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Obamacare Starts 10/1/13 – Are You Ready Employers?

Obamacare starts 10/1/13 – are you ready employers?

changed priorites signARE YOU READY FOR IT EMPLOYERS?
The health insurance exchanges go live in October, 2013.
Below are some major points that you need to be aware of as an employer, big or small!
Don’t let this major law change creep up on you unaware!
NOTE: This is a long article, but VERY important, please take the time to read this article if you are a business owner.

Overview:

Beginning October 1, 2013 the state and federal “exchanges” or marketplaces, as they have been renamed, will go live. The un-insured, those eligible for subsidies, and those with pre-existing conditions, can shop and purchase government approved health insurance with an effective date of Jan 1st 2014.
How will the “exchanges”/marketplaces work? What does this all mean?
Below are a few key summary points about exchanges: (more information is available via a variety of sites.https://www.healthcare.gov/ is one of the comprehensive sites we like)
  •  The exchanges/marketplaces will be an additional way to purchase health insurance. Existing channels such as brokers, who represent multiple carriers and carrier web-sites, will operate as before. Some major carriers will not be participating initially, on the “exchanges”/marketplaces. However, they will offer the same government approved plans.
  • The insurance plans offered will be called “metal” plans, noted below. These same plans will be available through major carriers and brokers, as well.
  • Four different “metal” plans will be offered on and off the exchanges/marketplaces and premiums paid will be vary mostly depending on individual out-of-pocket costs:
    • Platinum 90%/10%
    • Gold 80%/20%
    • Silver 70%/30%
    • Bronze 60%/40%
  • Each “metal” plan must cover the same set of minimum essential benefits. (a listing of these can be found on the healthcare.gov link above) The scope of benefits will be the same among the plans. The value of the benefits will vary based on the level chosen. Size of the provider networks will be a factor in pricing.
  • Subsidies will be available to those with income levels below 400% and above 133% of the Federal Poverty Level. Those applying for subsidies will use the “exchanges”/marketplaces. The IRS will determine the individual or families ability to pay.
  • No plan, on or off the exchange, will be allowed to impose deductibles, co-payments or other forms of cost sharing greater than $6,350 for an individual and $12,700 for a family, per year. Preventative health services are at no cost, no co-pay to the insured.

Immediate Implications for Employers:

Health Care Changes- Health Care Reform (Patient Protection Affordable Care Act or Affordable Care Act (ACA) is the law and the health insurance exchanges are coming. What do employers need to know and do NOW?

In 2014 Americans will face a penalty if they do not have health insurance and do not obtain coverage.

Explaining Health Care Reform to your employees is going get more complicated during the next few months of as some “exchanges” market their insurance plans aggressively. Employees will receive much communication about the “exchanges” in the mail and hear a great deal through the media. As a result there are going to be many miscommunications or misunderstandings.

 

There are many employers who think the program has been delayed and they do not have do to anything related to readiness for 2014. This is simply not true.
 
Employers may be relying on their benefit brokers to help them and there are several brokers who are helping their clients however, there are many who are not. Employers who don’t currently offer health benefits must also comply with some of the communication requirements with their employees.

Communications must take place now! Effective October 1, 2013 all employers regardless of size

are required to communicate and provide information to current employees and new hires related to health care “exchanges”.

 

Communications: The following provides some guidance on what employers need to communicate to employees:

  • ALL employers (large and small; offering benefits now or not; planning to offer or not) need to understand the upcoming changes and have a strategy for compliance and plans for addressing questions from employees
  • Beginning in 4Q 2014, (following the issuance of Exchange Notices, Open Enrollment on Exchanges and the advent of January, 2014) it is anticipated that employees will have several questions about the impact on them personally or their families
  • Employers need to prepare for, what is anticipated to be, a significant employee relations issue.

We believe, it makes good business sense to try to help your employees understand the changes and their responsibilities related to Health Care Reform

 

  • As you communicate focus on what matters. You don’t want to overwhelm employees. (communication should be clear, simple and unbiased)
  • Plan on-going communications and break it up into pertinent and timely information beginning in September, perhaps again monthly and if applicable during open enrollment (one communication will not likely be enough)
  • Communicating about health care changes gives employers an opportunity to explain what coverage they do/will offer, demonstrate the value of their benefits packages, learn from employees about their concerns and learn what they value in compensation and benefits packages.

Employer Compliance:

The following provides some guidance on the 2013-2014 compliance requirements that all employers* must do:

  • Exchange Notice
    • The first big notice requirement under the law is businesses’ obligation to provide notice about the “exchanges” to every employee by Oct. 1, 2013. Organizations must also distribute the notice to any new hire within 14 days of his or her hire date.
    • The notice informs employees about the existence of exchanges, how to get coverage on them and about the employer’s health coverage or lack of it.
    • The Department of Labor (DOL) has provided model exchange notices. Most organizations are not filling out the optional third page- (Attachment A -“Health Insurance Market Place Coverage Options”)http://hrchoice.com/wp-content/uploads/DOL-fillable.pdf
  • There are many states that have exchanges. States that do not will default to the federal exchange.
  • Employers must notify their employees about exchanges and how they should apply.
  • Employers do not have to apply for them, but will likely be expected to provide guidance.
  • Regulations do not identify a specific penalty for failing to comply with the notice requirement; the general PPACA noncompliance penalty of $100 for each day of noncompliance with a PPACA mandate would likely apply. The DOL or plan participants may bring a civil action against an employer for failure to comply.
  • Affected Employers (See FLSA regulations Attachment B.) http://hrchoice.com/wp-content/uploads/ATTACH-B-FSLA.pdf
    • “ACA’s Exchange notice requirement applies to employers that are subject to the FLSA. In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. In most instances, a business must have at least $500,000 in annual dollar volume of sales or receipts to be covered by the FLSA. SEE LEGAL INTERPRETATION OF THIS BELOW. The FLSA also specifically covers the following entities: hospitals; institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state and local government agencies.”
  • Legal Opinion about Covered Employers: Elizabeth B. Chilcoat, Sherman & Howard L.L.C.
    • “The FLSA provides for both enterprise coverage and individual coverage. Under enterprise coverage, all employees of the covered enterprise are protected by the FLSA. An enterprise is covered if it is engaged in interstate commerce and has at least $500k annual sales or receipts and the employers specifically listed (hospitals, institutions that care for the sick, etc.). Under individual coverage, an employee is protected by the FLSA if the employee engages in interstate commerce, or makes goods or provides services that are exchanged in interstate commerce. Because an employee engages in interstate commerce by using a pencil manufactured in another state, the practical effect of individual coverage is that all employees are covered by the FLSA. Enterprise coverage almost certainly applies because, even if the enterprise makes goods or provides services in Colorado, it is almost certainly participating in a business relationship of some sort with an out-of-state entity (e.g., the pencil manufacturer). So the employer must comply with the FLSA is correct.
  • In speaking with Kirsten Stewart, one of the ACA experts, about how this shakes out with regard to the Exchange Notice. Kirsten said that the best interpretation of the law is that every employer must comply with the exchange notice requirement in the ACA. She does not think (and I agree) that the ACA limits the requirement to provide notice of the healthcare exchanges to employers that engage in interstate commerce and make at least $500k/year. The ACA states that “an employer to which [the FLSA] applies” must provide the exchange notice. Enterprise coverage, which is the definition that you sent me, has to do with whether an employee is covered by the FLSA and not whether the employer is covered. Therefore, I do not think that relying on enterprise coverage to determine what employers the FLSA applies to is a good approach. Instead, Kristen and I agree that, because the FLSA defines an “employer” as anyone or any entity that employs a person, the exchange notice requirement applies to all employers.

Revised COBRA Notice

  • The DOL also has issued an updated model election notice under COBRA to inform qualified beneficiaries of coverage options through the Affordable Care Act “exchanges”.
  • Beginning no later than January 1, 2014, all COBRA election notices (and/or Continuation of Group Health Insurance Coverage notices as is case in Colorado for employers not covered under COBRA), must be updated to contain information about “exchanges”. Attachments C (links below) provide templates for both the updated COBRA Election Notice and Colorado Continuation of Group Health Insurance Coverage election notice. More information and templates can be found on the DOL and Colorado DOL websites.
    http://hrchoice.com/wp-content/uploads/Cobra-Updated-For-Exchange.doc

SBCs (Summaries of Benefits and Coverage)

  • Not to be confused with an SPD (summary plan description), a summary of benefits and coverage (SBC) now is required annually (typically at time of annual enrollment). The point of the SBC form, four pages of which must be completed, is to make it easy for employees and their family members to compare different plans so they can choose between them.
  • The notice was mandatory as of last year’s open enrollment, but not all employers are on top of the requirement.

W-2s

  • The requirement that W-2s include the cost of coverage for employees has already taken effect, but a lot of covered employers are not on top of this mandate either.
  • An exception to the requirement is in place for employers with fewer than 250 W-2s in the prior year; however, small businesses should be aware that this exemption is likely to eventually go away.
    6055 and 6056
  • The Internal Revenue Service (IRS) is expected later this summer to issue guidance on notices called by their revenue requirement section in the Internal Revenue Code (Title 26)-Section 6055 and Section 6056. The first year for gathering information for this mandate has been pushed to 2015, meaning the first 6055 and 6056 reporting won’t happen until 2016.
  • The IRS pushed back the employer-mandate penalties to 2015 on account of this notice.
  • Technically, 6055 reporting is reporting by anyone who provides minimum essential coverage, such as an insurance company or an employer that self-insures. An unresolved question is whether the burden to provide the data will be on the insurer or the insured.
  • 6056 reporting applies only to large employers. “There’s a lot of overlap in reporting” under 6055 and 6056. The IRS is evaluating whether the two reporting mechanisms can be combined to avoid duplication.
  • Regardless of the size of employers, they will be affected by the notice requirements; it will just be a matter of the extent to which they are affected.”

Though two critical penalties for employers were delayed until 2015, employers are being urged to develop at least a tentative plan for 2015 and beyond. For example, employers need to keep in mind that if a low-income employee qualifies for a federal subsidy for exchange-provided coverage in 2014 and continues that coverage and subsidy in 2015, an employer penalty will be triggered in 2015. Employers want their employees to know that the coverage they are providing them is enabling them to meet that [individual mandate] obligation.”

Other

  • It’s important for employers to understand, coordinate with payroll and prepare for a slew of new ACA reporting requirements in 2014.

Sources Referenced

  • Allan Zee, Argeus Benefits Group
  • ISU Insurance Group of Colorado
  • Society of Human Resources Management (SHRM);
  • Steve Bates, August 1, 2013 “Start Communicating About Health Care Changes”
  • HR.BLR.com

TO DO NOW LIST FOR EMPLOYERS

  • Prepare to Issue “Exchange Notices” (Health Insurance Market Place Coverage Options) to all employees by October 1, 2013
  • Determine where to direct employees with questions
  • Fill in pertinent employer details on the notice
  • Determine communications strategy and communication approach with employees
  • Issue notice by October 1, 2013
  • Update all “new hire orientation paperwork” to include “Exchange Notices”
  • Confirm you are prepared to report healthcare benefits on 2013 W2 statements (required for all employers over 250 W2 employees; likely to be requirement for all employers after 2014)
  • IF you currently provide healthcare benefits, confirm you are prepared to comply with SBC (Summaries of Benefits and Coverage) requirements at time of enrollment
  • Understand your compliance requirements and strategies for 2014 as they relate to ACA and prepare/modify processes accordingly. For example prepare to update COBRA notices by January 1, 2014. If appropriate meet with your advisor and/or HR Choice for a “2014 ACA Readiness Assessment”
  • Prepare leaders and administrators for employee questions beginning in October related to “Individual Mandates”, “Employer Mandates”, “Exchanges”, other topics related to ACA, your benefits, your plans to offer benefits and what support you will be offering employees in this new environment.

 

TALKING POINTS and FAQ EMPLOYERS THAT CURRENTLY OFFER HEALTHCARE BENEFITS

  • Beginning January 1, 2014 all individuals must have health insurance or face penalties at end of 2014:
    • This will be a new line item reported in individual tax returns
    • At this time while uncertainty on how non-compliance will be determined and penalties calculated, there will likely be a viable method in 2014 and for sure 2015
  • Regardless of expected flaws in the process, it is the law

Q: Are the benefits on the “exchange”/marketplace more affordable and/or comprehensive that what my employer offers?

A: Suggested employer response: “It is our understanding and intent that what we offer is as, if not more, comprehensive and affordable than what you as individuals and families can purchase on the “exchanges.” At our open enrollment period you will receive a SBC (Summary of Benefits and Coverage) which you can use to compare our coverage to that available on the “exchange.” We encourage you to review the SBC, shop on the “exchange”, ask us questions and so forth. It is our hope that our employees maintain their coverage with us and therefore welcome feedback and questions.”

Q: If I decide, may I buy on the “exchange”?
A: Yes. We recommend if you do, however, you do so with counsel from your tax or insurance advisor as there may be tax and other financial implications.

Q: I heard if I buy on the “exchange” I will get a tax refund or subsidy?
A: Some individuals may qualify. It is worth checking into, though as we understand the law, if individuals have access to affordable and comprehensive coverage through their employer or another source (spouse’s employer, parent’s employer) they could still buy on the “exchange, but will not be eligible for the subsidy.

Q: Can I stay on the company insurance and buy for my family on the “exchange?”
A: Yes. It is a good idea to compare and elect coverage that is in the best interest of your family. That is one of the anticipated benefits of “exchanges”.

Q: I have heard many employers are going to drop or significantly increase premiums for spouses and family members. Are you going to be doing this?

A: Helping our employees and their families maintain quality and affordable coverage if important to us. We are constantly re-evaluating options as they become available and examining what is in the best interest of all involved. For example, dropping or reducing coverage for spouses such that they are able to buy on the exchange AND qualify for a subsidy, may actually be preferred by our employees. This is all new territory for all of us. Dropping coverage just to reduce our expenses is not our intent. We are looking at this holistically with the best information we have.

Q: What resources/help are available to me to compare and understand the “exchanges”?

A: _________________ (employer to be prepared to address, please ask us if you need help!)

Q: Can you help me do what I need to buy insurance on the “exchange”?

A: We can provide support with how to access the exchanges. We are not able to help with the application or help you make the decision. We can, however, direct you to informative websites and individuals as needed.

TALKING POINTS and FAQ EMPLOYERS THAT CURRENTLY DO NOT OFFER HEALTHCARE BENEFITS

  • Beginning January 1, 2014 all individuals must have health insurance or face penalties at end of 2014:
    • This will be a new line item reported in individual tax returns
    • At this time while uncertainty on how non-compliance will be determined and penalties calculated, there will likely be a viable method in 2014 and for sure 2015
  • Regardless of expected flaws in the process it is the law

Q: Do you (my employer) have to legally offer health benefits now?

A: IF fewer than 50 full-time equivalent (FTE) employees (based on ACA formula*):
Because we have fewer than 50 FTE employees we are not required by law. We are continuing to evaluate the pros and cons and are actually hopeful that the “exchanges” being made available to small business owners (as means to obtain affordable group insurance for their employees) may present us options for offering these benefits in the future. At this time we are exploring the marketplace to determine if this is something that makes sense for us. We are also exploring options for our employees on the individual state exchanges. We will continue to keep you informed of our thinking and also encourage your thoughts, suggestions and questions as you research the exchanges.
*ACA Formula for FTE Calculation
http://hrchoice.com/wp-content/uploads/FullTimeEEGuide.pdf
A: IF near/more than 50 FTE employees (based on ACA formula):
Because we have 50 or more FTE employees we are required by law to “pay or play”. This means provide health coverage for our employees or prepare to pay fines in 2015. There are many variables to consider and we are looking at what is in the best interest of our employees, their families and our company’s financial well being. The information coming out about “exchanges” is new to all of us. It might make sense to allow our employees to purchase on the exchanges as there may be more comprehensive and affordable coverage than we can provide as a company plan. It may be that our employees prefer this model. Over the course of the next few months we will be evaluating all options with the intention of making a decision as soon as we can in 2014. For sure it is our intent to comply with our legal requirements as a large employer in 2014. We encourage you to become familiar with the “exchanges” and provide us feedback on your thoughts and preferences related to healthcare coverage.

Q: If I decide, may I buy on the “exchange” now?
A: Yes. We recommend if you do, however, you do so with counsel from your tax or insurance advisor as there may be tax and other financial implications.

Q: I heard if I buy on the “exchange” I will get a tax refund or subsidy?
A: Some individuals may qualify. It is worth checking into, though as we understand the law, if individuals have access to affordable and comprehensive coverage through their employer or another source (spouse’s employer, parent’s employer) they could still buy on the “exchange, but will not be eligible for the subsidy.

Q: What resources/help are available to me to compare and understand the “exchanges”?
A: _________________ (employer to be prepared to address)

Q: Can you help me do what I need to buy insurance on the “exchange”?
A: We can provide support with how to access the exchanges. We are not able to help with the application or help you make the decision. We can, however, direct you to informative website and individuals as needed.

LIST OF REFERENCED ATTACHMENTS/LINKS

 LIST OF CONTACTS AND ASSISTANCE FOR THE NEW REGULATIONS AND COMPLIANCE:

For more information and support with Exchange Notices, Employee Communications and 2014 ACA Preparedness Contact:

Phoenix CPA FirmAs Always, if you need help on this issue, or any other tax, payroll, bookkeeping, business issue we would always love to help!

Shauna Wekherlien, CPA, MTax

Your Tax Goddess

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