an independent licensee of the blue cross and blue shield association. u7430b, 2/11 this...
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An independent licensee of the Blue Cross and Blue Shield Association. U7430b, 2/11
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Changes and Considerations
Small Group (Under 50 Employees)Resource Guide
Health Care Reform and Employers
+ Many major provisions take effect in 2014: ▪ Individual mandate▪ Exchanges▪ Subsidies
+ Employers will have many new considerations:▪ Employer mandate: large employers may pay penalties▪ Calculations for determining full-time equivalent employees ▪ Some tax credits may be available▪ New reporting requirements
2
Calculating FTEs to Determine Employer Size
Number of Full-Time* Employees
Total Part-time**
Hours / 120
Total Full-Time Equivalent Employees (FTEs)
* Full-time employees are defined as those who work at least 30 hours per week** Part-time exempts seasonal employees (employed fewer than 120 days)
A firm has:• 25 full-time employees that work 30+ hours• 10 part-time employees who all work 24 hours per week
(96 hours per month, per employee)
Example
These part-time employees’ hours would be treated as equivalent to 8 full-time employees:
10 employees x 96 hours/120 = 1,920/120 = 8 FTEs
25 Full-time + 8 Full-time equivalents = 33 FTEs
Meets Requirements
of a Small Employer
Small Group Exemption
+ Small businesses with fewer than 50 full-time employees (or equivalent full and part-time employees) are EXEMPT from:▪ Penalties related to the employer mandate provision of the Affordable
Care Act (ACA)▪ ACA requirement to offer affordable coverage
≤ 10 Full-Time Employees
≤ 25 Full-Time Employees
Maximum Average Annual Wages
Up to $25,000 Up to $50,000
Percentage of Premium Paid by Employer
At least 50% At least 50%
Maximum Potential Credit 2010-2013
Up to 35% of employer premium payment (25% for tax exempt firms)
Scaled, dependent on average wages & FTEs
Maximum Potential Credit 2014 – on
Up to 50% of employer premium payment (35% for tax exempt firms) up to 2 years
Scaled, dependent on average wages & FTEs
Small Business Tax Credits – 25 or Fewer FTEs
Calculating Employees and Average Wages for the Small Business Tax Credit
Total Number of Hours Paid
in Given Year
2080 FTEs
Total Wages Paid in
Given Year
FTEsAverage Annual Wages
BCBSNC Tax Credit Calculatorhttp://www.bcbsnc.com/content/campaigns/taxsavings/index.htm
Reporting Requirements
Reporting of enrollment in health insurance
coverage
Self-insured employers, insurers
IRS
Effective 1/31/2015
Employer requirement to inform
employees of coverage options
Employers subject to Fair Labor
Standards Act
Distributed to Employees
TBD – Delayed until future guidance issued
Source: Ernst & Young LLP 2012
Fees & Assessments
+ Health Insurer Tax Fee▪ New sales tax on health insurers ▪ 2014 tax amount = $8 billion ▪ 2018 tax amount increases to $14.3 billion▪ Tax increased based on premium trend thereafter
+Reinsurance Fee ▪ Applies to all issuers and self-insured group health plans ▪ Fees will fund reinsurance program 2014 – 2016 to stabilize premiums
in individual insurance market▪ Proposed annual fee is $63 per enrollee in plan
Fees & Assessments, continued
+ Comparative Effectiveness Research Fee (PCORI)▪ Applies to insurers and self-insured for policies or plan years ending
after 9/30/12 thru 10/1/19▪ Funds research on effectiveness of medical treatments and
prescription drugs– FY2013 $1 per covered life– FY2014 $2 per covered life– FY2015 on – indexed
+ Tax on “High Value Plans” (“Cadillac” Plans)▪ Beginning in 2018▪ 40% excise tax imposed on insurer & self-insured on total annual
value of employer-sponsored coverage that exceeds $10,200/single, $27,500/family (value includes employer/employee contributions)
Employer Considerations
Keeping
Coverage
Dropping
Coverage
Medical Trend
New ACA
Requirements
Penalty
Replacement Cost
Employee perception
of value lost
Coverage Options
Source: Deloitte Consulting LLP: HR Executive Series 7/11/12
ACA Compliant Plan
Employer continues offering coverage that is compliant with ACA
Defined Contribution Plan
Employer provides funding that employee uses to purchase their choice of health insurance
Exchange
Employer uses Exchange to provide health insurance coverage
• Small Employers 2014-2016 (50 and below)
• Small Employer 2016 (100 and below)
• Large Employers in 2017 (State option)
Existing Provisions (Already in Effect)
Provision Individual Market
Small Group Market
Large Group Market
Self-Insured Grandfathered
Children’s Pre-existing Conditions(2010)
Yes Yes Yes Yes Does not apply to individual coverage, but applies to all other grandfathered coverage
Rescissions (2010) Yes Yes Yes Yes Yes
Lifetime Limits (2010) Yes Yes Yes Yes Yes
Annual Limits Restrictions (2010)
Yes Yes Yes Yes Does not apply to individual coverage, but applies to all other grandfathered coverage
Preventive Care (2010)
Yes Yes Yes Yes No
Age 26 Adult Children(2010)
Yes Yes Yes Yes Yes
Medical Loss Ratio (2011)
Yes Yes Yes No Yes
Unreasonable Rate Review (2011)
Yes Yes Yes No No
Future Provisions
Provision Individual Market
Small Group Market
Large Group Market
Self-Insured Grandfathered
Modified Community Rating (2014)
Yes Yes No No No
Essential Health Benefits (2014)
Yes Yes No No No
Actuarial Value(2014)
Yes Yes Same as Essential Health Benefits
No No
Out of Pocket Maximum (2014)
Yes Yes Yes Yes No
Annual Limits – eliminated (2014)
Yes Yes Yes Yes Does not apply to individual coverage, but applies to all
other grandfathered coverage
Clinical Trials Coverage (2014)
Yes Yes Yes Yes No
Employer Mandate
(Pay or Play) (2014)
No No Yes Yes, if applicable
large employer
Yes
Future Provisions
Provision Individual Market
Small Group Market
Large Group Market
Self-Insured Grandfathered
High-cost Plan Excise Tax (Cadillac Tax) (2018)
No Yes, remitted by issuer
Yes, remitted by
issuer
Yes, remitted by plan
administrator
Yes
Nondiscrimination rules for insured plans (TBD)
No Yes Yes Similar prior requirement
No, though self-insured plans must observe
prior requirement regardless of grandfather
status
+ ONLY non-grandfathered small group and individual plans must cover
+ 10 categories1. Ambulatory patient services2. Emergency services3. Hospitalization4. Maternity and newborn care5. Mental health and substance use disorder services, including
behavioral health treatment6. Prescription drugs7. Rehabilitative and habilitative services and devices8. Laboratory services9. Preventive and wellness and chronic disease management; and
10. Pediatric services, including oral and vision care
Essential Health Benefits
+ Exchanges and premium tax credits may make individual coverage more affordable for a firm’s employees
+ Recruitment and retention may be more difficult if employers don’t offer coverage
+ ACA includes several provisions to help employers establish or continue wellness programs:▪ In 2014, employers are allowed to apply up to a 30 percent premium
contribution differential (HHS may raise this to 50%).▪ In 2014, $200 million over a 5 year period will be available for wellness
grants for employers with fewer than 100 employees that work 25 hours or more per week.
Other Considerations
Key Considerations & Next Steps for Employers
+ Assess impact of health care reform provisions on workforce▪ Do your employees value your company differently, if it doesn’t provide
health insurance as a benefit?
+ Determine applicability of employer penalties ▪ Small Employer Groups (fewer than 50 full time employees) are EXEMPT
+ Consider other financial and tax implications
+ Assess your current benefit designs
+ Prepare for complying with tax and other reporting requirements
An independent licensee of the Blue Cross and Blue Shield Association. ®, SM Marks of the Blue Cross and Blue Shield Association. SM1 Mark of Blue Cross and Blue Shield of North Carolina. © 2013 BCBSNC. All rights reserved.
Thank You!
This document is for educational and discussion purposes only and is NOT intended to provide legal advice.
This document reflects information gathered to date.
Please note that due to the changing nature of health care reform, BCBSNC recommends continued monitoring of legislation and regulations related to the topics contained herein.