The Trends & the Impact of the Affordable Care Act ( ACA ) Presented By: The Cavanagh Law Firm, P.A. For: Arizona In Home Care Association August 12, 2014 Julie Pace 602.322.4046 jpace@cavanaghlaw.com www.cavanaghlaw.com Jennifer Sellers 602.322.4003 jsellers@cavanaghlaw.com www.cavanaghlaw.com Heidi Nunn-Gilman 602.322.4080 hnunngilman@cavanaghlaw.com www.cavanaghlaw.com
Will the Employer Mandate be Moved Again? 2 1. The employer mandate was originally set to become effective on January 1, 2014. 2. On February 10, 2014, the Treasury Department announced that companies with 100 or more workers will not be subject to penalties for 2015 if they demonstrate that they are offering insurance coverage for at least 70 percent of their full-time workers in 2015 (previously the threshold was 95 percent). 3. The Treasury Department also announced that employers with between 50 and 99 employees will not be required to provide health insurance coverage for employees until January 1, 2016.
Will the Employer Mandate be Moved Again? 3 4. In July 2014, the House of Representatives voted to sue President Obama because of his delays of the ACA employer mandate. With a near partyline vote of 225-201, representatives voted in favor of the suit. 5. The lawsuit would be difficult for the House to win because the House would have to prove standing---that it suffered direct harm from the President s conduct. 6. The House has been previously involved in lawsuits. The House spent $2.3 million to defend a law denying federal marriage benefits to same-sex couples. The U.S. Supreme Court ruled against the House in 2013.
Key ACA Stats 1. PricewaterhouseCoopers predict that premiums will increase by an average of 7.5 percent in 2015. The highest predicted increase is in Nevada where consumers might see premiums rise by 36 percent. However, some consumers in Arizona could see their premiums drop by 23 percent. 2. According to a Kaiser Family Foundation tracking poll released on August 1, 2014, 53 percent of Americans have an unfavorable view of the ACA while only 37 percent have a favorable view. Support for the ACA was at its peak when it was first signed in law in March 2010. 3. The uninsured rate has hit a five year low. 13.4 percent of American adults do not have coverage which is the lowest reported number for the past five years. 4. Most individuals who obtained coverage through a Marketplace are paying premiums. WellPoint is reporting as many 90 percent of their customers paid their first premium on a timely basis. Aetna is reporting between the low to mid 80 percent range. 4
Recurring ACA Legal Issues 1. Reviewing and responding to questions regarding insurance plans or insurance strategies to ensure compliance with the ACA Employers want to verify that insurance products or strategies offered by their insurance companies are ACA compliant. 2. Provide analysis of the impact of the pay or play mandate and the development of strategies to minimize the financial and administrative impact Evaluating how long the standard measurement period/look back period should last and whether employers can take advantage of seasonal exception. Standard measurement periods can be between 3 months and 12 months. Stability periods must be the same length as standard measurement periods, but cannot be shorter than 6 months. Employers should consider both fully insured plans and self-funded options. 5
Recurring ACA Legal Issues 3. Coaching and the development of talking points for benefit professionals or management to speak with their employees regarding their health care options Not all employees will benefit by enrolling in an employer offered plan. Some employees may have better options offered through the government or in enrolling in a Marketplace plan. For some employees, it may be cheaper to pay the penalties. Currently, the individual penalties are : 2014 $95 or 1.0 percent of income 2015 $325 or 2.0 percent of income 2016 (and after) $695 (indexed annually) or 2.5 percent of income The maximum penalty for an individual is $2,448 and $12,240 for a family. The maximum applies to individuals making $244,800 per year and for families of five or more, the maximum penalty would affect people making a combined yearly income of $1.2 million If employers educate employees of their options, often less employees enroll and therefore lower premium costs often result. 6
Recurring ACA Legal Issues 4. An increase in questions and advice concerning the design and implementation of wellness plans that are ACA and HIPAA compliant, as well as compliant with other laws such as ADA, GINA, EEOC and the tax code. Under the ADA, wellness plans must be voluntary. Under GINA, employees cannot be provided a financial incentive for providing genetic information. Employers providing wellness incentives need to draft wellness plans and associated supporting documents including physician waiver forms, notices, disclosures about the availability of reasonable alternatives, and consent forms. 5. Conducting investigations and providing advice regarding how to handle employees who lie and commit fraud to obtain premium reductions for non-tobacco use or other wellness incentives. Lying about smoking does not constitute a fraud basis to drop an employee from coverage. 7
Reoccurring ACA Legal Issues 8 6. Updating policies, handbooks, plans, and summary plan descriptions to reflect ACA changes. Best practice is to have handbooks and policies refer to plan documents and summary plan descriptions. May need to update eligibility requirements regarding full-time status for health insurance purposes and waiting periods (automatic enrollment for employers with 200 more employees delayed until DOL issues guidance and a maximum waiting period of 90 days).
ACA and Staffing Firms 9 1. The final employer mandate regulations indicate that staffing firms in some circumstances may be considered common law employers who are subject to pay or play. 2. For staffing firms that are not common law employers, the regulations indicate that customers of staffing firms would have to pay more for temporary workers if the staffing agency provided coverage in order to be ACA compliant.
According to the final regulations: ACA and Staffing Firms 10 an offer of coverage to an employee performing services for an employer that is a client of a professional employer organization or other staffing firm (in the typical case in which the professional employer organization or staffing firm is not the common law employer of the individual) made by the staffing firm on behalf of the client employer under a plan established or maintained by the staffing firm, is treated as an offer of coverage made by the client employer for purposes of section 4980H. For this purpose, an offer of coverage is treated as made on behalf of a client employer only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay to the staffing firm for the same employee if the employee did not enroll in health coverage under the plan.
ACA and Staffing Firms 3. The final regulations imply that IRS does not view a staffing firm as the common law employer in most scenarios and, therefore, not subject to pay or play. 11 It is the best practice to have service agreements or leased agreements between the employer and the staffing agency to spell out who is responsible for new hire paperwork, I-9s, notices under the ACA, wage & hour compliance, OHSA requirements, etc. Many times staffing agencies and employer are considered joint employers. 4. The final regulations require a client to pay a higher fee for temporary workers that are enrolled in a plan maintained by a staffing firm in order for that offer of coverage to satisfy the employer mandate. The final regulations, however, do not specify how much higher that fee should be or what proportion of the cost should pass through to the client.
ACA Hot Topic: Employer Payment Plans Are Not ACA Compliant 12 1. Employers using employer payment plans to reimburse employees on a pre-tax basis for premiums they pay for individual health insurance must cease. 2. The IRS Q&A posted on May 13, 2014, explains that employer payment plans cannot be integrated with individual policies to satisfy the market reforms. And it concludes that such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under Section 4980D of the Internal Revenue Code.
ACA Hot Topic: Hobby Lobby s Impact on the Employer Mandate & Coverage Requirements 13 1. On June 30, 2014, the U.S. Supreme Court ruled that owners of closely held for-profit corporations cannot be forced under the ACA to provide certain contraceptives that offend their religious beliefs. To do so, would violate the Religious Freedom Restoration Act ( RFRA ). 2. The Court did not define a closely held corporation or state how many shareholders would fit the definition. 3. The only guidance on the definition of a closely held corporation is to look to Hobby Lobby s corporate structure. Hobby Lobby is owned and operated by a single family. There are approximately 600 stores with about 30,000 employees in the U.S.
ACA Hot Topic: Hobby Lobby s Impact on the Employer Mandate & Coverage Requirements 14 4. Based on Hobby Lobby s corporate structure, a corporation owned and controlled by a single family could qualify for a RFRA exemption regardless of its number of locations and employees. But is the exemption only available for businesses held and run by a single family? 5. For instance, if the IRS definition of a closely held corporation applies, many businesses could qualify for the exemption. According to the IRS, a closely held corporation has more than 50 percent of the value of its outstanding stock directly or indirectly owned by five or fewer individuals at any time during the last half of the tax year. Under the IRS definition, personal service corporations are not closely held. 6. Approximately 90 percent of all companies in the U.S. are closely held, according to a 2000 study by the Copenhagen Business School in Denmark. As a result, many companies may qualify for an RFRA exemption for sincere religious beliefs.
ACA Hot Topic: Hobby Lobby s Impact on the Employer Mandate & Coverage Requirements 15 7. Hobby Lobby was not opposed to all contraception methods. Instead, the Company objected, based on religious grounds, to pay for two forms of the morning-after pill and two kinds of IUDs because they could result in the destruction of a fertilized egg. 8. May employers eliminate all forms of birth control from their company healthcare plans based on religious beliefs? The answer is a definitive maybe. The day after the Hobby Lobby decision was published, the U.S. Supreme Court vacated a decision by the Sixth Circuit in Autocam Corp. v. Burwell that had ruled against a company that objected to providing any contraceptives under its employee health plan. The case was remanded to the Sixth Circuit for further consideration in light of the Hobby Lobby decision.
ACA Hot Topic: Hobby Lobby s Impact on the Employer Mandate & Coverage Requirements 16 9. What about other medical items or services that are objectionable based on religious grounds? According to the Supreme Court, the Hobby Lobby decision was limited to the ACA s contraceptive mandate and should not be understood to hold that all insurance-coverage mandates, such as vaccinations or blood transfusions, must necessarily fail if they conflict with religious beliefs. Therefore, the question remains open if the RFRA exemption would be available for other ACA coverage requirements.
ACA Little Known Topic: Whistleblower Protections under the ACA 1. Many individuals are unaware of the ACA whistleblower protections enforced by the Occupational Health & Safety Administration ("OSHA"). Under the interim regulations, employees are protected from retaliation by their employers for: 17 Reporting an ACA Title I violation; Refusing to participate in an activity that the employee reasonably believes to be in violation of Title I; Assisting or participating in a whistleblower proceeding under 1558 of the ACA; or Receiving a tax credit or cost sharing reduction as a result of participation in a Marketplace.
ACA Little Known Topic: Whistleblower Protections under the ACA 2. Title I of the ACA relates to coverage protections, such as prohibitions on lifetime coverage limits, preexisting conditions exclusions, requirements to cover preventive services without cost sharing, and prohibitions on using certain factors to set premium rates. 18 3. The anti-retaliation protections apply to group health plans and health insurance issuers offering group or individual health coverage. Therefore, employees are also protected from retaliation by the insurance carrier that provides them with coverage. For example, employees are protected from acts such as issuers limiting or canceling their health insurance coverage. 4. Employees who believe they are victims of retaliation may file a complaint with OSHA within 180 days of the alleged retaliation. An employee may withdraw the employee's complaint from OSHA and sue in federal court if the agency does not act on the complaint within 210 days of filing.
ACA Little Known Topic: Tax on Self-Insured Plans to Fund Patient- Centered Outcomes Research Institute 19 Under the ACA, employers that sponsor a self-insured health plan have until July 31, 2014, to submit an updated IRS Form 720 regarding payment for a new tax requirement. The new tax funds the Patient-Centered Outcomes Research Institute, a new initiative to improve health decisions by advancing comparative clinical effectiveness research. For purposes of the new tax requirement, a self-insured health plan is any plan providing accident and health coverage other than through an insurance policy.
ACA Little Known Topic: Tax on Self-Insured Plans to Fund Patient- Centered Outcomes Research Institute Employers can figure out how much tax they owe by multiplying the average number of lives covered for the plan year by the rate of tax. Fortunately, the tax rate per participant is nominal: 20 Plan Year Ending Rate of Tax Between October 1, 2012 and October 1, 2013 $1 Between October 1, 2013 and October 1, 2014 $2 On or after October 1, 2014 To be determined
IRS Issue Draft ACA Reporting Forms 1. The ACA added two significant reporting requirements to assist the IRS in enforcing the individual and employer shared responsibility requirements and to administer the premium assistance tax credit. One set of reporting requirements apply to insurers, sponsors of self-insured plans, and governmental entities. The other set of reporting requirements apply to employers subject to pay or play. 21 2. Both reporting requirements are effective for coverage provided on or after January 1, 2015, with the first informational returns to be filed with the IRS and provided to employees in early 2016.
IRS Issue Draft ACA Reporting Forms 1. IRC 6055 Reporting: Insurers, sponsors of self-insured plans, governmental entities, and other parties must report information to the IRS for each individual to whom they provided minimum essential coverage. They also must also provide a statement to each individual. This report requirement is intended primarily to help the IRS enforce the individual mandate. The draft form is IRS Form 1095-B. 22 2. IRC 6056 Reporting: Employers subject to pay or play must report information to the IRS about the healthcare coverage provided to full-time employees. As with the IRC 6055 reporting, a statement is also provided to each individual. This reporting requirement will support the enforcement by the IRS of the employer shared responsibility provisions. The individual statement will be used by employees to determine eligibility for the individual premium tax credit. The draft form is IRS Form 1095-C.
ACA Employer Strategies 23 1. More employers are requiring employees to share the cost burden of premiums and are offering high deductible plans 2. Some employers are only offering skinny plans. Remember the penalties for not complying with the ACA mandate for large employers with 50 full-time equivalent employees include: Large employers that do not offer health care coverage to employees and dependents and have at least one full-time employee who receives a premium tax credit must pay a penalty of $2,000 per full-time employees (excludes the first 30 full-time employees). D.C. Circuit ruled that federal government may not subsidize health insurance for coverage purchased through the federal Marketplace (34 states including Arizona did not set up their own Marketplace). Fourth Circuit took the contrary view. For large employers that do offer health coverage to employees and dependents and have at least one full-time employee who receives a premium tax credit because employment-related health coverage does not provide minimum value (covers less than 60 percent of costs) or is not affordable (employer contribution> 9.5 percent of household income) must pay the lesser of: $3,000 per employee who is receiving a premium tax credit; or $2,000 for each full-time employee (excludes the first 30 full-time employees).
ACA Employer Strategies 24 3. Many employers are offering one plan that meets the minimum requirements of the ACA and offering other plans that are more benefit rich. 4. Some employers have insurance companies that are developing private exchanges for their employees that are tied to a defined contribution from the employer. 5. Some employers are only hiring variable hour employees as new employees. 6. Wellness plans are frequently becoming more outcome based.
ACA Surprises 25 1. The impact of the pay or play mandate really depends on each individual business and each industry. Some employers are surprised that their enrollment is lower than expected because their employees are receiving better plans through AHCCCS, other government programs, or their spouse. 2. While an employer may choose to provide a wellness incentive that is ACA compliant, business reasons may dictate that the employer not offer the wellness incentive. Wellness incentives should be chosen wisely. 3. Employers with a minimum wage workforce often offer a plan that just meets the minimum requirements of ACA. Unfortunately, if employees pursue a more benefit rich plan from the Marketplace, such employees will not receive any subsidy because the employer offers an ACA compliant plan to the employees.
ACA Predictions 1. The rise of ACA whistleblower claims 26 2. Increased claims made under the ADA, GINA, and potentially the EEOC 3. Gains in competitive advantage for some employers who determine cost-effective strategies in response to the pay or play mandate
Julie A. Pace 27 Julie A. Pace The Cavanagh Law Firm, P.A. 602.322.4046 jpace@cavanaghlaw.com www.cavanaghlaw.com Ms. Pace handles many issues involving the ACA and addresses the changes and options it presents to companies including minimizing the impact of the pay or play mandate and implementing legally compliant wellness plans. In addition to her ACA practice, Ms. pace also handles EEOC and ACRD charges, matters involving OSHA, ICE, OFCCP, DOL, DOT, NLRB, ADA, FMLA, ERISA, I-9s, E- Verify, Davis-Bacon, wage and hour laws, conducting sexual harassment investigations, and providing training to managers and employees. She also counsels employers on noncompete contracts, confidentiality agreements, employee discipline, drug testing, accommodation of disabled individuals, safety policies, affirmative action plans, wage conformances and wage determinations, and other related human resource policies and procedures. Ms. pace has been interviewed and quoted on immigration and employment law in news media across the nation, including ABA Journal, Forbes, Wall Street Journal, Business Week, The New York Times, CNN, NPR, Associated Press, USA Today, L.A. Times, CBS News, Fox News, and Arizona publications.
Jennifer L. Sellers 28 Jennifer L. Sellers The Cavanagh Law Firm, P.A. 602.322.4003 jsellers@cavanaghlaw.com www.cavanaghlaw.com Ms. Sellers advises employers regarding their responsibilities under the ACA. Additionally, Ms. Sellers has particular experience in matters involving ERISA. Her ERISA background, as well as her Master of Science in Taxation, allows her to advise clients on both the IRS rules and the U.S. Department of Labor rules involving the ACA. In addition to the ACA, Ms. Sellers provides counseling to employers in both the transactional and litigation arenas of employment and labor law. She offers advice on hiring, employment contracts, covenants not to compete, severance agreements, employee manuals, compensation, benefits and terminations. She also represents clients in a wide variety of employment litigation matters which involve the ADA, ADEA, Title VII, FLSA, FMLA, the Davis-Bacon Act, the Service Contracts Act, and the NLRA.
The Cavanagh Law Firm 29 The Cavanagh Law Firm offers a wide array of legal services involving the ACA, healthcare, ERISA, benefits, and employment law issues. We help insurers and employers understand their ACA obligations as well as counsel them in their compliance efforts. With our dual experience in both benefits law and employment law, we are uniquely able to effectively advise and represent our clients concerning the myriad of benefit, health, and employment laws that impact their businesses.