SHMR Employment Law Update November 12, 2014

The Patient Protection and Affordable Care Act for Employers

www.erblawfirm.comheather@erblawfirm.com360-220-1519

Learn/review the new requirements for employers under the Patient Protection and Affordable Care Act (ACA).

Session Objective

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PART 1: Patient Protection and Affordable Care Act (ACA) Overview

PART II: ACA Employer Notice Provisions

PART III: ACA and the Small Business Employer

PART IV: Large Employer Mandates

PART V: Take-Away Points and Resources

Presentation Outline

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PART I: ACA Overview

On March 23, 2010, President Obama signed the Affordable Care Act.

The law puts in place comprehensive health insurance reforms that will roll out over four years and beyond.

Expected to expand health coverage to 32 million Americans who are uninsured.

ACA Overview

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Directly effects every employer in this country and everyone living in this country

One of the largest laws and most complex in recent history

ACA Overview Cont.

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• Annual and Lifetime Limits

• Preventative Services

• Age 26 Dependents

• No Pre-Existing Conditions

• Summaries of Coverage and Benefits

• Non-discrimination for HCE’s

All Employers Impacted by the ACA

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• Appeals for claim denials

• Choice of Primary Care MD’s

• Age, Tobacco, Geography, elements in plan (individual and small group)

• 90 day less waiting period (Group Plans)

All Employers Impacted by the ACA Cont.

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PART II: ACA Employer Notice Requirements

The law requires employers subject to the Fair Labor Standards Act (FLSA) to provide information about the Health Insurance Marketplace/Exchange to their employees.

ACA Employer Notice Requirements

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• if employer’s annual revenue is $500,000 or more;

• the employer employs two or more employees; and

• engages in interstate commerce (an employer engages in interstate commerce if it has any regular activity, no matter how small, that is commercial in nature an crosses state lines). For example; purchasing office supplies form a company that does business in more than one state).

Who is Subject to the FLSA generally?

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FLSA also specifically covers the following entities: hospitals; businesses providing medical or nursing care for residents, schools and preschools, and government agencies

Who is Subject to the FLSA generally?

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3 Components/Requirements

Required Notice to WA Employees

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1. Provide employees with information about the Washington Healthplanfinder as well as contact information and a description of the services provided;

Required Notice to WA Employees

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2. An explanation that an employee may be eligible for a tax credit on premiums if he or she purchases coverage through the marketplace. In cases where said employee already receives benefits via their employer, he or she might be eligible if the employer plan covers less than 60% of allowable claims (thus not providing minimum value); AND

Required Notice to WA Employees

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3. Inform employees that any employer contribution to a health benefit plan may be lost if the employee chooses to purchase coverage through the marketplace, and that the employer contribution may have been excludable from federal income tax.

Required Notice to WA Employees

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• to each new employee within 14 days of hiring beginning October 1, 2013.

• to current employees before October 1, 2013, employers are required to provide the notice not later than October 1, 2013.

When Written Notice is Required

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• All employees, including full-time, part-time, seasonal and temporary employees whether or not they have health care coverage.

• The notice must be provided in writing in a manner calculated to be understood by the average employee.

• It may be provided by first class mail or electronic notice is ok so long as it meets DOL standards

Other Requirements

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• DOL Model Notice for employers who offer a plan to some or all employees– http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf

• DOL Mode Notice for employers who do not offer a health plan– http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf

CAUTION: These DOL Model Notices go beyond the statutory requirements for providing notice. Consult with your attorney or human resources personnel to determine whether these notices are appropriate for your nonprofit.

Model DOL Notices

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There is no fine or penalty under the law for failing to provide the notice.

Enforcement?

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Still could be consequences– an employee suffers damages as a result, for

example, by not obtaining Marketplace coverage, could blame that on their employer’s failure to provide the Notice.

– plan sponsors still have a fiduciary obligation to be forthcoming with plan participants and beneficiaries.

Enforcement?

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PART III: ACA and the Small Business Employer

Often depends on the size of the business

How many employees does the business have

How Will ACA Impact the Small Business Employer?*

# of FTE

Employees

24 or fewer

Up to 50

50 and above

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• Online marketplace

• Businesses (up to 50 employees)

• Find, compare and enroll in a health insurance plan

• Apply for tax credits to lower monthly premium costs

• Now open to all counties

Washington Healthplanfinder Business (SHOP)

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• Offer a single plan for all employees;

• Decide how much it wants to contribute towards premiums;

• Collect the employees’ share of premiums through payroll deductions;

• Premium contributions can be made with pre-tax dollars; and

• Receive one monthly invoice, and pay with one monthly payment

Washington Healthplanfinder Business (SHOP)

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• Credit (or refund for tax-exempt organizations) for insurance premiums paid by the employer for their employees’ health insurance;

• Starting January 2014, the maximum credit will increase to 50% of premiums paid for small business employers and 35% of premiums paid for small tax-exempt employers.

Small Business Tax Credit & SHOP

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• The amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.

• Two-year limit: starting in 2014, the tax credit can only be claimed for two years (even if you claimed the credit before).

Small Business Tax Credit

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Example Credit/Refund ScenariosTax Credit Scenarios

Vancouver Car Repair

Longview Diner Kelso Nonprofit

Employees 10 FTE’s 40 part-time employees or 20 FTE’s

9 FTE’s

Wages $250,000 total, or $25,000 per FTE

$500,000 or $25,000 per FTE

$198,000 or $22,000 per FTE

Employee Health Care Costs

$70,000 $240,000 $72,000

2010-2013 Credit

$24,500 (35%) $28,000 (35% credit with phase out due to number of employees)

$18,000 (25%)

2014 Credit $35,000 (50% credit)

$40,000 (50% credit with phase out due to number of employees)

$25,200 (35%)

*Chart Created by Washington Healthplanfinder 28

• Applies to employers with fewer than 25 employees;

• Those employees must have average wages of less than $50,000 per year. Excludes owners/key managers;

• Must purchase insurance through the SHOP Marketplace (Washington Healthplanfinder) to be eligible for tax years 2014 and beyond

Eligibility for Small Business Tax Credit

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For tax-exempt nonprofits the credit is actually a refund on quarterly payments the nonprofit has made to the IRS for income tax withholding or Medicare withholding from employee wages.

Special Benefit to Tax-Exempt Orgs.

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Part IV: Large Employer Mandates

• Employer Shared Responsibility Payment

• AKA, “Pay or Play Penalty”

Large Employer Mandates

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Full-Time Employee: an employee who is employed on average 30 hours or more per week (or at least 130 hours of service in a given month).

Full-Time Equivalent (FTE) Employee: a combination of employees, each of whom individually is not a full-time employee because they are not employed at least 30 hours per week, but who in combinations are counted as the equivalent of a full-time employee.

KEY DEFINITIONS

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Control Group Employer – employers with common owners or who are otherwise related are aggregated together to determine whether they meet the threshold number of 50(100 for 2015) or more full-time employees (including FTE employees).

KEY DEFINITIONS CONT.

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An employer that meets the 50 full-time employee threshold.

Generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees.

Applicable Large Employer Defined

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Applicable large employers are subject to a penalty if they

1. do not provide health care coverage (“the sledgehammer” penalty) and/or

2. offer health care coverage but it is not affordable and/or does not meet the minimum value of coverage (“the tack hammer” penalty).

Large Employer Mandates

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Applicable large employers are required to provide minimum essential coverage to at least 70% of its FTEs in 2015.

After 2015, employers must offer coverage to 95% of its FTEs (and their child dependents under age 26).

When Applicable Large Employers Fail to Offer Coverage “the Sledgehammer”

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The employer may be subject to an Employer Shared Responsibility payment (aka “Sledge Hammer Penalty”) if at least one of its full-time employees receives a premium tax credits for purchasing individual coverage through the exchange/Washington Healthplanfinder.

When Applicable Large Employers Fail to Offer Coverage “the Sledgehammer”

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• The penalty is $2,000 per year multiplied by the number of full-time employees for each calendar month of the year minus the first 30 full-time employees.

• Penalty is nondeductible.

“The Sledgehammer Penalty”

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Applicable large employers must offer minimum essential coverage that meets the minimum value and affordability guidelines.

• Minimum Value: Covers at least 60% of expected costs for an average person or family

• Affordable Coverage: limits an employee’s share of the premium contribution to 9.5% of the employee’s “household income”

When Applicable Large Employers Offer Inadequate Coverage “the Tack Hammer”

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• If an applicable large employer provides coverage that does not have minimum value and is not affordable, the employer penalty is $3,000 annually per full-time employee who receives a subsidy through the Washington Healthplanfinder, but is capped at the amount the employer would be penalized if the employer did not offer coverage.

• Safe harbors available • Penalty is nondeductible

“The Tack Hammer”

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Part V: Take-Away Points and Resources

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• Know the employee health insurance choices

• Engage a reliable broker or benefits counselor

• Educate employees on Medicaid

• Talk penalties with employees

• Update Employee Handbooks as necessary

• Invest in training for the person tasked with Health Care Reform

Take-Away Points

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• SHRM Health Care Reform– http://

www.shrm.org/hrdisciplines/benefits/articles/pages/healthcarereform.aspx

• Small Business Tax Credit – http://

www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers

– http://www.wahbexchange.org/info-you/employers/

Resources

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