Large Business Health Insurance Program

HEALTHCARE BENEFIT REQUIREMENTS FOR LARGE EMPLOYERS (OVER 50 EMPLOYEES)

Employers with over 50 employees have some homework to do before 2014 arrives.  All of the requirements of the Patient Protection and Affordable Care Act (PPACA) will be based on an employer’s previous years’ employment records.  For 2014, employers will be required to look back to any 6 month period in 2013 to determine their eligibility and requirements.

Requirements

1. Must provide healthcare benefits to more than 95% of their full-time employees
2. Must provide healthcare benefits that meet PPACA’s minimum requirements
   1. Contain the 10 Essential Health Benefits
   2. Coverage must be deemed “affordable”
3. Specific employee notification regarding the Exchange must be provided
4. Reporting of employee information to the government

Eligibility

Knowing how to count your employees is going to be crucial in determining what your requirements are going to be to make sure you hit that 95% mark:

1. A Full-Time Employee is any employee that works a minimum of 30 hours per week or 130 hours per month.
2. A Part-Time Employee is any employee that works less than 30 hours per week.  When determining how many Full-Time Employees you have, you must add up all the hours of your Part-Time Employees and divide by 120.  The result will be the number of Full-Time Equivalent Employees you have.  NOTE:  You must include the following “Hours of Service” when performing this calculation:
   1. Paid time off for vacation
   2. Holiday pay/hours
   3. Paid sick leave
   4. Disability
   5. Jury duty
   6. Military duty
   7. Leaves of Absences
   8. Exclude service relating to non-US sourced income
3. Seasonal Workers may work up to 4 months or 120 days a year without having to be included in the calculation.
4. Dependents – employers MAY be required to offer affordable health insurance to the dependents of their employee or be subject to Shared Responsibility Payments.  A Dependent is defined as:
   1. A natural child
   2. A step child
   3. An adopted child
   4. An eligible foster child
   5. NOTE: There is NO requirement to offer coverage for a spouse

QUALIFIED HEALTHCARE PLANS (QHPS)

The plans available to large employers will be provided by private health insurers – the same ones that are available today.   Each plan will be required to provide 10 Essential Health Benefits as follows:

• ambulatory patient services,
• emergency services,
• hospitalization benefits,
• maternity and newborn care,
• mental health and/or substance abuse treatment and services,
• prescription drugs,
• rehabilitative and habilitative services and devices,
• laboratory services,
• preventive and wellness services, and
• pediatric services (including dental and vision care)

These Essential Benefits are designed to limit out of pocket spending on covered benefits to no more than the limits on an HSA account (Health Savings Account): in 2014 that would equate to $6200 for an individual or $12,300 for a family.

Besides containing the Essential Health Benefits, plans will be required to cover a minimum of 60% of covered medical expenses.   The IRS and HHS (Health and Human Services) have developed a calculator to determine if the benefits being offered comply with the 60% coverage rule.  To check your current plans or plans you are considering offering.

AFFORDABILITY

Employers will be required to participate in the premium payments for their employees.  The amount of participation will depend on the plan that is being offered and the wages of the employee.

Employee participation for the employee’s coverage ONLY cannot exceed 9.5% of the employee’s household income or it will be deemed “unaffordable.”  Because employers will not have knowledge of the employee’s total household annual income, employers can limit the employee’s contribution to 9.5% of the employee’s W-2 wages.  For the health care benefit to be considered affordable, employee participation cannot exceed:

1. Salaried personnel – multiply the monthly salary by 12, then by 9.5%
2. Hourly personnel – multiply the hourly wage by 130, then by 12, then by 9.5%
3. 9.5% of the Federal Poverty Level for a single individual living in the state where they are employed

SHARED RESPONSIBILITY PAYMENTS (SRP)

The Shared Responsibility Payments are the penalties employers will be required to pay if they do not comply with the PPACA rules.  The Shared Responsibility Payments are calculated on a MONTHLY basis and indexed to increases in projected per capita national health expenditures.  These payments will be due any month in which

1. An employer offers coverage to less than 95% of his/her Full-Time Employees – including Full-Time Equivalent Employees (and possibly their dependents) AND at least one Full-Time Employee receives a Premium Tax Credit through the Exchange.
   • The amount of SRP that an employer will owe is calculated by taking the number of Full-Time Employees and subtracting 30 from that number.  The remaining number of employees is then multiplied by $2000 and the result is the SRP payment due.
2. An employer offers coverage to more than 95% of his/her Full-Time Employees – including Full-Time Equivalent Employees (and possibly their dependents) AND at least one Full-Time Employee receives a Premium Tax Credit through the Exchange.
   • The amount of SRP that an employer will owe is calculated by taking the number Full-Time Employees that are receiving a Premium Tax Credit and multiplying that number by $3000.  The total SRP cannot exceed what an employer would pay if he/she offered no coverage to their employees.
3. An employer offers coverage that is unaffordable or does not provide coverage that meets the 60% minimum coverage and at least 1 Full-Time Employee receives a Premium Tax Credit.
   • The amount of SRP that an employer will owe is calculated by taking the number of Full-Time Employees and subtracting 30 from that number.  The remaining number of employees is then multiplied by $2000 and the result is the SRP payment due.

Employers with 200+ employees will be required to automatically enroll any new employees into the health plan offered by the employer.  All employees will have the right to opt out of the plan. Employers will be required to provide specific notices to employees:

1. Information about the existence of the Healthcare Exchange
2. A description of the services offered in the Exchange
3. Details on how to contact the Exchange
4. A statement that the employee may be eligible for a premium tax credit for a Qualified Health Plan (QHP) purchased through the Exchange if the actuarial value of the employer’s health benefit plan is less than 60%.
5. A notice that the employee will lose the employer’s contribution toward health coverages and that all or a portion of the contribution may be excludable from federal income taxes if the employee purchases a QHP through the Exchange.

Employer’s Reporting Requirements:

1. Employee’s details: name, identification number, etc.
2. Whether Full-time employees are offered an employer sponsored plan
3. Details regarding the employer’s sponsored plan, such as the waiting period, availability, premium costs, and employee’s share of costs.
4. The number of Full-time equivalent employees for each month of the year.
5. Name, address, tax ID of each full-time employee and the months they were covered under an employer sponsored health benefit plan.

CAFETERIA PLANS

If an employer’s fiscal year begins in 2013, the employer may permit participants one mid-year election opportunity to drop their current coverage and to enroll in the Exchange.  Those that elected to not participate may enroll also to avoid penalties with the individual mandate.  Employers implementing these rules must amend their Cafeteria Plans by December 31, 2014, making it retroactive to the first day in the 2013 plan.

WHAT SHOULD EMPLOYERS DO NOW?

1. Determine if they are in “applicable large employer” that would be subject to the rule.
2. Choose a method to calculate full-time equivalent employees that must be offered healthcare benefits.
3. Check to see if your current plan meets the minimum requirements for coverage and make necessary adjustments
4. Calculate to see if your employee’s plans are “affordable” and adjust where necessary.
5. If you have a fiscal-year plan, amend the cafeteria plan to allow mid-year election changes.