Employers aren’t doing reform math
Source: https://www.benefitspro.com
By Denis Storey
For as cost-conscious as most employers are, a new study reveals more than half of them haven’t even worked out the math when it comes to how much health reform is going to cost them.
But among those who have started doing the math, the survey, just released from Willis Human Capital Practice, shows two-thirds of them have already seen compliance-based cost increases stemming from the reform law. And this makes for a strange dichotomy, since the experts at Willis insist employers are relying on some misguided perceptions as the plan for life after reform, which is why, they say, so many employers haven’t done anything yet.
In fact, the study shows that only 20 percent of employers expect to adjust their benefits plans as a result of increased compliance costs. But perhaps most damning—or embarrassing—is this revelation: “Consequently, the vast majority of employers still hope to comply with health care More than half of employers haven’t even worked out the math when it comes to healthcare reform.reform and expand their health coverage as necessary—without reducing other benefits,” lifted straight from the Willis press release.
“Employers are still coming to terms with the impact of health care reform, and many employers still seem to function in a ‘shock mode.’ While few employers consciously manage their group medical benefits as a component of their total rewards perspective, survey responses indicate the very beginning of an employer trend in this direction,” said Jay Kirschbaum, practice leader, national legal and research group, Willis Human Capital Practice.
IRS Proposes Regulations on Employer Penalty
Source: UBA
The Internal Revenue Service has released proposed regulations on the health care reform employer "shared responsibility" penalty provision. This is the penalty on "large" employers (those with at least 50 full-time or full-time equivalent employees) that do not provide affordable minimum essential coverage for full-time employees and their dependents and have at least one full-time employee who receives subsidized Exchange coverage (new Internal Revenue Code section 4980H, enacted as part of the Patient Protection and Affordable Care Act of 2010 as amended by the Health Care and Education Reconciliation Act of 2010). The IRS also posted on its website a set of related questions and answers.
Employers Affected
An employer meets the penalty provision's large employer threshold if it employed, on average, at least 50 full-time or full-time equivalent employees in the prior calendar year. Thus, for 2014, the first year the penalty is effective, an employer would consider the average number of such employees it had during 2013 to determine whether it is a covered large employer. The proposed regulations include a transition rule under which employers may use any consecutive six-month period in 2013, instead of the full year, to calculate the average number of employees.
A full-time employee is one who is employed by the employer an average of 30 hours per week. Part-time employees count, too, taking into account the number of full-time equivalents: For a given month, add the number of hours for all part-time employees (counting no more than 120 hours for any one employee) and divide by 120. Count all hours worked and all hours for which payment is made or due for vacation, illness, holiday, incapacity, layoff, jury duty, military duty, or leave of absence. Notice 2011-36 had limited the period of leave that must be included to 160 hours but the proposed regulations eliminate this limitation.
The proposed regulations clarify that the IRS's safe harbor for determining full-time status (i.e., using the look-back/stability period approach) will not apply for purposes of determining whether an employer meets the threshold of 50 full-time employees. Instead, whether an employer is a large employer for a given year will be determined by calculating employees' actual hours of service in the immediately preceding year. Equivalency rules may be used for employees not paid on an hourly basis. An entity not in existence in the preceding year may be a large employer in its first year if it is reasonably expected to employ an average of at least 50 full-time employees during its first year. Special hours-counting rules are proposed for educational institutions, employees paid on a commission basis, and other circumstances.
Whether a worker is an employee of a particular employer will be based on the long-standing common law principle that, if a service recipient has the right to direct and control how a worker performs services, that service recipient is the worker's employer. The proposed regulations also reiterate that controlled group rules apply for purposes of identifying the employer. Thus, all common law employees of all entities that are part of the same controlled group or affiliated service group must be counted to determine whether the threshold of 50 full-time employees is met.
Assessable Penalty for Affected Employers
For a given month beginning after 2013, if an employer does not offer minimum essential coverage to "substantially all" of its full-time employees and their dependents and a full-time employee obtains subsidized Exchange coverage, the employer must pay a penalty equal to $166.67 multiplied by the number of its full-time employees in excess of 30. Under the proposed regulations, "substantially all" means all but five percent of full-time employees or, if greater, five full-time employees. The proposed regulations define "dependent" as a child, within the meaning of Code 152(f)(1), who is under age 26. (Thus, a spouse is not a dependent.) The proposed regulations offer transitional relief (only for 2014) for employers that do not currently provide dependent coverage. Any employer that takes steps during its plan year that begins in 2014 toward offering dependent coverage will not be liable for penalties solely on account of its failure to offer dependent coverage for that plan year. The proposed rules also explain that the 30-employee reduction used when calculating this penalty is applied on a controlled group basis so that each member company reduces its number of full-time employees by a ratable share of 30.
If an employer offers minimum essential coverage to substantially all of its full-time employees and their dependents, but a full-time employee nevertheless obtains subsidized Exchange coverage (i.e., because the employer's coverage fails to meet the minimum value or affordability test), the employer must pay a penalty equal to the lesser of the penalty determined in the preceding paragraph or $250 multiplied by the number of full-time employees who are certified as having subsidized Exchange coverage for the month.
Since no penalty is triggered unless at least one full-time employee obtains subsidized Exchange coverage, it is important to know whether a full-time employee can obtain subsidized Exchange coverage. An employee can obtain subsidized Exchange coverage only if his or her household income is between 100 percent and 400 percent of the federal poverty line, he or she enrolls in Exchange coverage and is not eligible for Medicaid (or other government coverage), and either no employer coverage is offered or the employer coverage offered fails to meet either a minimum value test or an affordability test:
- Employer coverage meets the minimum value test if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan. The Department of Health and Human Services is working with IRS to develop a calculator that employers may use to determine whether this test is met.
- Employer coverage meets the affordability test if the employee is required to pay no more than 9.5% of his household income for self-only coverage. Since employers have no practical way of knowing what an employee's household income is, the IRS previously stated that employers could use an employee's W-2 reported wages as a safe harbor. The proposed regulations explain how that safe harbor would apply, including how it would apply to partial years worked. The W-2 safe harbor will be very useful to most employers, but the proposed regulations also offer two additional safe harbors that employers may use to determine affordability: one based on monthly rate of pay (i.e., coverage is affordable if the employee's monthly cost for self-only coverage does not exceed 9.5% of his monthly rate of pay) and the other based on eligibility for Medicaid (i.e., coverage is affordable if the employee's cost for self-only coverage does not exceed 9.5% of the federal poverty line for a single individual).
If an employee elects coverage under an employer's group health plan, the employee cannot qualify for subsidized Exchange coverage even if the employer coverage fails the minimum value or affordability test. However, providing mandatory group health coverage that fails the minimum value or affordability test will not prevent an employee from obtaining subsidized Exchange coverage.
The proposed regulations retain the look-back/stability period safe harbor method provided in prior guidance for determining which employees are full-time for purposes of the penalty calculation. Thus, an employer can use a look-back period of up to 12 months to determine whether an on-going employee (i.e., one employed for at least the length of the look-back measurement period selected) is a full-time employee. If an employer uses a look-back/stability period for its on-going employees, it also can use the look-back/stability period for new and seasonal employees. The proposed regulations include additional special rules for a new variable-hour employee or seasonal employee whose status changes during the look-back measurement period, for rehired employees and employees returning from unpaid leaves of absence, for employees of temporary agencies, and for other special circumstances.
The proposed regulations assure that an employer will (a) receive certification of an employee's receipt of subsidized Exchange coverage and (b) have an opportunity to respond regarding application of the penalty before IRS actually assesses a penalty in connection with that employee.
Recordkeeping obviously is important both for compliance (existing law already requires substantial recordkeeping for tax purposes) and to substantiate any defense to a penalty.
Opportunity to Comment on Proposed Regulations
Employers and other stakeholders can help shape final regulations at a public hearing on April 23, 2013, and by submitting written comments by March 18, 2013. In addition, the government also requests comments on the new Code § 6056 employer-reporting requirements and the 90-day waiting period rule.
New PPACA Fees Will Strike Employers
Source: UBA
By Josie Martinez
The goal of health care reform is health care for all… but at what cost? By 2014, businesses with 50 or more full-time-equivalent employees will be at risk for financial penalties (the so-called “shared responsibility assessments”) if they do not offer health coverage to full-time employees. We are all well aware of the $2,000 and $3,000 assessments that could be applied to employers that do not offer affordable, minimum value coverage to full-time employees, and most of us have been advising clients on penalty avoidance strategies for many months already. Meanwhile, business owners nationwide struggle with weighing the financial aspects of providing such coverage or paying the penalties. A recent survey suggests that only 28 percent of companies that employ a large number of low-income workers offer health benefits.
But there are other costs to consider, as well. In addition to shared responsibility assessments, there will be various other fees that will be felt by employers that are expected to ultimately result in higher premiums and could undermine a core principle of the Patient Protection and Affordable Care Act (PPACA) that is meant to provide basic health protections for all Americans. Over the next several years, insured group health plans will be required to absorb the costs of three new fees. These fees imposed by PPACA on insurers will inevitably trickle down to increase rates in the coming years. In a recent meeting presented by a major national health insurance carrier, regarding “State and Federal Reform Impact,” it became clear that at least three new assessments/fees imposed on carriers will affect employers’ renewal rates in the future and ultimately their bottom line:
- Reinsurance Assessment - This per capita fee on medical plans will fund a three-year reinsurance program designed to reimburse companies that insure high-cost individuals in the individual health insurance market. The total amounts to be assessed are $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. The estimated fee is approximately $63 per year ($5.25 per month) per covered individual in the first year; however, fees are expected to decrease in subsequent years. The assessment applies to both insured and self-funded plans. Insurance providers will pay the fee for insured plans while third-party administrators may pay the fee on behalf of self-funded plans.
- Comparative Effectiveness Research Fee (CERF) – This is an annual fee imposed on all insured and self-insured plans. The goal of the research is to determine which of two or more treatments works best when applied to patients, thereby comparing different types of therapy against each other. CERF will be charged to health plans to help fund the research that will be conducted by the Patient Centered Outcomes Research Institute, a nonprofit organization established by PPACA. The initial annual fee is $1 per year per health plan member (includes dependents). The annual charge increases to $2 per member the following year and then increases annually with inflation after that until it ends in 2019. Insurance providers will pay the fee on behalf of insured plans, while employers with self-funded plans will need to determine their liability and account for this fee in their own reporting. For many plans, the first payments will be due July 2013.
- Health Insurance Industry Fee – This annual fee affects all fully insured plans. The estimated cost of this tax will be $8 billion for 2014 and eventually increase to $14.3 billion by 2018. The tax is divided among health insurers and will likely be passed on to plan sponsors as an addition to premium. The Health Insurance Industry Fee has a much greater potential financial impact than either of the other two taxes because it is intended to help fund the cost-generating provisions of the PPACA. The fee will be divided among health insurance carriers based on each carrier’s share of the overall premium base and will only be assessed relative to insured health plans, inclusive of medical, dental and vision plans. Self-funded health plans and associated stop loss premium will not be included in the premium base. Adding insult to injury, this fee is not deductible for federal income tax purposes. This substantially increases the cost impact, which is expected to be in the range of 2 percent to 2.5 percent of premium in 2014, increasing to 3 percent to 4 percent of premium in later years. Insurance companies will likely begin to reflect this additional cost in their premium rates in 2013 and/or 2014.
These new fees are supposedly intended to raise revenues that will support the individual insurance market, help fund the state exchanges and assist with conducting research for more effective treatments. But they will also dramatically impact group health plan premiums and could spur many employers to drop their group health plan sponsorship, pushing more employees into the individual market. In anticipation of what lies ahead, it behooves us to work proactively with employers so they can plan their finances accordingly rather than be blindsided by unwelcome surprises well before implementation happens.
Employee questions on PPACA exchanges likely to spike
Source: https://eba.benefitnews.com
By: Gillian Roberts
Ignorance will not be bliss come October when state and federal exchanges begin enrollment for individuals and small group employees. While brokers are experiencing anxiety about their role in such exchanges, employees of all types may be confused about their options — thus providing brokers the chance to come to the rescue with targeted communication on the subject.
“Most employees don’t think [health reform] impacts them yet,” says Mike Thompson at PricewaterhouseCoopers’ human resource services. But, when more information begins to come out on public exchanges, “employees are very likely to be very confused,” he adds. “It’s one of the reasons that HHS deferred employers communicating about the exchanges to their employees.”
Jim Blaney, CEO, human capital practice, Willis North America, says employees are concerned about costs the Patient Protection and Affordable Care Act might pass on them, and how exactly PPACA’s exchanges will affect them. “I get the feeling that employees might start to think that their employer will just throw them out on the exchanges for coverage,” he says. “That will bring around a whole set of communications opportunities for the broker and the employer.”
According to a Kaiser Family Foundation analysis in fall 2009, about 2% of uninsured people could purchase health insurance through a workplace plan, but simply chose not to do so. These same employees are likely to have questions about exchange eligibility come this fall, and turn to their HR department (and broker) for answers. For example, according to a Lake Research and Enroll America survey compiled last fall, 78% of all uninsured were not aware that they may qualify for subsidies and will have coverage options in 2014.
“There's a lot of need for targeted education by state, versus federal campaigns,” says Mollyann Brodie, director of public opinion and media research at Kaiser Family Foundation.
The Department of Health and Human Services in late January launched Health Insurance Marketplace, a website and marketing campaign designed to educate people about exchange open enrollment. According to HHS spokesman Fabien Levy, the agency is targeting both uninsured and insured people through email and text message updates, as well as social media conversations on Twitter, Facebook, Tumblr and YouTube. He points out that the Congressional Budget Office predicts that 9 million Americans will obtain coverage through the exchanges in 2014.
State organizations vary drastically in the level of education and tools provided to residents. Some of the most active states so far are Maryland and California. Both have informational websites dedicated to their respective exchanges. Willis’ Blaney says confusion for employees will likely increase when more states begin their awareness campaigns.
There is also a need for education in the small business market, says Sarah Dash, a researcher at Georgetown University’s Center on Health Insurance Reforms. With so much still undetermined, and many more HHS regulations and communications to come, Kaiser’s Brodie says moving forward with an education campaign is more important than ever. “If we wait until the public is perfectly informed” on the details of PPACA, she says, “we’ll be waiting forever.”
The Check is NOT in the Mail
Source: https://analytics.ubabenefits.comBy Lesa Caputo, Benefit Advisor
The Reality of Health Care Budgeting Shortfalls and the Impact on Employers Now and in the Future
I can’t remember the last time that I went out to my mailbox to check for new mail on a Saturday afternoon but, nonetheless, I was shocked when I heard it announced on the morning news recently that Saturday mail delivery would be ending in order to help the U.S. Postal Service find some relief to its serious budgetary issues. However, my shock was not that the good old “snail mail” service was struggling or even that it needed the $2 billion it estimates it will save annually by ceasing Saturday mail delivery.1 My shock was that this new “savings” would not achieve even 50 percent of the pennies in the couch needing to be found to pay the $5.6 billion annual retiree health care fund that the USPS was unable to pay in 2012, despite federal law that they fund this benefit in advance for future retirees.2 So aside from the “benefits” of a tan and the great calf muscles received from many years of mail delivery, does this mean that those who have devoted their entire careers to a government entity with the expectation of certain other benefits (namely that their health care benefits will be paid as promised upon retirement and until death) just isn’t going to happen? The envelope please...
What will happen to the burgeoning population of retirees in future decades who find not only their retirement underfunded but also their health care? And what will the impact of the difficult decisions that these generations will have to make be on Medicare, Medicaid, long-term care costs and the commercial health care insurance industry that already does a fair amount of subsidization for shortfalls that already exist in these programs now? Read on about the real date-sensitive material enclosed…
As America ages, U.S. employers face an emerging business challenge due to the impacts to both corporate health care costs and employee productivity resulting from the eldercare and caregiving crises. A recent study shows that eldercare costs U.S. businesses more than $33 billion in lost productivity annually through absenteeism, distraction, replacement, reduced hours and more. 1
The business disruption breaks down like this -- 12 percent take leaves of absences, 36 percent miss workdays and 40 percent rearrange their schedule. 2 And millions more fall into the category of presenteeism -- physically at work but mentally dealing with distractions that impair productivity. Employees who’ve faced caregiving issues are increasingly concerned about their own long-term care. With the average cost for a skilled nursing facility topping $79,935 per year, skyrocketing care costs are the No. 1 risk to a secure retirement for baby boomers.3 Not only is long-term care more costly than most people realize, but also (contrary to popular belief) health insurance, disability plans, even Medicare and Medicaid, don’t cover many of the care options most people would choose.
So what can employers do today to address these issues and reduce the amount of junk mail invading their employees mental inboxes? There are several solutions:
- Health and Wellness Initiatives: Whether your organization already embraces the investment in a truly integrated wellness program that rewards and incentivizes healthy behaviors or you are in the initial stages of investigating the true return on investment (ROI) in such a program, make sure that your wellness program includes mechanisms to help identify, address and provide resources for employees suffering the negative effects of stress -- including being a member of the “sandwich generation.
- Core Long-Term Care Benefits with “Buy Up” option: Although there has been a significant exodus of carriers from the long-term care insurance industry of late, there are still a couple of well-established carriers offering “true group” coverage, whereby the employer can purchase a basic group long-term care program to fund for their employees and allow employees to “buy up” to a higher level of benefits at their own cost on a voluntary basis. No matter how long-term care benefits are offered to employees, it is essential that caregiving awareness and education be coupled with the introduction, enrollment and implementation of a successful long-term care plan.
- Group Retiree Health Plans: More and more employers are finding that their current provider of medical benefits for their active employees and retirees under age 65 is not interested in insuring their retiree population of those age 65+ in coordination with Medicare. In response to this need, UBA’s Strategic Allies such as The Hartford are offering stand-alone group policies to employers that may be funded by the employer or paid by the retiree to fill the gaps in their Medicare medical and pharmacy benefits. Large employers that are self-funding their medical benefits may especially want to inquire with a UBA Partner advisor about the potential reduction to their claims liability from implementing an insured group retiree health plan.
- FMLA Absence Management: There is no doubt that larger employers experiencing a high volume of FMLA-related leaves of absence appreciate the peace of mind and convenience of outsourcing this labor-intensive and very complicated HR responsibility. But convenience aside, there is also a very quantifiable potential cost saving reason for employers to consider investing in a FMLA absence management program. When maternity is excluded, caregiving accounts for 40 percent of all FMLA leaves and those who are on FMLA leave for caregiving are four times as likely to file an LTD claim. LTD claims are typically coupled with high medical costs. And so thecirculation continues until the final notice arrives C.O.D.
The Megro Benefits Company has access to discounted premiums, fees and administration for all of these solutions and more. Contact us to discuss these ideas in more detail.
Employers who make it a priority to deliver a well-intentioned employee benefits package to ensure their employees peace of mind about their futures will find the return on their investment in the form of first-class employees reporting for work every day of the week -- and maybe even on Saturdays!
References:
- Washington Post: Mandate Pushed Postal Service into the red for first quarter, February 2013
- The MetLife Caregiving Cost Study: Productivity Losses to U.S. Business, June 2006
- The MetLife Market Survey of Nursing Home & Home Care Costs, September 2009
- Caregiving in the United States, National Alliance for Caregiving and AARP, 2004
Determining if 'play or pay' applies to you
Source: https://eba.benefitnews.com
By Deborah L. Grace
Under the Patient Protection and Affordable Care Act, a large employer is subject to penalties if it fails to offer to full-time employees health coverage or if the coverage that it offers is not affordable or does not provide minimum value. These new “shared responsibility” rules are effective as of January 1, 2014, and apply to all employers, including non-profits and governmental entities. This article describes the regulations proposed by the Internal Revenue Service in December 2012 for determining if an employer is a “large employer” for purposes of the shared responsibility rules of Section 4980H of the Internal Revenue Code.
What is a large employer?
For any calendar year, an employer is a “large employer” if it employed an average of at least 50 full-time and full-time equivalent employees on business days during the preceding calendar year. The calculation used to determine large employer status seems deceptively easy. An employer totals the number of full-time employees and FTEs that it employed each month and then divides that total by 12. If the resulting number is 50 or greater, the employer is a large employer.
An exception is provided for an employer who, for 120 days or less during the calendar year, exceeded the 50 full-time employee threshold due to the employment of seasonal employees. This means that hiring activity for 2013 may affect an employer’s status as a large employer for 2014. Note also that this analysis must be made for every calendar year.
All employees of entities that are under common control, as determined under Code Section 414(b) or (c), or that are members of an affiliated service group under Code Section 414(m) or (o), are taken into account in determining if the members of the group constitute a large employer. For example, suppose Company A has 20 full-time employees and Company B has 40 full-time employees. Company A owns 80% of the stock of Company B.
Under Code Section 414(b), Company A’s ownership of at least 80% of the stock of Company B causes Companies A and B to be members of a parent-subsidiary controlled group. Because of the controlled group status, the employees of Company A and B are added together when determining large employer status, resulting in both Company A and Company B being large employers for purposes of the shared responsibility rules.
Who is an employee?
For purposes of these rules, only common-law employees are counted. A sole proprietor, a partner in a partnership, a member of a limited liability company taxed as a partnership, and a 2-percent or more S corporation shareholder is not counted as an employee. Also excluded from this test’s definition of “employee” is any individual who is paid by a staffing agency but provides services to an employer on a substantially full-time basis, including an individual whose services would meet the “leased employee” definition of Code Section 414(n).
How does an employer determine if an employee is full-time?
A “full-time employee” is one who is employed by the employer an average of at least 30 hours of service per week or 130 hours of service per calendar month. Consistent with longstanding Department of Labor rules, hours of service include both hours for which the employee is paid for services performed and also hours for which the employee is paid and no services are performed due to vacation, holiday, illness, disability, layoff, jury duty, military duty or leave of absence. If an employee is paid on an hourly basis, then the employer must use those hours to determine if the employee’s status for the month is full-time.
Use of equivalencies for non-hourly employees. If an employee is not paid on an hourly basis, then the employer may use one of the following methods to determine the hours that the employee worked: (i) count actual hours worked by the employee; (ii) credit 8 hours of service for any day that the employee would be credited with at least 1 hour of service; or (iii) credit 40 hours for each week that the employee would be credited with at least 1 hour of service. An employer cannot use an equivalency method if it would result in understating an employee’s hours. For example, if an employee usually works three 10 hour days a week, the employer cannot use the days-worked equivalency, since that would understate the employee’s hours.
Service outside the U.S. Hours worked outside the U.S. where the employee does not receive the U.S. source income for that service are disregarded. As a result, a U.S. entity that is a member of a multinational controlled group may, for purposes of determining whether it is a large employer, exclude individuals who do not work in the U.S. For example, a U.S. sales office of a multinational entity with no other presence in the U.S. that has 5 full-time employees will not be a large employer for purposes of the shared responsibility rules. Note, the proposed regulations do not change the rules under COBRA that require all employees, including foreign nationals with no U.S. source income, to be counted when determining if the entity has crossed the 20 employee threshold and thereby be required to offer COBRA continuation coverage to qualified beneficiaries.
How does an employer calculate the number of full-time equivalents?
All employees (including seasonal employees) who were not full-time employees for any month are included in calculating the employer’s FTEs for that month. The number of FTEs is determined using a two-step process. First, the employer must calculate the aggregate number of hours of service (but not more than 120 hours of service for any employee) for all employees who were not employed on average at least 30 hours of service per week for that month; second, the total hours for the month for all such non-full-time employees is divided by 120. Fractions are included in determining a monthly FTE count but, as explained in the next paragraph, are disregarded for the determination of whether an employer is a large employer.
How does an employer calculate its large employer status?
Once the employer has the number of full-time employees and FTEs that it employs each month during the prior calendar year, the employer totals these monthly numbers and then divides that total by 12 to determine the average. Fractions are disregarded for this purpose. For example, an employer that has on average 49.9 full-time employees (including FTEs) for the preceding calendar year is allowed to round the total down, and therefore would not be a large employer.
Transition Rule. For 2014, an employer may determine its large employer status by using a period of at least 6 consecutive months in 2013 rather than the full 2013 calendar year. This transition rule will allow an employer who is close to the 50 full-time employee threshold time to determine its status for 2014 and make any needed adjustments to its health plan to comply with Code Section 4980H. For example, an employer could determine its large employer status during the period of March through August 2013 and then decide what changes are needed for its health plan (or implement a plan) between September through December 2013.
What is the seasonal employee exception?
An employer that on average exceeds the 50 full-time employee threshold (taking into account FTEs) for 120 days or fewer during a calendar year due to the employment of seasonal workers during that 120 day period is not a large employer. The 12 day period does not need to be consecutive, and an employer may choose to use four months as a measuring period in place of 120 days. An employee may be able to be treated as a “seasonal worker” for purposes of the large employer definition if the employee worked on a seasonal basis for more than four consecutive months.
Definition of Seasonal Worker. Under Code Section 4980H, employees who perform services on a seasonal basis as defined by the Secretary of Labor, including migrant and seasonal agricultural workers, and retail workers employed exclusively during holiday season qualify as seasonal workers. Under the proposed regulations, the IRS has determined that the term seasonal employee is not limited to agricultural or retail workers, and would include individuals whose employment “is of the kind exclusively performed at certain seasons or periods of the year and which, from its nature, may not be continuous or carried on throughout the year.” Until further guidance is issued, an employer may apply a reasonable good faith interpretation of this definition. For example, it may be reasonable for an accounting firm to determine that the additional staff hired during the months of February through April to prepare individual income tax returns are seasonal workers.
If an employer is not in existence during all of 2013, then it will be a large employer if it reasonable expects to employ an average of at least 50 full-time employees (taking into account FTEs) on business days during 2014.
In a merger of acquisition situation, Code Section 4980H defines the term “employer” to include any predecessor to such employer. The IRS has indicated that in defining a predecessor employer, it may use rules similar to those that apply for determining a successor employer for employment tax purposes. Under those rules, an employer that acquires all of the property used in a trade or business of another employer is a successor employer to the predecessor business.
What are the Suggested Next Steps?
Determine if your business will be a large employer for 2014, based on the company’s anticipated full-time employee count for 2013. If the company and other members of its controlled group regularly employ between 40 and 60 full-time employees and FTEs, establish a 6 month or longer transition period in 2013 to determine large employer status for 2014.
Steps that a large employer will want to take, including determining if the health plan that it offers employees is affordable and provides minimum value and identifying full-time employees who must be offered coverage to avoid a penalty, will be addressed in a subsequent article.
5 things on Americans’ 2013 health policy agenda
Source: https://eba.benefitnews.com
By Gillian Roberts
With the 113th Congress up and running and the president’s policy schedule filling up by the day, a recent poll by the Kaiser Family Foundation and Harvard School of Public Health identified five things Americans would like the government to set as top health care priorities this year:
1. State exchanges. Fifty-five percent of respondents say state-based health insurance exchanges are a top priority for their lawmakers. With only 18 states and Washington, D.C., declaring they will create state exchanges, more information is needed on how federally run exchanges will operate in the remaining states. “This is the year of the health insurance exchange,” said David Colby of the Robert Wood Johnson Foundation at a luncheon held Thursday at the Kaiser Family Foundation. The panelists, including Drew Altman, CEO of KFF, noted that governors are still split along partisan lines about the creation of exchanges.
2. PPACA opposition. Fifty-two percent, including 78% of Republicans, say the Patient Protection and Affordable Care Act opponents in Congress should continue trying to overturn the law. When asked why, a majority of respondents cited overturning the law for “less impact on taxpayers, employers and health care providers.”
3. PPACA complacency. Forty percent think that PPACA opponents in Congress should “accept that it is now the law of the land,” and move on to focus on implementation.
4. Premiums. Increasing state regulation of health insurance premiums should be a priority for lawmakers, 37% of respondents say.
5. Women’s health care. One-fifth of respondents believe lawmakers should limit women’s family planning, reproductive health and other services. A timely topic as PPACA’s birth control mandate seems poised to head to the Supreme Court later this year, according to the Associated Press.
What is my State doing with Exchanges, Medicaid under PPACA?
Source: United Benefit Advisors
States have two major decisions to make with respect to the Patient Protection and Affordable Care Act (PPACA) -- whether they will run the health exchange themselves, and whether they will expand Medicaid to cover most individuals whose income is below 133 percent of the federal poverty level.
Exchange Election
Beginning in 2014, all states will have a health exchange. If a state chooses not to run an exchange, the federal government will run the exchange for the state. An exchange run by the federal government for a state is called a federally facilitated exchange (FFE). States may also choose to share the operation of an exchange with the federal government - that is called a partnership exchange.
Medicaid Election
States also have to decide whether they will expand Medicaid coverage to most individuals who have an income below 133 percent of the federal poverty level (FPL). The FPL is $11,490 for a single person and $23,550 for a family of four in 2013. The federal government will pay most of the cost of expanded Medicaid coverage, but some states have concerns about the ultimate cost of the expansion to the states.
As of Feb. 1, 2013, the states had made the following choices. (The deadline for most exchange elections for 2014 has passed, although states may elect a partnership exchange for 2014 until Feb. 15, 2013. There is no deadline for the Medicaid election. It is expected that many states will make the Medicaid expansion decision as part of their 2013 budgeting process.)
Click Map to See results for your state
Medicaid Election
Source: United Benefit Advisors
Medicaid is a joint state-federal program. States are not required to participate in Medicaid, but all of the states currently do. The federal government pays 50 percent to 75 percent of the cost of Medicaid. In return, the states must follow a variety of rules, although they have the ability to make a number of choices. Currently, to obtain federal funding the states must provide Medicaid to pregnant women and children under age six with family incomes below 133 percent of FPL, to children aged six through 18 with family incomes below 100 percent of FPL, and to disabled and elderly adults who qualify for Supplemental Security Income based on low income and assets. Some states currently provide Medicaid to working parents and adults without dependents, but many do not, or do so only for those with incomes well below FPL.
In an effort to reduce the number of uninsured, PPACA would require Medicaid to cover virtually all adults with household incomes at or below 133 percent of FPL as of Jan.1, 2014. The federal government would pay 100 percent of the cost of coverage for the expanded coverage group during 2014 through 2016, and then gradually decrease its contribution to 90 percent of the cost for 2020 and later years. The Supreme Court ruled that Congress did not have the power to cut off all Medicaid funding if a state didn’t expand Medicaid to meet the expanded eligibility under PPACA, so states are now deciding whether expanding Medicaid eligibility makes sense for them.
Individuals who are eligible for Medicaid will not be eligible for premium subsidies. This means that employers in states that choose not to increase Medicaid eligibility may have to pay penalties on more employees than those in states that have chosen to expand Medicaid eligibility.
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Exchange Election
Source: United Benefit Advisors
The purpose of an exchange is to make it simpler for individuals and small businesses to obtain coverage. The exchanges will not provide insurance, but they will provide a way for people to compare the cost and coverage available from different insurers, provide resources to individuals to help them choose a plan, and oversee the insurance options available through the exchanges. Virtually all Americans will be able to buy coverage through an exchange, even if they have access to coverage through an employer. However, premium subsidies will not be available to people who have access to adequate coverage through their employer, no matter how large or small their employer is, but who choose to buy through the exchange instead. Recently, the government has begun calling the exchanges the “health insurance marketplace.”
Each state will choose its own “essential health benefits” package, although all insurance provided to individuals and small groups (generally, those with 100 or fewer employees) must provide certain types of “essential” coverage. (Self-funded and large employers are not required to provide the “essential health benefits.” Instead, these plans will need to cover “core” benefits (hospital and emergency care, physician and mid-level practitioner care, pharmacy, and laboratory and imaging) at a 60 percent actuarial value to avoid employer penalties.)
For additional information on each state’s EHB, go here: Additional Information on Proposed State Essential Health Benefits Benchmark Plans | cciio.cms.gov
Employers should understand that even if they offer coverage to their employees, they will have some interaction with the exchanges. If any employee chooses to purchase coverage through the exchange and requests a premium subsidy, the exchange will need information about the coverage offered to employees from the employer.
Currently there is debate about whether people in a federally-facilitated exchange will be eligible for the premium tax subsidy. The federal government’s position is that these people will be eligible for the subsidy, as it was not Congress’ intent to treat people differently based upon where they live. Employers hoping to avoid the play or pay penalty have an interest in this question because penalties are triggered by the employee’s receipt of a premium tax subsidy through the exchange. If subsidies are not available through the federally facilitated exchanges, employers in those states would not be subject to penalties. This issue likely will be settled by the courts (Oklahoma has filed a lawsuit), but in the meantime, employers in states that will have FFEs should not assume the penalties will not apply to them. Also, note that those who obtain coverage through private exchanges will not be eligible for the premium tax subsidies.
Whether a state runs its own exchange is a year by year decision, so, for example, a state that has an FFE or a partnership exchange for 2014 could run its own exchange in 2015.
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