The document discusses key provisions of the Affordable Care Act that employers need to be aware of, including extended coverage standards, non-discrimination standards, and shared responsibility standards. It explains that employers with 50 or more full-time employees that do not offer affordable, minimum essential coverage will face penalties, while individuals without coverage may be assessed a penalty. The document provides details on ACA compliance requirements and outlines opportunities for employers to assess their compliance obligations.
What You Need to Know about the Patient Protection & Affordable Care Act (Updated Version)
1. What You Need to Know About theWhat You Need to Know About the
Patient Protection and Affordable CarePatient Protection and Affordable Care
ActAct
By: Otto S. Shill, Attorney at LawBy: Otto S. Shill, Attorney at Law
2. ABOUT JACKSONWHITEABOUT JACKSONWHITE
We offer a full range of legalWe offer a full range of legal
services to assist individuals,services to assist individuals,
families, and businesses.families, and businesses.
Founded in 1983.Founded in 1983.
The firm has grown steadilyThe firm has grown steadily
to include 24 highlyto include 24 highly
experienced attorneys.experienced attorneys.
We are proud to be one ofWe are proud to be one of
the largest law firms in thethe largest law firms in the
East Valley.East Valley.
3. • Regulatory Compliance
• Safety Compliance
• Government Investigations
• Government Contracting &
Procurement
• Business, Corporate, &
Partnership Issues
• Business & Wealth
Succession Planning
• Human Resources
Planning & Disputes
• Tax Law
• Labor & Employment
• Public Policy
4. Current Enforcement EnvironmentCurrent Enforcement Environment
• COBRACOBRA:: 20 or more employees.20 or more employees.
• FMLAFMLA:: 12 weeks job-protected, unpaid leave for birth & care of a12 weeks job-protected, unpaid leave for birth & care of a
child, care of immediate family member, or employeechild, care of immediate family member, or employee’s serious’s serious
health condition.health condition.
• TITLE 7TITLE 7:: Prohibits employers from considering race, religion, color,Prohibits employers from considering race, religion, color,
nationality, or sex when making decisions regarding hiring, firing,nationality, or sex when making decisions regarding hiring, firing,
pay, benefits, etc.pay, benefits, etc.
• RETIREMENT PLANSRETIREMENT PLANS:: Employee Retirement Income SecurityEmployee Retirement Income Security
Act; DOL audits are on the rise.Act; DOL audits are on the rise.
• FAIR LABOR STANDARDS ACTFAIR LABOR STANDARDS ACT:: Overtime (1.5 x base rate)Overtime (1.5 x base rate)
payable to employees working more than 40 hours per week.payable to employees working more than 40 hours per week.
• NATIONAL LABOR RELATIONS ACTNATIONAL LABOR RELATIONS ACT :: Prevents employersPrevents employers
from interfering with employees’ concerted activities to improve theirfrom interfering with employees’ concerted activities to improve their
employment situation.employment situation.
• OSHA / ADOSHOSHA / ADOSH:: Regulates workplace safety standards.Regulates workplace safety standards.
5. Government Audit PrioritiesGovernment Audit Priorities
Internal Revenue Service will focus onInternal Revenue Service will focus on
small business starting in 2014small business starting in 2014
Department of Labor – overtime auditsDepartment of Labor – overtime audits
National Labor Relations BoardNational Labor Relations Board
Department of Health and HumanDepartment of Health and Human
ServicesServices
OSHA Compliance InspectionsOSHA Compliance Inspections
7. Extended Coverage StandardsExtended Coverage Standards
Dependents remain insured until age 26Dependents remain insured until age 26
Pre-existing conditions eliminated by 2014Pre-existing conditions eliminated by 2014
Lifetime coverage limitations eliminated byLifetime coverage limitations eliminated by
20142014
Deductibles of small group plans will beDeductibles of small group plans will be
limited to $2,000 for individuals and $4,000 forlimited to $2,000 for individuals and $4,000 for
families.families.
8. Non-discrimination StandardsNon-discrimination Standards
Under the PPACA, all non-grandfathered plans will beUnder the PPACA, all non-grandfathered plans will be
required to satisfy the nondiscriminatory requirementsrequired to satisfy the nondiscriminatory requirements
under Internal Revenue Code Section 105(h)(2).under Internal Revenue Code Section 105(h)(2).
A plan must not:A plan must not:
• Discriminate in favor of highly compensated individualsDiscriminate in favor of highly compensated individuals
(HCI) in regards to eligibility(HCI) in regards to eligibility
• Favor HCI participants in regards to benefits offeredFavor HCI participants in regards to benefits offered
• Impose waiting periods that favor HCIsImpose waiting periods that favor HCIs
• Provide more favorable employer contributions to HCIsProvide more favorable employer contributions to HCIs
A plan must:A plan must:
• Provide identical employee/employer contributions at eachProvide identical employee/employer contributions at each
benefit levelbenefit level
• Provide the same types of benefits to HCIs and non-HCIsProvide the same types of benefits to HCIs and non-HCIs
• Establish the same maximum benefit level and type ofEstablish the same maximum benefit level and type of
benefits for all ages, years of service, and compensationbenefits for all ages, years of service, and compensation
9. DISCRIMINATION TESTINGDISCRIMINATION TESTING
There are two sets of tests that must be satisfied to determine whetherThere are two sets of tests that must be satisfied to determine whether
or not a plan is nondiscriminatory.or not a plan is nondiscriminatory.
Eligibility TestEligibility Test
An employer must pass one of the following:An employer must pass one of the following:
• 70% Test: plan must benefit at least 70% of all non-excludable employees.70% Test: plan must benefit at least 70% of all non-excludable employees.
• 70%/80% Test: plan must benefit at least 80% of non-excludable employees if70%/80% Test: plan must benefit at least 80% of non-excludable employees if
70% of all non-excludable employees are eligible to participate in the plan.70% of all non-excludable employees are eligible to participate in the plan.
• Reasonable Classification Test:Reasonable Classification Test:
• Non-discriminatory classification: the percentage of HCIs whoNon-discriminatory classification: the percentage of HCIs who
benefit under the plan is not significantly higher than thebenefit under the plan is not significantly higher than the
percentage of non-HCIs.percentage of non-HCIs.
• Reasonable Classification: the eligibility requirements forReasonable Classification: the eligibility requirements for
employees must be reasonable and based on objectiveemployees must be reasonable and based on objective
business criteria—compensation, geographic location, type ofbusiness criteria—compensation, geographic location, type of
job.job.Benefits TestBenefits Test
Once a plan satisfied the eligibility test, it must be determined whether or not theOnce a plan satisfied the eligibility test, it must be determined whether or not the
benefits offered favor HCIs. To satisfy this test, all benefits to must be providedbenefits offered favor HCIs. To satisfy this test, all benefits to must be provided
to all participants and all benefits provided to dependents must be the same forto all participants and all benefits provided to dependents must be the same for
all participants.all participants.
10. What are the Penalties forWhat are the Penalties for
Discriminatory Plans?Discriminatory Plans?
The employer may be subjected to an excise tax of $100The employer may be subjected to an excise tax of $100
per day with respect to each related individual.per day with respect to each related individual.
Effective Date delayed until regulations are published.Effective Date delayed until regulations are published.
11. GlossaryGlossary
HCI:HCI:
• One of the 5 highest paid officersOne of the 5 highest paid officers
• A shareholder who owns more than 10%A shareholder who owns more than 10%
• Among the highest paid 25% of all employeesAmong the highest paid 25% of all employees
Excludable Employee:Excludable Employee:
• Employees under the age of 25Employees under the age of 25
• Part-time or seasonal employeesPart-time or seasonal employees
• Employees covered by a collectiveEmployees covered by a collective
bargaining agreementbargaining agreement
• Employees who have not completedEmployees who have not completed
3 years of service3 years of service
• Employees who are nonresident aliens andEmployees who are nonresident aliens and
receive no earned income from the employerreceive no earned income from the employer
that constitutes income from sources within the United Statesthat constitutes income from sources within the United States
12. SHARED RESPONSIBILITYSHARED RESPONSIBILITY
Employers
Employers with more than 200 employees will be required to automatically
enroll all employees in their health insurance plans, allowing individual
workers to opt-out.
Employers with 50 or more full-time workers that do not offer health
insurance coverage will pay an assessment of $2,000 per full-time worker
(not including the first 30 workers) if any of their employees obtain premium
tax credits through the Exchange. Employers that offer unaffordable
coverage or coverage that does not meet the minimum requirements will pay
$3,000 annually for any employee who qualifies for premium savings in the
Marketplace
Employers will be required to provide notice to their employees of their
health insurance options, including coverage through the Exchange.
Effective Dated delayed until calendar year 2015.Effective Dated delayed until calendar year 2015.
13. Individuals
Individuals who can afford to purchase health insurance coverage
and do not do so will face a penalty of the greater of $95 or one
percent of income in 2014, $325 or two percent of income in 2015 and
$695 or 2.5 percent of income in 2016, up to a cap of the national
average bronze plan premium. Families will pay half the amount for
children up to a cap of $2,250 for the entire family. After 2016, dollar
amounts will increase by the annual cost of living adjustment.
This requirement is essential to keep the cost of health insurance
premiums affordable. Without a coverage requirement, the market
reforms that insurance companies will implement such as eliminating
pre-existing condition requirements and requiring guaranteed issue
would make the price of health insurance unaffordable for most
Americans.
SHAREDSHARED
RESPONSIBILITYRESPONSIBILITY
14. INSURANCE COMPANIESINSURANCE COMPANIES
Must pay a premium excise tax annually on healthMust pay a premium excise tax annually on health
insurance premium income in excess of $25,000,000.insurance premium income in excess of $25,000,000.
Designed to Raise $102 Billion over the next 10 years.Designed to Raise $102 Billion over the next 10 years.
Does not apply to self-insured plans.Does not apply to self-insured plans.
SHAREDSHARED
RESPONSIBILITYRESPONSIBILITY
16. What DoesWhat Does “Affordable” Mean?“Affordable” Mean?
In order for a plan to beIn order for a plan to be “affordable,” the self-only“affordable,” the self-only
premiums must not exceed 9.5 percent of the employeespremiums must not exceed 9.5 percent of the employees
income (regardless of whether or not there are other wageincome (regardless of whether or not there are other wage
earners in the employee’s household).earners in the employee’s household).
19. What is a Full-Time Employee?What is a Full-Time Employee?
A full-time employee is employed an average of at least 30A full-time employee is employed an average of at least 30
hours per week.hours per week.
This can be calculated by looking back at least 3 but noThis can be calculated by looking back at least 3 but no
more than 12 consecutive months to determine whether ormore than 12 consecutive months to determine whether or
not an employee has averaged at least 30 hours per week.not an employee has averaged at least 30 hours per week.
20. Other Types of EmployeesOther Types of Employees
• Part-Time EmployeesPart-Time Employees
Part-time employees work less than 30 hours per week. LargePart-time employees work less than 30 hours per week. Large
employers are not required to offer minimum essential coverage toemployers are not required to offer minimum essential coverage to
these employees.these employees.
However, the hours of part-time employees will be converted intoHowever, the hours of part-time employees will be converted into
full-time equivalent (FTE) employees. This is done by adding up allfull-time equivalent (FTE) employees. This is done by adding up all
of the hours worked by non-full-time employees per week andof the hours worked by non-full-time employees per week and
dividing the total by 30.dividing the total by 30.
(If 6 employees work 5 hours per week, that will equal one FTE(If 6 employees work 5 hours per week, that will equal one FTE
employee).employee).
• Seasonal EmployeesSeasonal Employees
An employer is not consideredAn employer is not considered “large” if they have 50 FTE“large” if they have 50 FTE
employees for 120 days or less during one calendar year.employees for 120 days or less during one calendar year.
21. Shared Responsibility ReportingShared Responsibility Reporting
The employer mandate of the PPACA will affect businesses differentlyThe employer mandate of the PPACA will affect businesses differently
depending on the following factors:depending on the following factors:
•Number of full-time employeesNumber of full-time employees
•Whether or not your employees qualify for government subsidiesWhether or not your employees qualify for government subsidies
•Starting in 2014, businesses with more than 200 employees will beStarting in 2014, businesses with more than 200 employees will be
required to auto-enroll employees into their coverage.required to auto-enroll employees into their coverage.
•Starting in 2013, businesses with more than 250 employees will beStarting in 2013, businesses with more than 250 employees will be
required to report the aggregate cost of coverage under theirrequired to report the aggregate cost of coverage under their
employer-sponsored group plan to the IRS.employer-sponsored group plan to the IRS.
•Whether or not you were already offering minimal essential coverageWhether or not you were already offering minimal essential coverage
•Does your business have aDoes your business have a waiting periodwaiting period before full-timebefore full-time
employees are eligible for coverage?employees are eligible for coverage?
22. 1. More than 50 employees, not offering health care to FTE employees,1. More than 50 employees, not offering health care to FTE employees,
one or more of them are receiving subsidies.one or more of them are receiving subsidies.
$2,000 fine per FTE employee (minus the first 30).$2,000 fine per FTE employee (minus the first 30).
2. Less than 50 FTE employees, not offering health care.2. Less than 50 FTE employees, not offering health care.
No penaltyNo penalty..
3. More than 50 employees, offering health care, one or more3. More than 50 employees, offering health care, one or more
employees are receiving subsidies because offered care is aboveemployees are receiving subsidies because offered care is above
9.5%.9.5%.
$3,000 penalty per employee who qualifies for premium$3,000 penalty per employee who qualifies for premium
savings, or $2,000 per FTE employee (minus the first 30).savings, or $2,000 per FTE employee (minus the first 30).
4. More than 50 employees, offering4. More than 50 employees, offering affordableaffordable health care, no FTEhealth care, no FTE
employees receiving subsidies.employees receiving subsidies.
No penaltyNo penalty..
Shared Responsibility –
What Penalties Apply?
23. Key Planning OpportunitiesKey Planning Opportunities
• Effective Dates & Grandfathered
Plans
• Review Company Ownership:
• Who is the employer?
• Controlled & Affiliated Service
Group Aggregation
• Ownership Attribution Rules
(particularly affect families)
• Determine total number of
• full-time employees
• Measuring 30 hrs/week
• Impact of DOL audit-waiting
time
• Employees vs. Independent
Contractors
• Determine number of full-time
equivalent employees
• Determine plan affordability &
minimum essential coverage
compliance
• Review non-discrimination
compliance
• Employee vs. Independent
Contractor
• Review Compliance Calendar
• Compliance deadlines: shared
responsibility postponed until
2015; non-discrimination
postponed until regulations are
published
• Start now to avoid compliance
problems
• Review company audit profile
• Self-Insured vs. Insured Plans
• Methods of shifting costs to employees
• Premiums, deductibles, co-pays
• Who will sign up?
• Who will use the exchange and
claim a credit: employee
demographics
• Union Plans
24. How do I Use My Advisors?How do I Use My Advisors?
Legal CounselLegal Counsel
– Compliance IssuesCompliance Issues
Employee ClassificationEmployee Classification
Overtime ComplianceOvertime Compliance
Company OwnershipCompany Ownership
StructureStructure
Plan components,Plan components,
eligibility, and participationeligibility, and participation
Number of employees /Number of employees /
FTE employeesFTE employees
– Strategic PlanningStrategic Planning
Corporate reorganizationCorporate reorganization
Changes in employeeChanges in employee
workforceworkforce
Costs and risks ofCosts and risks of
non-compliancenon-compliance
Plan design issuesPlan design issues
Accountant
•Costs of compliance / Penalties of
non-compliance
•Corporation Reorganization
•Reporting issues
•Number of employees / FTE
employees
•Available credits for individuals
and small business
Insurance Advisor
•Plan Design Issues
•Timing of Renewals
•Plan Coverage Compliance
•Rate Structure
•Self-Insurance Options
25. What Should You Be Doing Now?What Should You Be Doing Now?
1. Decide whether to “play,” which would provide employer-sponsored
coverage to full-time employees, or “pay” employer-shared-responsibility
penalties of about $2,000 per uninsured employee.
If “playing”: analyze the affordability and minimum value of coverage and
determine whether, when, and how to start counting the hours an employee
worked.
If “paying”: establish how full-time employees will be identified for shared-
responsibility reporting and penalty assessment.
2. Understand the public exchanges and how they will affect the employer’s
particular workforce and plan design. Strategize some ways to best interact with
the exchanges and communicate the service to employees.
3. Review plan terms for 2015 compliance (considering 2015 mandates and
current plans that may no longer be permitted), and implement required plan
design changes.
4. Consider increasing wellness program incentives.
5. Amend plan documents to reflect changes to eligibility, plan design, and
wellness incentives. Terminate arrangements no longer permitted (e.g.,
mini-med plans).
26. What Should You Be Doing Now?What Should You Be Doing Now?
6. Prepare and distribute required employee communications such as
summaries of benefits and coverage, exchange notices, summary plan
descriptions, and summaries of material modification.
7. Pay first comparative research fees by July 31, 2013 and budget for
future reinsurance fees.
8. Plan for new federal reporting.
9. Revise Health Insurance Portability & Accountability Act privacy
and security policies and procedures before the Sept. 23, 2013 deadline for
compliance with final regulations.
10. Review the plan document and required summaries to ensure they
are accurate and compliant with applicable regulations.