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NJ CUPA‐HR ‐‐ The Affordable Care Act & Its Implication for Employers April 4, 2014

The Affordable Care Act & Its Implication for Employers

About NJBIA…

• Represents 21,000 companies of all sizes and types,

which employ over 1 million workers in the State.

• Advocate for business representing their interests in

both legislative and regulatory arenas in order to make this state a great place to do business.

• NJBIA provides a wide range of benefits and services

to members, including: insurance programs, committees and seminars.

Additional member resources from NJBIA:

• Healthcare Issues Network: Electronic updates about

developments that affect the cost and availability of health insurance.

• Health Affairs Committee: Meetings that bring a wide

range of healthcare stakeholders together to hear from lawmakers & policy leaders.

• NJBIA Fast Facts: Fact sheets to help businesses comply

with laws & regulations affecting business.

• Seminars: An annual series to assist businesses of all sizes

make health insurance purchasing decisions.

The Affordable Care Act & Its Implication for Employers

The Affordable Care Act & Its Implication for Employers

Employer Coalition for Technical Education

• Businesses can allow vocational‐technical students to

come in and experience firsthand what goes on in a business through internships and demonstrations.

• Business operators themselves can go into the

classroom and provide students with instruction from the unique perspective of an employer.

• And businesses can contribute by helping vocational

technical schools develop a curriculum that teaches the skills that are needed in the working world.

The Affordable Care Act & Its Implication for Employers

Employer Coalition for Technical Education

• NJBIA formed a partnership with the NJ Council of

County Vocational Schools to help get businesses directly involved in education.

• The goal is to align our education a policy with

workforce needs to create a pipeline of qualified students that have the workplace readiness skills that employers need.

The Affordable Care Act & Its Implication for Employers

Minimum Wage, etc.

• Minimum wage will be increased under new federal

contracts to $10.10 an hour, from $7.25 (federal).

• Regulatory changes to the Fair Labor Standards Act

are also expected to be proposed in the near future to narrow the “white‐collar” exemption.

• New Jersey’s state minimum wage rose to $8.25 on

January 1, 2014 (with annual inflation adjustments each September).

Average Annual Health Insurance Premiums and Worker Contributions for Family Coverage, 2003‐2013

SOURCE: Kaiser/HRET Survey of Employer‐Sponsored Health Benefits, 2003‐2013.

$2,412 $4,565 $6,657 $11,786 2003 2013 Worker Contribution Employer Contribution $9,068 $16,351 80% Total Premium Increase 89% Worker Contribution Increase

The Affordable Care Act & Its Implication for Employers

• However, Garden State residents’ self‐reported

awareness of the reforms doesn’t necessarily correlate with their knowledge of specific aspects

• f the law.

– Just 1‐in‐3 New Jerseyans have heard a lot (11%) or some (23%) regarding the new health care exchanges,

• r marketplaces, which open on October 1st.

– Another 31% have heard only a little and 33% have heard nothing at all.

The Affordable Care Act & Its Implication for Employers

• 90% of the respondents to the Midwest Business

Group on Health survey reported that employees wondered how the Affordable Care Act would affect their benefits. Other survey highlights:

– About 90% of self‐funded employers say they will not steer their covered lives into either public or private exchanges in the near future – instead, choosing to study the HIX model further before making any moves.

Source: Midwest Business Group on Health (MBGH) survey conducted in June and July, released in September 2013. 40 respondents.

The Affordable Care Act & Its Implication for Employers

– More high deductible health plans and fewer managed care plan options, including point‐of‐service plans, are expected among MBGH members during the next four years, though there’s uncertainty about the number of employers planning to offer only HDHPs. – Nearly 70% of respondents are developing their own ACA messaging on open‐enrollment options, as well as an overview of health care reform and its impact on benefit programs. Few of them indicated that they are relying solely on their health plan for employee communications in this area.

The Affordable Care Act & Its Implication for Employers

• Key areas of focus for ACA compliance include educating

employees about the law (71%), benefit designs that will reduce exposure to excise taxes (59%) and wellness plan incentives (49%).

• More than 70% of respondents say they will not increase

salaries for employees who obtain insurance coverage from public exchanges.

• Employees of MBGH members are most concerned about

the impact of the ACA on their benefits (64%) and higher

• ut‐of‐pocket costs (63%), but they also are eager for

information about the exchanges (53%).

What Should Employers Know?

The individual mandate

• Requires most US citizens and legal residents to

purchase health coverage or incur a tax penalty of $95 (or 1% of adjusted gross income), whichever is greater for 2014.

• Individuals under 18 pay one‐half.
• Exemption: There are some, including for certain

religious backgrounds and the so‐called “hardship exemption” if the cost of the annual premiums exceed 8% of household income.

The Affordable Care Act & Its Implication for Employers

The Affordable Care Act & Its Implication for Employers

• Penalty calculation: Generally, the penalty is based
• n a percentage of the taxpayer’s household

income, and is imposed on a monthly basis. –The flat dollar amount is phased in over three years ($95 for 2014; $325 for 2015; and $695 for 2016 and then indexed for inflation). –The applicable percentage is 1% for 2014; 2% for 2015; and 2.5% for 2016 but cannot exceed the annual premium for the “bronze” level plan

• ffered thru the exchange.

The Affordable Care Act & Its Implication for Employers

• Effects of the individual mandate:
• Gives all taxpayers, including employees, an incentive to
• btain coverage
• Increases the likelihood of
• 1. Employees seeking a premium tax credit and
• 2. Triggering IRS assessments against employers
• What is a premium tax credit? A refundable

(advanceable) federal tax credit available to certain low‐ income individuals who were not offered affordable, minimum value plans to subsidize exchange obtained coverage.

The Affordable Care Act & Its Implication for Employers

Small Employer Tax Credit

– Beginning in 2014, the credit refunds 50% of health insurance expenses for eligible employers purchasing thru exchange and is available for any two consecutive

• years. (Credit was 35% for 2010 – 2013)

– The credit is fully available to companies with 10 or fewer full‐time employees and average wages below $25,000. The credit phases out as the number of employees increases to 25 and wages grow to $50,000. Tax‐exempt organization of maximum credit of 35%.

The Affordable Care Act & Its Implication for Employers

Exchange Enrollment

• Enrollment in the individual exchange began October 1

and ran thru March 31, 2014 for individuals.

• For 2014, open enrollment will be delayed until Nov. 15

ending Feb. 15, 2016

• SHOP enrollment for employers will be on‐going, however

there was an annual open enrollment period from October 15 – November 15. Coverage began Jan. 1, 2014.

• To find out more, visit Healthcare.gov and find

information links. Alternatively, call 1‐800‐318‐2596.

The Affordable Care Act & Its Implication for Employers

Marketplace: The Basics

• NJ has a federal Individual and SHOP Marketplaces
• Each plan’s actuarial value (AV) must fall within the

metallic tier (Bronze – 60%, Silver‐ 70%, Gold – 80% and Platinum – 90%). AV=% of total average costs for covered benefits that a plan will cover

• Rating is now to the member level so a rate is paid for

each individual and each member of their family

• e.g. At Widget LLC Adam pays $300/m, Betsy pays

$225/m and Chris pays$350/m.

The Affordable Care Act & Its Implication for Employers

Marketplace: The Basics

• Other rating changes:
• No gender rating
• Tobacco use is not a permitted rating factor in NJ,

but is permitted in other states by as much as 1.5x

• Plans available “on the exchange” are also available

“off the exchange”

• What happened in 2014?
• Widespread disruption. New rating, taxes and

benefit changes contributed to higher premiums while metallic tiers, MOOP and networks lead to new plans for many.

The Affordable Care Act & Its Implication for Employers

• Q. Can I buy in the SHOP if I’m self‐employed or own

a small business?

• A. If you’re self‐employed with no employees, you

can shop for coverage on the exchange. If you have fewer than 50 employees, you can get coverage for yourself and your workers through the Small Business Health Options program, known as the SHOP Marketplace.

The Affordable Care Act & Its Implication for Employers

Employers with 1‐49 employees:

• Considered a “small employer”
• No mandate that small employers provide coverage
• This is a “new” definition. New Jersey formerly

defined small employer as having 2‐49 employees

The Employer Mandate

• “Large employers” must offer their workers “affordable”

and “minimum essential” health care coverage that has “minimum value” or pay a penalty.

• What is minimum essential coverage? No definition yet

but we know the broad categories that

• What is affordable coverage? An employees contribution

may not exceed 9.5 percent of the employees income.

• What is “minimum value”? Generally, the plan’s share of

total allowed cost of benefits is not less than 60%.

The Affordable Care Act & Its Implication for Employers

• Who is a large employer? The mandate applies to

employers with 50 or more full‐time employees during the previous calendar year.

• The law considers an employee who works at least 30

hours a week a full‐time employee, as well as two employees who each work 15‐hours per week to count as

• ne full‐time employee.
• The mandate does not apply to employers that exceed 50

employees for 120 days or less, and whose extra employees are considered seasonal workers. The Affordable Care Act & Its Implication for Employers

• What is the penalty?

– The company could be subject to an annual penalty of $2,000 for each full‐time employee that 1) doesn’t

• ffer health coverage and 2) at least one employees

receives government subsidized insurance through the marketplace, minus the first 30 employees. – Employers whose coverage is deemed unaffordable or low value could be subjected to a penalty of $3,000 for full‐time employees that receives government subsidized insurance through the government insurance exchange. The Affordable Care Act & Its Implication for Employers

The Affordable Care Act & Its Implication for Employers

The Phase‐in: Employers with 50‐99 Employees

• Required to provide a minimum level of affordable

coverage

• 2015 – must provide information on the number of

employees

• 2016 – penalties are assessed

The Affordable Care Act & Its Implication for Employers

The Phase‐in: Employers with 100+ Employees

• Required to provide a minimum level of affordable

coverage

• 2015 – must cover 70% of employees
• 2016 (and beyond) – must cover 95% of employees.

Penalties are assessed.

The Affordable Care Act & Its Implication for Employers

Determining the Number of Employees

• 30+ hours/week on average = 1 FTE
• Part time employees count in calculating FTEs
• e.g. two 15‐hour ees = 1 30‐hour FTE
• Entire company, including subsidiary, is analyzed in

determining FTEs.

• If combined companies meet threshold, all

companies must comply.

• Reassess FTEs annually.

The Affordable Care Act & Its Implication for Employers

Employer Manadte: Adjunct Hours

• Recent guidance suggest that adjuncts should be

credits for 1.25 hours of prep for each hours spent teaching

• Guidance was released in Feb 2014 by the IRS and

Treasury

How is the ACA paid for? New taxes…

• Health Insurance Tax: taxes health insurance (not self‐

funded coverage) and is paid by the carrier – Generates $8B in 2014 and more then $100B over the next 10 years

• Transitional Reinsurance Fee: A fee of $63 for each

covered person which will be collected for three years. The purpose is to offset cost of coverage for people with preexisting conditions

The Affordable Care Act & Its Implication for Employers

Maximum 90‐day waiting period

• 90‐days max, does not mean 3‐months.
• Prevents cost control through longer waiting periods
• In combinations with the employer mandate, may makes

certain employees classifications irrelevant (probationary, intern, non‐benefit eligible) The Affordable Care Act & Its Implication for Employers

Key ACA Dates ‐‐ January 1, 2014

• Marketplace coverage begins
• Individual mandate for health coverage
• Medicaid expansion
• New taxes and fees:
• Reinsurance Fee: $63 per covered life
• Health insurer fee: 2‐3% to collect $8 billion
• Medicare withholding for high wage earners: indiv over

$200,000/joint over $250,000 FICA increases from 1.45% to 2.35

The Affordable Care Act & Its Implication for Employers

Key ACA Dates ‐‐ January 1, 2014 (cont.)

• Maximum 90‐day waiting period
• Maximum‐out‐of‐pocket $6,350/$12,700 (all non‐

grandfathered plans) for 2014. Increases to $6,600 in 2015.

• No annual dollar limits on essential benefits
• Pre‐existing condition exclusions are prohibited (all plans)
• Dependent to age 26 (applies to all plans now)
• Provider discrimination: all non‐grandfathered plans

cannot discriminate on covered services based on the provider

The Affordable Care Act & Its Implication for Employers

Key ACA Dates ‐‐ January 1, 2014 (cont.)

• Clinical trials: must be covered by nongrandfathered plans
• Preventative services on US Preventative Services Task

Force must be covered without cost sharing (nongrandfathered plans)

• Wellness programs: ACA permits rewards (or penalties of

up to 30% of the total cost of coverage and 50% of the total cost of for tobacco cessation

The Affordable Care Act & Its Implication for Employers

January 1, 2015

• Employer "play or pay" mandate (delayed from 2014)
• Employer information reporting to the IRS on employee

coverage 2016

• All SHOP exchanges must open to employers with up to

100 FTEs

The Affordable Care Act & Its Implication for Employers

2017

• States may open exchanges to businesses with more than

100 employees 2018

• Cadillac Tax ‐‐ 40% excise tax on high‐cost health plans

The Affordable Care Act & Its Implication for Employers

The Affordable Care Act & Its Implication for Employers

Where are we headed?

• Exchanges – watch the trend toward private exchanges
• Workplace wellness
• Self funding of health benefits (100+)