ACA Compliance

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ACA Compliance Your Top Ten List for 2014 and
Beyond
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Presentation by

• AON Risk Solutions
• Dawn Montano
• Assistant Vice President
• 6501 Americas Parkway NE, Ste 650
• Albuquerque, NM 87110
• [phone]
• Dawn.montano_at_aon.com

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Employer Mandate and Penalties Begin in 2015
Or
Failure to Offer Penalty
Targeted Penalty

• Employer does not offer Minimum Essential
  Coverage (MEC) to at least 95 of all FTEs and
  their eligible dependents, and
• At least one FTE enrolls in Exchange and receives
  Federal subsidy
• 2,000 per year for each FTE (minus first 30
  FTEs) within controlled group entity

• Employer offers MEC to FTEs but coverage is
  either
• Unaffordable or
• Not minimum actuarial value
• 3,000 per year per each FTE who enrolls in an
  Exchange and receives a Federal subsidy

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ACA Employer Mandate Affordability Rules

• Affordability Test
• Affordability test for purposes of the premium
  tax credit is based on the cost of self-only
  coverage, even if the employee elects family
  coverage
• An employer-sponsored plan is affordable if the
  FTEs required contribution for self-only coverage
  under the plan does not exceed 9.5 of the
  applicable taxpayers household income for the
  taxable year.
• The IRS has issued three safe harbors for the
  purpose of determining affordability
• W-2 safe harbor (current year W-2 Box 1)
• Rate of pay safe harbor
• Federal poverty level line safe harbor (9.5 of
  FPL is approximately 1,100 per year safest
  choice and allows for simple reporting)

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How do you determine FTEs under the Look Back
Method?

• Under the Look-Back Measurement Method, an
  employer
• Must establish an Initial Measurement Period
  (IMP)
• No less than 3 months and no more than 12 months
• May establish an Administrative Period
• No more than 90 days
• Must establish a Standard Measurement Period
  (SMP)
• No less than 3 months and no more than 12 months
• Employer determines months in which SMP starts
  and ends
• Must be uniform
• Can use starting and ending payroll periods if
  additional rules are followed
• Must establish a Stability Period
• Period of time for which FTE must be offered
  coverage
• Stability Period must follow and be associated
  with an IMP and SMP

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2014 Transition Measurement Periods for Stability
Periods Starting in 2015Ongoing Employees

• Employer wants to use a 12-month SP beginning in
  2015
• Employer may adopt a transition measurement
  period that is shorter than 12 consecutive
  months, but at least 6 consecutive months, and
  that begins no later than 07/01/2014 and ends no
  earlier than 90 days before the first day of the
  plan year beginning on or after 01/01/2015
• Applies to employees as of the 1st day of the
  transition measurement period
• If an employee is hired during or after the
  transition measurement period, general Look-back
  rules apply

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Look-Back Measurement Method ExampleOngoing
Employees

• Employer uses a 12-month SMP period that begins
  October 15 and ends October 14
• Employer uses an AP from 10/1512/31, following
  the end of the SMP
• During APs, employer looks back (see elbow
  arrows below) at total hours of service in SMP to
  determine if employee was employed on average at
  least 30 hours/week
• Employee has 1,820 total hours of service during
  SMP 1 1,820/52 weeks 35 average hours/week
• Employee has 1,500 total hours of service in SMP
  2 1,500/52 weeks 28.84 average hours/week
• Employee has 2,080 total hours of service in SMP
  3 2,080/52 weeks 40 average hours/week
• Employer offers coverage during a 12-month SP
  that equals the calendar plan year
• Based on hours worked during the SMPs, employee
  is eligible for coverage in the 2015 plan year
  and the 2017 plan year, but not eligible for
  coverage in the 2016 plan year

Standard Measurement Period 1 (10/15/201310/14/2
014) Works Full-Time
Standard Measurement Period 3 (10/15/201510/14/2
016) Works Full-Time
Standard Measurement Period 2 (10/15/201410/14/2
015) Does Not Work Full-Time
AP 3 10/15/1612/31/16
AP 2 10/15/1512/31/15
AP 1 10/15/1412/31/14
Stability Period 1 (01/01/201512/31/2015) Offer
Coverage (MV)
Stability Period 2 (01/01/201612/31/2016) Dont
Offer Coverage
Stability Period 3 (01/01/201712/31/2017) Offer
Coverage (MV)
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Look-Back Measurement ExampleNew Variable Hour
Employee

• Variable Hour Employee hired on May 10, 2015
• 12-month IMP beginning on date of hire
  (05/10/2015-05/09/2016)
• 1 month AP from the end of the IMP through the
  end of the 1st calendar month beginning on or
  after the end of the IMP
• During the AP, employer looks back (see elbow
  arrow below) at total hours of service in IMP
• 12-month SP

Initial Measurement Period (05/10/201505/09/2016)
12-Month Initial Stability Period (07/01/201606/3
0/2017)
AP 05/10/201606/30/2016
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Look-Back MethodTransitioning New Variable Hour
E/ee to Ongoing Employee

• Variable Hour Employee hired on May 10, 2015
  12-month IMP begins 06/01/2015 and ends
  05/31/2016
• During the AP (06/01/201606/30/2016), employer
  looks back at employees hours of service during
  the IMP
• Works full-time during the IMP (1,560 total
  hours/52 weeks 30 average hours of
  service/week)
• Must be treated as a full-time employee and
  offered coverage during the entire, associated
  ISP (07/01/201606/30/2017)
• Does not work full-time during his first SMP
  following (that begins after) his start date
  (10/15/201510/14/2016)
• During the AP (10/1512/31), employer looks back
  at employees hours of service during the SMP
• Employee has 1,456 total hours of service during
  SMP 1,456/52 weeks 28 average hours of
  service/week
• Is not required to be offered coverage during
  remaining portion of SP for ongoing employees
  after the SMP (07/01/201712/31/2017)
• Treat the employee as not a full-time employee
  only after the end of the ISP associated with the
  IMP

Remainder of Stability Period (07/01/201712/31/20
17) Dont Offer Coverage
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Look-Back MethodTransitioning New Variable Hour
E/ee to Ongoing Employee

• Variable Hour Employee hired on May 10, 2015
  12-month IMP begins on start date
• AP from the end of the IMP through the end of the
  1st calendar month beginning on or after the end
  of the IMP
• Does not work full-time during the IMP
• Employee has 1,456 total hours of service during
  IMP 1,456/52 weeks 28 average hours of
  service/week
• Not required to be offered coverage during the
  ISP
• Works full-time during his/her first
  overlapping or immediately following SMP
  1,560/52 weeks 30 average hours of service/week
• Must be treated as a full-time employee for the
  entire SP that corresponds to that SMP
• Offer coverage during the entire SP that overlaps
  the portion of the first ISP (01/01/201706/30/201
  7)
• Offer coverage 01/01/1712/31/17

Employee Hired 05/10/2015 Initial Measurement
Period (05/10/201505/09/2016) Does Not Work
Full-Time
AP
12-Month Initial Stability Period (07/01/2016 12/
31/ 2016) Dont Offer Coverage
AP
Stability Period (01/01/201712/31/2017) Offer
Coverage (MV) Stability Period cuts short the
ISP of no coverage to 07/01/201612/31/2016
12-Month Standard Measurement Period (10/15/20151
0/14/2016) Works Full-Time
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2
THE EMPLOYER MANDATE AND ELIGIBILITY for
Exchange Subsidies
Individual is not eligible for subsidized
coverage if offered affordable health care
coverage of minimum value from an employer
What happens if an employed individual is offered
affordable employee-only coverage, but family
coverage is unaffordable?
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Proposed Regulations on Reporting Rules
Code Section 6055 requires reporting to IRS by
plan sponsors and health insurers about health
care coverage offered to individuals and requires
statements to individuals
Code Section 6056 requires employers to file a
return with the IRS about health care coverage
provided to FTEs and provide a written statement
to FTEs
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Transitional Reinsurance Fee Designed to
Stabilize Exchanges
Reinsurance fund stabilizes insurers in exchanges
during their first three years in the event of
losses due to adverse selection
Fees are due in installments
Fees are required only for major medical
coverage
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Cost-sharing Limits Start in 2014
Health plans must limit annual cost-sharing to
same cost-sharing limits as HDHP/HSA plans in 2014
Transition rule for 2014 for multiple service
providers
For 2015, medical and Rx carve-out may use
separate OOP limits, as long as combined OOP
limit applicable to all EHBs does not exceed
maximum OOP limit
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What IsAnd IsntMinimum Essential Coverage?
Minimum Essential Coveragedoes not include
excepted benefits
Excepted benefits dont have to comply with ACA
group market rules but wont satisfy mandates
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HRAs and the ACA
HRAs must be integrated with another
ACA-compliant group health plan in order to
comply with ACA group market reforms
Previous guidance outlined minimum value and
non-minimum value options for an HRA to be
considered integrated
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HPID Health Plan Identifier
Health Plans are required to use a Health Plan
Identifier (HPID) in HIPAA standard electronic
transactions
For fully-insured plans, the carrier will obtain
the HPID
Self-funded plan sponsors will need to obtain
their own HPID
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9
FSA Carryover Option
Employers can allow FSA participants to carry
over up to 500 of unused FSA funds for use in
subsequent plan years
Employers who want to adopt the 500 carryover
rule must amend their plan documents on or before
the last day of the plan year from which the
amounts may be carried over
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Excise Tax on High Cost Employer Health Care
Coverage
Effective in 2018, 40 excise tax is imposed on
excess employer health care benefits
The excess benefit is coverage over certain
indexed thresholds
Coverage includes employer contributions and
employee pre-tax contributions under cafeteria
plans
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Employers Need to Comply with ACA and Reduce Costs
Your Health Care Compliance Strategy
What do you have to do? When? What are your
options?
Your Health Care Strategy
What is your long-term plan to reduce your health
care costs?
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Questions? Contact

• AON Risk Solutions
• Dawn Montano
• Assistant Vice President
• 6501 Americas Parkway NE, Ste 650
• Albuquerque, NM 87110
• [phone]
• Dawn.montano_at_aon.com

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