1 Health Care Reform Webinar February 19, 2016
2 Agenda Summary Timeline ACA Reporting Transitional Reinsurance Fee PCORI Fee Medical Loss Ratio Employer Mandate Strategies SPDs & Wrap Documents
3 Reform: Summary Timeline Date Item Fully/Self-Insured Responsible Party 1/15/16 First installment payment due on TRF for /31/ B & 1095-C due to Individuals 5/31/ /1095-B and 1094/1095- C due to IRS (paper filing only) 6/30/ /1095-B and 1094/1095- C due to IRS (electronic filing only) FI and SI FI and SI FI and SI FI and SI FI- Carrier SI- Employer Forms and responsible parties will vary Forms and responsible parties will vary Forms and responsible parties will vary 7/31/16 Pay PCORI fee on Form 720 FI and SI FI- Carrier SI- Employer 7/31/16 MLR rebates disbursed to participants FI Employer 10/15/16 Medicare Part D Notice FI and SI Employer 11/15/16 Second installment due on TRF for /15/16 Annual enrollment count due to HHS for 2016 TRF FI and SI FI and SI FI- Carrier SI- Employer FI- Carrier SI- Employer
4 ACA Reporting 2 Reporting Obligations: 6055: Every person who provides minimum essential coverage to an individual during a calendar year. 26 U.S.C. 6055(a) 6056: Every applicable large employer required to meet the requirements of [the employer mandate] during a calendar year. 26 U.S.C. 6056(a).
5 ACA Reporting- Which Forms to Complete? Large Groups (Over 50 FTEs) Employer, fully insured, 75 FTEs in C & 1095-C (except Part III) Employer, self-funded, 75 FTEs in C & 1095-C Small Groups (Under 50 FTEs) Employer, fully insured, 39 FTEs in No reporting requirement Employer, self-funded, 39 FTEs in B & 1095-B
6 ACA Reporting- Extended Deadlines 2015 Report Original Deadline Extended Deadline Forms Sent to Individuals 2/1/2016 3/31/ B 1095-C Forms Filed with IRS 1094-B and 1095-B 1094-C and 1095-C 2/29/2016- Paper 3/31/2016- Electronic 5/31/2016- Paper 6/30/2016- Electronic
7 ACA Reporting- Common Questions My employees are receiving 1095 forms, but I thought the reporting obligation was delayed. What s going on? Deadline to report was delayed, nothing wrong with filing early. Since the employees received a 1095, do we (employer) still need to complete the reporting? Yes. Insurance company issued the B forms, but ALEs must complete the 6056 reporting obligation. Employees are asking if they can file their taxes without the 1095-C. What should I tell them? Go ahead and file. The IRS advised that a 1095 is not required this year as proof of coverage. Read about it on TerrillConnect.
8 ACA Reporting-Common Questions I only need to report on employees enrolled in the plan, right? It depends, but that s probably wrong. If the employer is an ALE, they must report on all full time employees, regardless of enrollment. Selffunded employers must report on everyone enrolled in the plan (and if they re an ALE, they must also report on all full time employees, regardless of enrollment). What s a qualifying offer? 3 components: 1. offer to employee that meets the federal poverty line safe harbor (~ $93 / month for 2015) 2. offer to spouse, and 3. offer to dependents.
9 Transitional Reinsurance Fee Transitional Reinsurance Fee (TRF) Carriers began applying tax on renewals effective February Applies to fully-insured and self-funded plans. Year 1 - $63 per member per year or $5.25 pmpm (2014). Year 2 $44 per member per year or $3.67 pmpm (2015). Year 3 Proposed at $27 per member per year or $2.25 pmpm (2016). Who pays? Fully-insured plans - Insurers are responsible. Self-insured plans Plan / Employer is responsible. What coverage is subject to fee? Major medical coverage (grandfathered & non-grandfathered).
10 Transitional Reinsurance Fee Exclusions Excepted benefits, supplemental coverage, secondary coverage and coverage not meeting the minimum value (60% AV). Accident-only coverage Children s Health Insurance Program EAP s or wellness programs that do not provide major medical benefits Expatriate-only plans Flexible Spending Accounts Integrated HRA s Health Savings Accounts Stop loss Reinsurance policies Coverage for Tribal members and dependents (not employment-based plans) TRICARE Medicaid, Medicare, Medicare supplemental plans and Medicare Advantage plans Part D prescription drug benefits Prescription drug benefit plans Retiree-only plans that pay secondary to Medicare Specified diseases or hospital indemnity coverage Stand-alone vision and dental
11 Transitional Reinsurance Fee Timeline & Collection of Fees When January 15, 2016 November 15, 2016 What Final date for 1 st payment of 2015 Membership counts due to HHS 4 th Quarter of nd payment due for 2015 January 15, 2017 Final date for 1 st payment of th Quarter of nd payment due for 2016 How to report & make payment Reporting based on first 3 quarters of enrollment data.
12 Transitional Reinsurance Fee Calculation Methods 1. Actual count total lives ( belly buttons ) covered each day of plan year divided by # of days in plan year 2. Snapshot total lives on one consistent date during each quarter divided by 4 3. Snapshot Factor total singles + (dependent coverages x 2.35) Method - # reported on 5500 form filed for the plan year - Sum of participants covered at beginning and end of the plan year Snapshot Example January 1 1,100 members April 1 July 1 1,200 members 1,150 members 3,450 divided by 3 = 1,150 members 1,150 X $52.50 = $60,375 (1 st payment 1/15/16) 1,150 X $10.50 = $12,075 (2 nd payment 4 th quarter 2016) Total Payment = $72,450
13 PCORI Fee Patient-Centered Outcomes Research Institute (PCORI) Fee applies to policy years ending after 9/30/12 and before 10/1/19 $2.00 per member fee for second plan year ending after 9/30/13 $2.08 per member fee for third plan year ending after 9/30/14 $2.17 per member fee for fourth plan year ending after 9/30/15 Indexed to inflation in subsequent years through 2019 Who is required to pay? All health insurance plans fully-insured or self-funded (including retiree only) - Fully-insured plans carrier pays - Self-insured plans employer pays & files form 720 FSA plans if the employer contributes more than $500
14 PCORI Fee Calculating the # of covered lives Actual count total lives ( belly buttons ) covered each day of plan year divided by # of days in plan year Snapshot total lives on one consistent date during each quarter divided by Method - # reported on 5500 form filed for the plan year - Sum of participants covered at beginning and end of the plan year - May only be used if Form 5500 for the plan year has actually been filed by the fees due date (7/31) Special Rules For FSA s & HRA s Counts are only done on participants (subscribers) and not members If offering a self-funded HRA in conjunction with a self-funded medical plan the plans are considered one offering
15 PCORI Fee How is the fee amount reported and paid Reported and paid using IRS Form 720 Part II No. 133 on page 2 of 7. Form 720 and the PCORI fee are due July 31
16 Medical Loss Ratio Requirement on fully-insured markets Insurance companies must spend a certain percentage of premiums received for medical services and the improvement of health care quality. If they do not reach these percentages, the insurer must provide the excess back to the policyholders in the form of a rebate. - 80% Medical Loss Ratio (MLR) target for small / individual market. - 85% Medical Loss Ratio (MLR) target for large group market. Annual Calculation of Rebates By state, by book of business and business entity Rebates due to policy holders by 7/31 Must be allocated appropriately Employer / employee shares. Specific uses cash rebates, future premium reductions or benefit enhancements Employees must receive rebate within 90 days
17 Medical Loss Ratio MLR Rebate Allocation If the employees made premium contributions, and the employer receives a rebate check, the employer must determine: 1. What portion of the rebate is attributable to participant contributions and; 2. How the participants' share of the rebate will be used for their benefit. The portion of the rebate attributable to participant contributions is usually based on the share or percentage of premiums paid by the employees. For example, if employees pay 25% of the premium cost and the employer receives a rebate of $4000, $1000 (25% x $4000) is deemed to be attributable to participant contributions and must be used for the benefit of the participants.
18 Medical Loss Ratio 3 Options for Allocating Rebate: 1. The rebate can be paid to the participants, under a fair and equitable allocation method. I.e., the employer could "weight" the rebate so that an employee with family coverage who paid a larger share of premiums would get a larger share of the rebate. - The employer may conclude that only current participants are allowed to share in the rebate. Each employee who received a share of the rebate would recognize additional taxable income. 2. The employer can apply the rebate toward future participant premium payments (i.e., give participants a "premium holiday"). 3. The employer could use the rebate to provide enhanced benefits for the participants. The DOL suggests using the 2 nd and 3rd options if payments to participants is not cost effective. Ex: if the payments to participants are de minimis or if they would give rise to tax consequences to the participants. Allocation or distribution to participants within 3 months after receipt of MLR rebate.
19 Employer Mandate Strategies Categorizing Employees Applicable Large Employers (ALEs) have 2 options when hiring an employee: 1. Full time - Employees reasonably expected to work 30+ hours per week on average. - Must be offered coverage within 90 days of employment 2. Variable hour - Every employee who is not full time. - Can be part time employees or employees with fluctuating work schedules. - Can also be seasonal employees. - Employers must track their hours to determine if they meet full-time status and are owed an offer of coverage - How do you track and average hours?
20 Employer Mandate Strategies Measurement Period Used to determine which variable hour employees are full time (who should get an offer of coverage). 2 Types: Initial (measuring from date of hire) Standard (measuring in sync with stability period) Length determined by employer 3 to 12 months. Administrative Period Used to calculate hours and conduct open enrollment 90 day limit Between measurement and stability periods. Stability Period Period when coverage must remain in place if elected. 2 Types: Initial (if employee qualifies during initial measurement period) Standard Must match the measurement period (if measurement period is 6 months or more). Employees status as full time is locked during stability period (even if hours dip).
21 Employer Mandate Strategies J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D STANDARD STABILITY PERIOD (1/1/15 to 12/31/15) Administration STANDARD STABILITY PERIOD (1/1/16 to 12/31/16) Administration STANDARD STABILITY PERIOD (1/1/17 to 12/31/17 Administration STANDARD MEASUREMENT (11/1/14 to 10/31/15) STANDARD MEASUREMENT (11/1/15 to 10/31/16) STANDARD MEASUREMENT (11/1/16 to 10/31/17) INITIAL MEASUREMENT (6/1/15 to 5/30/16) Administration INITIAL STABILITY (6/1/16 to 5/31/17)
22 Employer Mandate Strategies Employer Mandate Obligations: Offer affordable, minimum value coverage to 95% of full time employees and minimum essential coverage to dependents. What is Minimum Value? Plan that provides at least 60% actuarial value Bronze level plan What is Affordable? Employee share of cost for self-only coverage on the lowest offered plan cannot exceed a specified percentage of the employee s household income: % in % in 2016
23 Employer Mandate Strategies 3 Safe Harbors to calculate affordability Federal Poverty Line Cannot exceed 9.66% of mainland poverty line. Ex: 2016 FPL: $11,880 $11,880 x.0966 / 12 = $95.04 W-2 Based on box 1 of current year W-2 (modified adjusted gross income) Cannot exceed 9.66% of W-2 box 1 wages divided by 12. Ex: box 1: $55,000 x.0966 / 12 = $ Rate of Pay Based on the employee s hourly rate of pay (or monthly salary). Cannot exceed 9.66% of rate of pay multiplied by 130 divided by 12. Ex: rate: $13/hr x.0966 / 12 = $140.83
24 Employer Mandate Strategies Affordability Safe Harbor Frequently Asked Questions: Can I use the rate of pay safe harbor for salaried / exempt employees? - Yes. Instead of using a 130 hours as a multiplier, simply use the employee s monthly salary as of the first day of the coverage period. If I use the rate of pay safe harbor for an employee that was out on an extended leave of absence, do I adjust the 130 hour multiplier? - No. The calculation remains the same even though the employee may not have in fact earned any income during a particular month. Can I use the rate of pay safe harbor for tipped or commissioned employees? - Probably not. The rate of pay for tipped employees is extremely low, so the resulting number would likely be less than the federal poverty line safe harbor. A commission is also not regarded as a rate of pay. The IRS suggests using one of the other safe harbors for these employees.
25 Employer Mandate Strategies Employer Mandate Penalties Two penalties: (a) failing to offer minimum value coverage to 95% of full time employees and (b) failing to offer affordable, minimum value coverage to employees. ACA: indexed penalties to inflation. Original annual amounts: (a) $2,000 x all full time employees (minus 30); (b) $3,000 for each person who waived unaffordable coverage and received a subsidy on the exchange.
26 SPDs & Wrap Documents Summary Plan Description - ERISA requirement for group health plans - Notifies the participants of the plan s terms and legal notifications When to Distribute? - Distributed in a manner reasonably calculated to ensure actual receipt of the material - With enrollment materials - Within 90 days of coverage for new hires - Within 120 days after a new plan is adopted Furnish to Whom? - Covered employees (generally not spouses or dependents) - Covered retirees - COBRA qualifies beneficiaries - Child/parent-guardian under QMCSO - Spouse/dependent of deceased retiree - Guardians of incapacitated persons
27 SPDs & Wrap Documents Typically contain: Description of plan eligibility, benefits and coverage termination Plan-identifying information Coordination of benefits ERISA rights Plan contributions and funding Group Health Plans require additional information For example: - Provisions about COBRA, GINA, USERRA, etc. - Detailed description of group health plan benefit provisions - Warning that if SPD and plan document conflict, plan document controls, etc.
28 SPDs & Wrap Documents Wrap Document Insurance carrier s contract or certificate booklet don t count as an SPD! Holes in the documentation are filled using a wrap document Two types of wrap documents Mega-wrap document - Wraps the required ERISA language around a carrier s certificate of coverage. - Can combine many employer-sponsored plans into a single plan. - Can help employer simplify their Form 5500 filing. Single-plan wrap document - Used to wrap the required ERISA language around a single plan. - Can be used by plan to wrap ERISA language around a medical certificate of coverage.
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