employer’s share of cost of benefits

• Names and contact info of employees and months covered by employer’s healthplan

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2014 Plan Changes

• No pre-existing condition exclusions or limitations• Cant deny coverage or charge HIGHER premiums

• Wellness program changes - maximum reward increases to 30%

• Limits on out-of-pocket expenses and cost-sharing

• No waiting periods over 90 days

• Coverage of clinical trial participation

• Guaranteed issue and renewal

• No annual limits on essential health benefits

• Insurance premium rating restrictions

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Dependent Coverage

Beginning in 2014

• Large employers must offer health coverage to DEPENDENTS

• If NOT, subject to a shared responsibility penalty

• No REQUIREMENT of Employer Contribution to Dependent Coverage

• Does NOT include SPOUSE – Specifically Omitted

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Non Discrimination Rules

WAITING on Final Guidance

• Applies to NON-Grandfathered, Fully Insured Health Plans

• PROHIBIT discrimination in favor of Highly Compensated Individuals (HCI’s)– Prohibited from Discrimination for ELIGIBILITY– Prohibited from Discrimination for CONTRIBUTIONS and BENEFITS

• WILL be subject to ADVERSE TAX CONSEQUENCES

• Highly Compensated Individuals:– One of the FIVE highest paid officers;– Shareholder with more than 10% ownership; OR– Highest paid 25% of all employees

• NOTHING prevents Reverse Discrimination

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Employer Strategies to Avoid Penalties

• Reducing the number of hours to UNDER 30

• Reducing the size of the workplace to UNDER 50 FTE’s

• Reducing benefits to reduce premium

• Is it “cheaper” to NOT offer health insurance?

• INCREASING contribution for single employees and REDUCING fordependents

• “Wage Weighted” benefits – Reverse Discrimination

• Dual Option: High Plan / Low Plan

• Bottom Line: Avoid the Subsidy

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List Billing

PRE-Healthcare Reform

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Rating Category PremiumsSingle $500Employee & Spouse $1,000Employee & Child(ren) $1,000Family $1,500

List Billing

Post-Health Care Reform

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Name Premiums

Employee #1 $700

Spouse #1 $750

Dependent #1 $500

Dependent #1 $500

Total $2,450

Employee #2 $600

Spouse #2 $550

Dependent #1 $500

Total $1,650

What is an Exchange?

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Public health insurance exchange required byACA

Primarily online marketplace for purchasing healthinsurance (Qualified Health Plans)

Run by state or federal government with consumerassistance from other entities

For individuals and small employers (generally up to50 employees) – OR the traditional market

When is Open Enrollment for the Exchange?

• Annual Enrollment Period: November 15th to February 15th

• Special Enrollment Rights for Qualifying Events

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Questions??

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Thank you for attending!!

Thomas Hartetharte@landmarkbenefits.com

Landmark Benefits, Inc.www.landmarkbenefits.com

@thomasharte