The Ultimate Guide to. Health Care Reform. Everything You Need to Know About the Affordable Care Act and What it Means for Your Business

Transcription

1 The Ultimate Guide to Health Care Reform 2014 Everything You Need to Know About the Affordable Care Act and What it Means for Your Business

2 Table of Contents Overview Pg. 3 Common Terms and Definitions Pg. 4 Key Dates and Requirements Pg. 4 9 Employer Mandate Pg. 5 6 Compliance, Costs and Credits Pg. 7 8 Impacts on Hourly Workforces Pg How Software Can Help Pg Conclusion Pg. 12 2

3 Overview Whatever you call it and whether or not you agree with it, Obamacare, the Affordable Care Act, ACA, health care reform is having and will continue to have a huge impact on service-industry businesses. Top 5 ACA Concerns 1. Rising costs Our new Ultimate Guide gives you everything you need to know about the Affordable Care Act and how it specifically applies to your business. You ll learn the basics of, and best practices for, health care reform, including: When new requirements go into effect and what you should be doing now How much certain fines, fees and credits could save or cost you Why workforce software is the best way to increase compliance and savings 3. Difficulty to remain competitive 2. Administrative burden to comply 4. Job cuts 5. Don t fully understand the implications Health care cost employers ~ $7,225 per enrolled employee in

4 Common Terms and Definitions Affordable coverage A plan for which the employer covers at least 60 percent of health care expenses, and for which employees premiums do not exceed 9.5 percent of his or her annual household income Dependent A child under the age of 26 (spouses do not qualify) Full-time equivalent employee A person who is employed, on average, at least 30 hours per week Large business An employer with 50 or more full-time equivalent employees SHOP Marketplace The Small Business Health Options Program (SHOP) marketplace is the part of the online health insurance exchange that small businesses use to buy employee health plans Small business An employer with fewer than 50 full-time equivalent employees What s Required Key Features and Deadlines of the ACA Requirements have been rolling out since the Affordable Care Act was signed into law on March 23, To keep you compliant with what s already in place and prepared for what s planned, we ve outlined some of the major ACA provisions that pertain to service-industry employers like you Affordable Care Act signed into law March 23,

5 Pay or Play Employer Mandate Overview The Employer Shared Responsibility Payment, also known as the Employer Mandate fee, is a requirement that all businesses with more than 50 fulltime equivalent (FTE) employees provide health insurance for their full-time employees or pay a per-month fee on their federal tax return. Approximately 96 percent of employers have fewer than 50 full-time employees and are exempt from any of these provisions in any year. The Employer Mandate, originally set to begin in 2014, is now delayed until 2015/2016. Businesses with full-time equivalent employees will need to start insuring workers by Those with a 100 or more will need to start providing health benefits in The U.S. Treasury Department has enacted several limited transition rules to help ensure a gradual phase-in to Employer Shared Responsibility Payment provisions. General Employer Mandate Provisions The employer mandate is based on full-time equivalent employees, not just full-time employees. The fee is based on whether or not you offer affordable health insurance to your employees that provides minimum value. The annual fee is $2,000 per employee if insurance isn t offered (the first 30 full-time employees are exempt). If at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total. The fee is a per month fee due annually on employer federal tax returns; 1/12 of the $2,000 or $3,000 per employee annual fee. Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible Summary of Benefits and Coverage (SBC) Communication. For open enrollment periods starting on or after W-2 Reporting. W-2s issued in January 2013 for 2012 tax year (employers issuing >250 W-2s for 2011). PCORI Fees. For plans ending or later. 5

6 Pay or Play Employer Mandate Continued Limited Transition Rules Employer responsibility provisions will generally apply to larger firms with 100 full-time employees starting in 2015 and employers with 50 full-time employees in Employers must offer coverage to 70 percent of their full-time employees in 2015 and 95 percent in 2016 and beyond, in order to avoid fines. Employers may use an optional look-back measurement method to make it easier to determine whether employees with varying hours and seasonal employees are full-time. Final regulations also clarify the application of this method and the alternative monthly method of determining full-time status. Affordability safe harbors permit employers to use the wages they pay, their employees hourly rates, or the federal poverty level in determining whether employer coverage is affordable under the ACA. Employers can determine whether they had at least 100 full-time or fulltime equivalent employees in the previous year by reference to a period of at least six consecutive months, instead of a full year. Employers with plan years that do not start on January 1 will be able to begin compliance at the start of their plan years in 2015 rather than on January 1, Employers will not have to offer coverage to their full-time employees dependents in 2015 if they are taking steps to arrange for such coverage to begin in On a one-time basis, in 2014 preparing for 2015, plans may use a measurement period of six months, even with respect to a stability period of up to 12 months FSA Contribution Limits. $2,500 limit on employee contributions to health FSAs. For plan years beginning on or after Health Insurance Marketplace Opens. Effective High-Income Earners Tax Increases. 0.9% increase in employee-paid Medicare tax; 3.8% FICA tax increase on unearned income. For 2013 tax year. Employer Medicare Deductible Eliminated. Medicare D expenses no longer tax deductible for employers. For 2013 tax year. 6

7 Compliance, Costs and Credits What kind of fines could you be facing from the ACA? We ve broken down the most common employer fines, fees, taxes, and tax breaks and how much each one could cost you. Not offering coverage Large businesses that don t offer qualified coverage to FTE employees and their dependents, and if an employee purchases coverage through the online Health Insurance Marketplace with the assistance of federal subsidies will have to pay up to $2,000 for every FTE employee beyond the first 30 employees,. The amount of the fine will be adjusted annually to reflect the growth in national insurance premium costs. Cost: $2,000 per employee Discriminating in plans Health care plans can no longer discriminate in favor of highly compensated employees. If employers have options that discriminate, they will eventually be forced to pay a penalty of $100 per day, per non-highly compensated employee. Cost: $100 per day, per employee Not offering affordable coverage If you do offer coverage, but the coverage does not meet certain plan or premium parameters, you may still have to pay a fine. If either of these two conditions is not met, the employer must pay a $3,000 annual fine for each employee who declines his or her employment-based insurance and obtains government-subsidized coverage through an online exchange. Comprehensive plan coverage First, employers will be fined if a plan is judged not to be comprehensive. A plan is considered comprehensive if the employer pays at least 60 percent of health care expenses and the employee s deductibles and copayments do not exceed 40 percent of total expenses. Cost: $3,000 per employee Affordable premiums Second, employers will be fined if employees premiums are considered unaffordable relative to their household incomes. Premiums are considered unaffordable if the employee s share exceeds 9.5 percent of his or her annual household income Small Business Tax Credit Increase. Employer tax credit up to 50% of contributions to providing health insurance to employees. Effective Individual Coverage Mandate. Wellness Premium Differential. Differential can increase to 30%; 50% for tobacco-related 7

8 Compliance, Costs and Credits Continued Failing to provide SBCs Employers are currently required to provide to employees Summaries of Benefits and Coverage (SBC), a four-page form detailing the group health care plan that describes coverage and how the insurance will apply to certain situations. If employers fail to provide SBCs, the fee is $1,000 for each violation, with a possible additional penalty of $100 per day, per effective participant. Cost: $1,000 per violation $100 per day, per employee Patient-Centered Outcomes Research Institute (PCORI) Fee The Patient-Centered Outcomes Research Institute Fee helps fund moreinformed health decisions by advancing the quality and relevance of evidencebased medicine, through comparative clinical effectiveness research findings. PCORI fees are assessed at $1 per covered life per year in year one, increasing to $2 in year two and indexed annually thereafter. For plans ending or later; payment due of the calendar year following the end of the plan year. Cost: $1 per employee in year one, and indexed annually thereafter Small Business Tax Credit Qualified small businesses and small non-profit organizations can receive a tax credit of up to 50% of their contribution to provide health insurance for employees. Credit: 50% of employer contribution 37% of workers making $15,000-$20,000 annually participate in employer plans, compared to 81% of employees who earn $45,000 annually. $13B Projected employer fines the government will collect from ACA New Fees. Insurance Industry Fee and Transitional Reinsurance Program Fee. For 2014, $63 PPPY. OOP Limits. $6,250 individual/$12,500 family. For 2013 tax year. Limited Deductibles. $2,000 individual/$4,000 family. For non-grandfathered insured small group market plans, for 2013 tax year. 8

9 Impacts on Hourly Workforces For Employers The service industry is arguably the hardest-hit by health care reform regulations. These organizations like restaurants, convenience stores, hotels and retail businesses typically have a large percentage of hourly workers, low wages and high opt-out rates for coverage. Each of these factors contributes to service-industry businesses experiencing significantly higher cost impacts from health care reform, as compared to businesses in sectors like technology or finance many of which already offer health insurance to employees. Service-industry companies, however, typically operate on much tighter margins. Because of this, they are less likely to currently offer health insurance coverage to their hourly employees. Having to now provide health benefits to the majority of their employees most of whom they re not currently accounting for represents an enormous increase in labor costs for 2015 that many service-industry companies aren t prepared to cover. As a result, a number of employers plan to limit employees hours and/or total number of employees, in order to avoid these cost increases altogether. Companies restricting total hours-worked below the ACA s 30-hour definition of full-time status are also known as 29ers; those capping their total workforce size below 50 employees in order to exempt themselves from largeemployer status and, therefore, providing health insurance are 49ers. For Employees How are these 29ers and 49ers strategies affecting their employees? According to a 2013 Department of Labor employment survey, 8 million Americans want a full-time job but are stuck with part-time hours; this number is only going to grow as employers look to limit hours below 30/week. Employees are left working multiple part-time jobs and feeling undervalued and disengaged. Disengaged employees quickly lead to high turnover and low customer satisfaction, ultimately hurting your productivity, culture and revenue Employer Shared Responsibility Payment. For employers with more than 100 FTE employees. Auto Enrollment. For some time after 2014 (no guidance issued yet). Nondiscrimination Testing. For some time after 2014 (no guidance issued yet). 9

10 Impacts on Hourly Workforces Continued Many of the determinations employers must make to figure out how the law impacts them for example, the applicable large employer calculation are much more complicated than for other businesses who have more stable workforces with less turnover. - Tom Boucher, CEO Great New Hampshire Restaurants Inc. Eight out of 10 companies say they will cut hours of full-time workers and hire more part-time workers. 46% of all retail and hospitality businesses don t currently cover all of their employees working 30 hours/week; 41% of those that do say their plans won t be considered affordable. We can t really calculate what it s going to be like. - John Mackey, Co-Founder and Co-CEO Whole Foods We have always had a significant number of full-time employees and they are integral to our success. The data we have collected during our test around guest satisfaction and employee engagement has only reinforced this. - Clarence Otis, Chairman and CEO, Darden Restaurants In the restaurant industry, only three out of every 10 hourly employees currently participate in health care plans. Several of the other people I work with, some of them are single parents, and we do the best we can. Twentyeight hours a week just isn t going to cut it for the bills. Johnna Davis, Taco Bell employee It was 29 1/2 [hours], and they d kick you out. They d always print off a little slip every day and say who was getting close. Keaton Hasty, Busboy, Olive Garden 10

11 How Workforce Management Software Can Help Whether you choose to Pay or to Play, an online workforce management system can help enforce companywide ACA compliance and cost control. These systems like PeopleMatter s complete set of mobile workforce solutions and business analytics tools automate and connect hiring, training, scheduling, communication, and HR processes, increasing efficiency, visibility and cost-savings. Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business. - Stephen Caldeira, President, International Franchise Association HR/Communication Clear communication and consistency across your entire company is key to rolling out a successful health care reform program. With an online system, corporate can set certain thresholds, like how many hours is considered Fulltime, across the entire company. You can also distribute new HR policies and updates, like the now-required Explanation of Benefits documents, to all managers and/or team members at all locations instantly online. The small business with the right approach [to ACA] will develop a leg up. - David Marini, VP, ADP Training When you re hiring a lot of people, you need to make sure they re prepared before they re on the floor and in front of customers. An allin-one online system lets you assign courses and track progress in real time, so you know who s ready to put on the schedule. And with features like those in PeopleMatter LEARN, you can assign these tasks as part of onboarding, so employees are prepared before they walk in on day one. You can also distribute important documents, policies and educational info and require employees to acknowledge receipt with an e-signature through LEARN, so you know you re covered and team members have the info they need. Hiring If you decide to hire more part-time employees or you have to to keep up with high turnover, an online people management system helps you identify and onboard the best candidates quickly. With a system like PeopleMatter HIRE, you can see employees availabilities on their online application, so managers can make sure they re filling the spots they need. Additionally, step-by-step onboarding and I-9 verification lets you get new hires on the floor faster while ensuring 100 percent compliance company-wide. 8 out of 10 companies plan to cut hours and hire more parttime workers as a result of ACA cost increases 11

12 How Workforce Management Software Can Help Continued Scheduling One of the biggest benefits and ROI contributors is an online system s scheduling capabilities. Manually creating and managing schedules can already be difficult. Doing so while trying to optimize for health care reform requirements is down right impossible. An online scheduling system that s connected to your HR, hiring and training helps you ensure 100% compliance, control labor costs and increase efficiency. With an online Platform, you can track actual vs. scheduled hours and run realtime reports on this info to evaluate your labor management efficiency. These reports can also help you determine the status of an employee over certain look-back periods to see if you re required to provide coverage for them. PeopleMatter SCHEDULE also warns managers when they re creating the weekly schedule if an employee is over the company s set threshold. Corporate can set up alerts to notify them when locations cross certain thresholds. And when managers are reviewing employees shift-change requests which will most likely increase in volume as employees try to juggle multiple part-time jobs they can see the impact, both in hours and costs, that approving the request will have. This helps prevent employees from working more than 30 hours/week, even if they re originally scheduled within the part-time range. I think you ll see labor software coming out to help restauranteurs and retailers meet the demand for the hours, as well as what our team members need. - Sally Smith, CEO, Buffalo Wild Wings More than 1/3 of restaurant employees currently work 30 hours/week Conclusion Navigating the Affordable Care Act won t be easy. Whether you re planning on cutting hours, paying fines or a little of both or if you don t know what in the world you re going to do yet we re here to help. To learn more about how PeopleMatter can help you maximize efficiency and cost savings in the wake of health care reform, visit peoplematter.com/platform or talk with our sales team. Other helpful resources Sources: CNBC.com, FastCasual.com, HealthAffairs.org, Healthcare.gov, Inc. Magazine, Huffington Post, Jackson Lewis LLP, Lockton, Marsh & McLennan Agency, Mercer, National Restaurant Association, Orlando Sentinel, People Report, QSR Magazine, The Wall Street Journal, U.S. Treasury Department 12

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