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Health Care Reform Doing the Math Your Speaker Today: Constance Starkey
| Date post: | 17-Dec-2015 |
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Health Care ReformDoing the Math
Your Speaker Today:Constance Starkey
What’s New?
The Buzz
• State of the ACA
• Supreme Court & King v Burwell
• The MLR
• California
New Tools
On the Informer
• Compliance Kit
Compliance Kit
Scenarios
Scenario #1
Corporation X:
• Is a large employer who sponsors a health plan that covers all full-time employees as defined under the ACA.
• Has a maximum orientation period prior to a 90-day waiting period for coverage.
• Has hired Abby whose start date in a full-time position is October 1.
What date is the latest that Abby’s coverage should start?
Scenarios
Scenario #1: Orientation
If Abby’s start date as a full-time employee is October 1, the last permitted day of the orientation period is October 31.
From Abby’s start date:
One calendar month = November 1
Minus one calendar day = October 31
Scenarios
Scenario #1: Waiting Period
90 days
The waiting period must start November 1, and the 90th day would be January 29 which would indicate coverage must start no later than January 30.
Scenarios
Scenario #1 Answer:
In order to be in compliance with
ACA regulations, Abby’s coverage
must begin no later than January 1
4th Calendar Month
However, this does not meet the employer shared responsibility requirements that coverage can begin no later than the first day of the fourth calendar month of employment.
January 1
Scenarios
Scenario #2
• Corporations A, B and C are members of a Controlled Group for the 2015 calendar year.
– Corporation A has 50 FT employees,
– Corporation B has 40 FT employees and
– Corporation C has 20 FT employees
How many employees could Corporation C subtract from their total when calculating a possible penalty?
Scenarios
Scenario #2: Calculations
Corporation A has 50 FT employees Corporation B has 40 FT employeesCorporation C has 20 FT employees
For 2015 ONLY, for the sake of calculating possible penalties, the employer may subtract 80 employees. However, each entity is able to subtract only their % of employees.
Total Number of Employees
110
Scenarios
Scenario #2 Answer:
The employees are divided among the entities whether they are in compliance or not.
110
FT employees
Corporation A
50 = 46%110
FT employees
Corporation B
40 = 36%110
FT employees
Corporation C
20 = 18%
46% of 80 = 37 36% of 80 = 29 18% of 80 = 14
Corporation C may subtract 14
Scenarios
Scenario #3
Corporations D, E, and F are members of a Controlled Group, Company Y, for the 2015 calendar year. Company Y has a combined total of 110 FT employees.
– Corporation D has 50 FT employees, all of whom receive affordable, MV, employer-sponsored coverage
– Corporation E has 40 FT employees, 10 of whom receive affordable, MV, employer sponsored coverage, the remaining 30 receive coverage that does not meet MV or the affordability requirements.
– Corporation F has 20 FT employees. They are not currently offered employer-sponsored coverage.
If this employer changes nothing, what is the potential penalty?
Scenarios
Reminder:
Each company within a control group is
considered a separate entity
Penalties are confined to the entity or entities that
are out of compliance
The entities that are in compliance are not
penalized based on the other entities.
Scenarios
Scenario #3 Corporation D: 50 FT Employees
Corporation D is in compliance with the law.
Coverage for all 50 FT employees:
Affordable
Meets MV
Employer-sponsoredPenalty for Corporation D = $0
Scenarios
Scenario #3 Corporation E: 40 FT Employees
Coverage for 10 employees:
Affordable
Meets MV
Employer-sponsored
Coverage for 30 employees:
Does Not Meet Affordability Requirements
Does Not Meet MV
Corporation E is NOT in compliance with the law.
Scenarios
Scenario #3 Corporation E: Penalty Calculations
OR11040 = 36% Percentage of Employees
in Corporation E
36% of 80 = 29 Allowable subtraction
40-29 = 11 Number of Penalties
11 X $2,000 = $22,000Corp E Penalty
30 Employees Receive Subsidy in the Exchange:
30 X $3,000 = $90,000
The ACA allows employers to pay the lesser
of either penalty, therefore, Corporation E
would pay $22,000
Scenarios
Scenario #3 Corporation F: 20 FT Employees
No Employer- Sponsored Coverage Corporation F is NOT in compliance with the law.
Scenarios
Scenario #3 Corporation F: 20 FT Employees
OR11020 = 18% Percentage of Employees
in Corporation F
18% of 80 = 14 Allowable subtraction
20-14 = 6 Number of Penalties
6 X $2,000 = $12,000Corp F
Penalty
20 Employees Receive Subsidy in the Exchange:
20 X $3,000 = $60,000
The ACA allows employers to pay the lesser
of either penalty, therefore, Corporation F
would pay $12,000
Scenarios
Scenario #3 Company Y Penalties:
• Corporation D = $0
• Corporation E = $22,000
• Corporation F = $12,000
Company Y would owe
$34,000 in tax penalties$34,000
Scenarios
Scenario #4
• Corporation Z has 110 FTEs.• Employee salary range is $30,000 to $70,000• 75 employees have monthly wages of $3,200 or more • 35 employees each have monthly wages of $2,500 • Corporation Z offers all employees Minimum Value, Minimum
Essential Coverage• Employer-paid premium is $62,000 annually• Current employee monthly contribution for employee-only
coverage is $300
Scenarios
Scenario #4
• Does Corporation Z owe a penalty and • if so, what would the potential cost of the penalty be? • Would it be advantageous for this employer to drop coverage and
pay a penalty? • Why or why not?
Scenarios
Scenario #4 Answer: Does employer owe a penalty?
Employee contribution is $300 per month
Annual employee contribution is $3600
$300 X 12 months
$3,600 annual
Scenarios
Scenario #4 Answer: Does employer owe a penalty?
Employee contribution is $300 per month
Annual employee contribution is $3600
$3,600 is 9.5% of $37,894 per year$3600 / 9.5%
3600.095 = $37,894
Scenarios
Scenario #4 Answer: Does employer owe a penalty?
Employee contribution is $300 per month
Annual employee contribution is $3600
$3,600 is 9.5% of $37,894 per year
Annual salary must be at least $37,894 to meet affordability requirement
75 employees earn $38,400 or more
Employer contribution meets affordability requirement for 75 employees
35 employees earn $30,000 annually
Employer contribution does not meet affordability requirement for 35 employees
Scenarios
This employer does not meet the affordability
requirements, and is subject to penalty
Scenario #4 Answer: Does the Employer Owe a Penalty?
75 employees meet affordability requirements75 110
= 68%
68% < 70%
35 employees do not meet affordability requirements
75 = 68% of total employees (110)
ACA requirement = affordable coverage to 70% of employees (note: this goes up to 95% for 2016)
Scenarios
Scenario #4 Answer: What would the penalty be?
Employer would pay lesser of the penalties, so, maximum penalty would be $60,000
Penalty 1
$60,000
110 employees - 80 30 X $2,000
ORAll 35 Eligible Employees Receive Subsidy in the Exchange:
$105,000
Penalty 2
35 employeesX $3,000
$60,000
For 2015 ONLY employer may subtract 80 employees. From 2016 on, employers may subtract 30 employees.
Scenarios
Scenario #4 What would be your recommendation?
A. Do nothing
B. Increase Employer Contribution
C. Increase salaries for those 35 employees
D. Drop coverage and pay the penalty
Scenarios
Scenario #4 : What if they do nothing?
Employer currently pays $62,000 annual premium
Penalty would be $60,000
If the employer does nothing, the cost to the employer would be $122,000
62,000+ 60,000
$122,000
Scenarios
Scenario #4: What if they increase employer contribution?
$30,000X .095
$30,000 X 9.5%
$2,850
Lowest wage is $30,000/year
Maximum employee contribution for affordable coverage is 9.5%, or $2,850
Scenarios
Scenario #4: What if they increase employer contribution? Lowest wage is $30,000/year
Maximum employee contribution for affordable coverage is 9.5%, or $2,850
Currently, employees are paying $3,600 per year
$3,600Current employee
contribution
-$2,850Maximum employee contribution
Additional employer contribution required
$ 750 Employer must increase contribution by $750 per employee
Scenarios
Scenario #4: What if they increase employer contribution? Lowest wage is $30,000/year
Maximum employee contribution for affordable coverage is 9.5%, or $2,850
Currently, employees are paying $3,600 per year
Employer must increase contribution by $750 per employee
$ 750
X 110 employees
$82,500
Cost of increase for 110 employees is $82,500
Scenarios
Scenario #4: What if they increase employer contribution? Lowest wage is $30,000/year
Maximum employee contribution for affordable coverage is 9.5%, or $2,850
Currently, employees are paying $3,600 per year
Total cost with increased employer contribution: $144,500
Employer must increase contribution by $750 per employee
$62,000Current employer-
paid premium
+ $82,500Additional employer contribution
Total cost with increased employer
contribution
$144,500
Cost of increase for 110 employees is $82,500
Scenarios
Scenario #4: What if they increase wages?
What we know: With current employee contribution of $300/month Wages must be $37,894/year to meet affordability requirement
of 9.5%
$37,894
35 employees earn $30,000 per year
- $30,000
$7,894Wage adjustment required to meet affordability
Employer must increase 35 employee wages by $7,894
Scenarios
Scenario #4: What if they increase wages?
Increasing the wages of the 35 employees from $30,000 to
$37,894 would cost the company $276,290 + $62,000 in annual
premium would equal $338,290
What we know: With current employee contribution of $300/month Wages must be $37,894/year to meet affordability requirement
of 9.5% 35 employees earn $30,000 per year Employer must increase 35 employee wages by $7,894
$7,894
X 35
$276,290
Scenarios
Scenario #4: What if the employer drops coverage?
Employer would pay $2,000 penalty per employee for all employees (minus 80)
Total employer cost by dropping coverage
would be $60,000
110 - 80 employees
30 X $2,000
$60,000 penalty
For 2015 ONLY employer may subtract 80 employees. From 2016 on, employers may subtract 30 employees.
Scenario #4 Answer:
Recommendation: Increase Employer Contribution
Scenarios
Do Nothing
2015 Employer Cost$122,000
2016 Employer Cost$222,000
2015 Employer Cost$144,500
2016 Employer Cost$144,500
Increase Employer Contribution
Increase 35 Employee Wages
2015 Employer Cost$338,290
2016 Employer Cost$338,290
Drop All Coverage
2015 Employer Cost$60,000
2016 Employer Cost$160,000
THANK YOU
