THE PATIENT PROTECTION AND AFFORDABLE CARE ACT A BASIC GUIDE TO THE EMPLOYER MANDATE. Presented by Mario K. Castillo Attorney at Law

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1 THE PATIENT PROTECTION AND AFFORDABLE CARE ACT A BASIC GUIDE TO THE EMPLOYER MANDATE Presented by Mario K. Castillo Attorney at Law

2 What Has Been Delayed? Only Two Parts Of The Employer Mandate Have Been Delayed. 1. The assessment of penalties 2. The reporting requirements All other requirements of the Affordable Care Act are still in EFFECT Example: Lactation rooms, 90 day health care benefits, coverage for dependents until the age of 26, etc. Nursing Mothers: Employers must provide unpaid, reasonable break time to nursing mothers to express breast milk for one year after a child s birth. A restroom does not count Must be shielded from view and free of intrusion Employers with 50 or less employees are exempt if able to show an undue hardship

3 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges (6) Gain Familiarity with How Penalties Arise (7) Gain Familiarity with Qualified Healthcare Plans (8) Understand Who Gets Coverage Offers, Help, or Both (9) Survey Your Workforce (10) Understand that Reasonable Responses Depend on Your Business (11) We Don t All Need To Know How to Take a Turn at 200 mph, Some of Us Just Need to Learn how to Drive

4 A Tale of Two Birds

5 Your Business, Your Road, Your Decisions

6 Your Business, Your Road, Your Decisions

7 This Ocean Only Affects Certain Vessels Those certain vessels are called Applicable Large Employers. An Applicable Large Employer is a Single Employer Who Employs more than 50 Full-Time Employees or Their Equivalent. Before you start counting employees, well, what is a Single Employer exactly?

8 Single Employer vs. Employer

9 The Ocean Only Affects Certain Vessels A Single Employer is: Controlled Group Parent-Subsidiary Brother-Sister Combined Group An Affiliated Service Group An A-Organization A B-Organization A Management Organization

10 Defining Employer: Takeaways Ensure you define the employer correctly. Separate EIN numbers do not matter. If you own/control multiple legal entities you need to get a legal opinion as to your single employer status before you go any further. When referring to legal obligations, speak in the legal lingo (e.g., ALE vs. Non-ALE, not small group, large group, etc.) to avoid confusion.

11 The Roadmap (1) Define the Employer (2) Identify the Employees (1) Employees v. Owners (2) Employees v. Independent Contractors (3) Employees v. Leased Employees

12 Identifying Employees These groups of people don t count: (a) Non-Participating owners are not considered employees. (b) Independent contractors are not included towards your 50 full-time employees or their equivalent assuming they really are contractors. Do not misclassify your employees; the penalties are stronger now than ever. (c) Leased employees are specifically excluded; final regulations are still in the works.

13 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (1) Full-Time vs. Part-Time (2) Seasonal vs. Ongoing (120 days) (3) Temporary vs. Perpetual (4) Hourly vs. Salary (5) Calculate FTEs

14 Classify Your Specific Employee Types How is your workforce distributed? Identify the type of employees you have. Put them into specific categories. Remember: Full-Time employees are all those people that provide your company with at least 30 hours of service a week or more. Average at least 6-months of variable hour employees to get a good feel for where they are. Know all of this before you seek ACA advice so that you can be better equipped to know what services and products you need, want, or have to buy to get compliant.

15 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges

16 The Marketplace / The Exchange An exchange is a state or federal agency or political subdivision that was created by the Affordable Care Act. States were given the option of running their own exchanges or letting the federal government run them within their state. Texas has elected to have a federal exchange. This is where your employees will go to get insurance coverage if your company does not offer it or employees are not happy with the coverage you offer. Gain a working knowledge of individual exemptions. The Fair Labor Standards Act requires a very particular notice to your employees to go out by October 1, 2013.

17 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges

18 The SHOP Exchange The Shop Exchange will be available only to small businesses to start off (usually 50 or less employees) Eventually, the possibility exists to expand it beyond the original eligible employers. SHOP Exchanges Pick a metal, employee picks the actual plan (delayed) Pick a plan (or plans), employee must buy that plan or plans SHOP Exchange Tax Credits Three Requirements: Less than 25 employees (owners and family do not count); Whose average pay is $50,000 or less; and Employer pays at least 50% of the premium Form 8941 Capped at 2 Years

19 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges (6) Gain Familiarity with How Penalties Arise

20 Penalty Trigger An Applicable Large Employer, Employed A Full-Time Employee, That Went To An Individual Exchange/ Marketplace, and Obtained A Health Insurance Premium Subsidy or Tax Credit, Because Her Employer did not offer any coverage at all, or Because Her Employer did not offer the right kind of coverage.

21 Weak vs. Strong Penalties Offer Coverage= Weak Penalty If you offer coverage and an employee qualifies for a subsidy through the exchange, then you only have to pay $3,000 times the number of employees who qualified for coverage on the exchanges. $3k per subsidized FT employee (capped by if you did not offer) Did Not Offer Coverage= Strong Penalty If you do not offer coverage and at least one full-time employee qualifies for a subsidy through the exchanges, you will have to pay a penalty of $2,000 for each of your full-time employees. $2k x (Y 30) = Penalty, where Y = Total FT employees

22 Strong Penalties If you did not offer health insurance: 56 Full-time Employees 100 Full-time Employees 200 Full-time Employees 1 Full-time employee qualifies for a subsidy through the Exchanges. 1 Full-time employee qualifies for a subsidy through the Exchanges. 1 Full-time employee qualifies for a subsidy through the Exchanges = = = x $2,000 = $52, x $2,000 = $140, x $2,000 = $340,000 Total Penalty: $52,000 Total Penalty: $140,000 Total Penalty: $340,000

23 Weak Penalties If you attempted to offer a qualified health plan to your full-time employees, but it did not meet all the requirements: 56 Full-time Employees 100 Full-time Employees 200 Full-time Employees 2 Full-time employees qualify for a subsidy through the Exchanges. 4 Full-time employees qualify for a subsidy through the Exchanges. 6 Full-time employees qualify for a subsidy through the Exchanges. 2 x $3,000 = $6,000 4 x $3,000 = $12,000 6 x $3,000 = $18,000 Total Penalty: $6,000 Total Penalty: $12,000 Total Penalty: $18,000

24 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges (6) Gain Familiarity with How Penalties Arise (7) Gain Familiarity with Qualified Healthcare Plans

25 Qualified Healthcare Plans Penalty Liability Shield: (1) Minimum Essential Coverage: a list of plans (2) Minimum Value (1) Bronze: 60% Actuarial Value (2) Silver: 70% Actuarial Value (3) Gold: 80% Actuarial Value (4) Platinum: 90% Actuarial Value (3) Affordable (Safe Harbor): Employee premiums may not exceed 9.5% of employee income (4) Offer it to at least 95% of your workforce. (5) Offer it to the particular employee.

26 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges (6) Gain Familiarity with How Penalties Arise (7) Gain Familiarity with Qualified Healthcare Plans (8) Understand Who Gets Coverage Offers, Help, or Both

27 Offers, Help, or Both? If you are an ALE, you must offer QHP coverage to: Full-Time Employees and their dependents. Does not include spouse, Does not include other employee types. If you are an ALE, you must help pay for QHP coverage for: Only the Full-Time Employee (and no one else). This was the 9.5% of employee income we spoke about earlier, you only have to pay to the point where the employee pays no more than 9.5%.

28 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges (6) Gain Familiarity with How Penalties Arise (7) Gain Familiarity with Qualified Healthcare Plans (8) Understand Who Gets Coverage Offers, Help, or Both (9) Survey Your Workforce

29 Make Informed Decisions When making decisions about ACA responses, it is important that you make decisions informed by the realities of your business. Your workforce is unique, if you don t know how, you cannot custom tailor a response to the ACA.

30 Make Informed Decisions Every dot is an employee. There are 165 employees in this example. Assume premiums are $300 a person. This is where information helps you make better decisions. 165 x 300 = $49,500/month

31 Make Informed Decisions Every dot is an employee. There are 165 employees in this example. The darker side are parttime employees; not entitled to coverage (98 of them). This leaves 67 full-time employees. 67 x 300 = $20,100/month

32 Make Informed Decisions Now, apply the individual exemptions: Members of religious sects or divisions; members of healthcare sharing ministries; exempt noncitizens; Medicaid and Medicare recipients; incarcerated folks, Native Americans, Etc. Now you have 49 eligible, non-exempt employees. 49 x 300 = $14,700/month

33 Make Informed Decisions Now, apply what I call the maybes People in this group are technically entitled to coverage, but they probably will not take it. (Full-time employees under 26, spouses, etc). Now you have 22 eligible, non-exempt employees. 22 x 300 = $6,600/month

34 Survey Your Workforce If you have data, use it! For example, some companies have offered coverage in the past and past behavior can sometimes predict future behavior quite well. If you do not have data, you need to get it. Nevertheless, be VERY CAREFUL about how you go about doing this.

35 Quick Tips Be mindful of the anti-retaliation and nondiscrimination rules in the Affordable Care Act, Try to keep the information anonymous. Shield your operational command / decision-makers from having access to that information. If it is an option, hire a third-party to do the surveying. For example, 75% of your workforce showed a willingness to participate in your coverage at X specific price point vs. Bobby in accounting said he wants great insurance or he is going to an exchange. If Bobby gets fired for some unrelated reason, you might get yourself in trouble.

36 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges (6) Gain Familiarity with How Penalties Arise (7) Gain Familiarity with Qualified Healthcare Plans (8) Understand Who Gets Coverage Offers, Help, or Both (9) Survey Your Workforce (10) Understand that Reasonable Responses Depend on Your Business

37 Your Business, Your Road, Your Decisions

38 Your Business, Your Road, Your Decisions If someone is telling you to use your sails, and you don t have any, that is not very helpful. If someone is telling you to change the gasoline type you put in your motorboat, but you don t have a motor on your sailboat, that is not very helpful. The same applies to your business; the advice should be tailored to you like a fine suit.

39 Just Offer QHP But is it really that easy?

40 Minimum Participation Levels In some cases, insurance coverage cannot be purchased because of minimum participation levels (even by willing employers). In Texas most insurance companies require a 75% participation level for large group employers (this is industry standard). Insurance companies do this to avoid ADVERSE SELECTION. Insurance companies want to make revenue. Minimum participation levels are perfectly legal for large group plans even after the Affordable Care Act. Small group plans have guaranteed issue, but not guaranteed renewal.

41 Make Informed Decisions Every dot is an employee. There are 165 employees in this example. The darker side are parttime employees; not entitled or eligible for coverage (98 of them). 75% of 67 = ~50 employees, if you can t get 75% of them to opt-in, you cannot buy the coverage.

42 Tight Spots Offer Coverage= Weak Penalty If you offer coverage and an employee qualifies for a subsidy through the exchange, then you only have to pay $3,000 times the number of employees who qualified for coverage on the exchanges. $3k per subsidized FT employee (capped by if you did not offer) Did Not Offer Coverage= Strong Penalty If you do not offer coverage and at least one full-time employee qualifies for a subsidy through the exchanges, you will have to pay a penalty of $2,000 for each of your full-time employees. $2k x (Y 30) = Penalty, where Y = Total FT employees

43 Barebones / Skinny / MEC Plans A Skinny Plan offers minimum essential coverage. In some cases, this is a better option than not offering coverage at all. Only requires 25% participation level. Three things you should know about skinny plans: Not for everyone If your industry traditionally offers competitive health insurance, a skinny plan is not a reasonable option. Considerable option for employers unable to reach a 75% participation level. Temporary solution A transition plan as you move towards a Qualified Health Plan. May violate anti-discrimination provisions ACA delayed this provision in Nov. 2011, however may be an issue in the future. ERISA section 510 This response is only less aggressive than doing nothing.

44 The ACA is Complex, but Manageable Assess your business before you go into talk to an advisor. It cuts down on learning about things that are irrelevant to you and your business. If you cannot afford to offer your employees insurance, it makes no sense for you to sit through a sales presentation whose aim is for you to buy insurance. If you know you can t or wont offer coverage, be honest about what you want to do or what you can do BEFORE you walk into any meeting with an advisor. The more honest your assessment, the better the advice, and the better you can position yourself for success based on your goals.

45 The Roadmap (1) Define the Employer (2) Identify the Employees (3) Classify Employees (4) Gain Familiarity with Individual Exchanges (5) Gain Familiarity with SHOP Exchanges (6) Gain Familiarity with How Penalties Arise (7) Gain Familiarity with Qualified Healthcare Plans (8) Understand Who Gets Coverage Offers, Help, or Both (9) Survey Your Workforce (10) Understand that Reasonable Responses Depend on Your Business (11) We Don t All Need To Know How to Take a Turn at 200 mph, Some of Us Just Need to Learn how to Drive

46 Measurement Periods

47 Measurement Periods My best advice: Don t worry about it unless you have variable hour employees. If you only have full-time employees this is not an issue and you should RUN from any person trying to explain this to you. If you only have a few variable hour employees then you may want to consider pushing them up to fulltime. The money you lose in wages will undoubtedly be less than the administrative costs of keeping track of variable hour employees.

48 Disclaimer ABOUT US. Established in 1998, Monty & Ramirez LLP is the largest Hispanic-owned labor, employment and immigration law firm in the Southwest. The Firm is passionate about representing the interests of companies. The firm offers a range of corporate legal services to Fortune 500, publiclytraded companies, major industry associations and governmental agencies (notably serving as Immigration Counsel for the agencies). The Firm represents employers in investigations and audits conducted by the National Labor Relations Board, Department of Labor, Bureau of Citizenship and Immigration Service, Occupational Safety and Health Administration and Equal Employment Opportunity Commission. DISCLAIMER. This presentation is for informational purposes only and provides general information concerning employment and immigration law to help you identify when you may need additional advice. It is not an exhaustive treatment of the statutes, case law or regulations that are involved with the subject. Please recognize that the law is developing rapidly in this area and you will want to obtain current legal advice on your specific situation before taking action. Employment and Immigration law liabilities are often highly dependent on the particular facts and circumstances of the individual case or situation. As such, employers should seek the advice of counsel prior to making their determinations. Monty & Ramirez LLP is available to answer any employment or immigration related issue(s) with Your Company.

49 Contact Information Mario K. Castillo Monty & Ramirez LLP 150 Parker Road, Third Floor Houston, Texas Phone: LinkedIn: