Experts Answer Health Care Reform Questions from TCB’s April 24 Webinar
Questions not answered during our live April 24 webinar are addressed below—first by Julie Bunde of HealthPartners, and then by Ed Wegerson of Lindquist & Vennum.
Q&A with Julie Bunde, director of product management and product and market solutions at Bloomington-based HealthPartners:
Q. Will there still be a 90-day waiting period for coverage?
A. Employers can still have waiting periods, but they cannot exceed 90 days. Current waiting periods that provide coverage on the first of the month following 90 days no longer meet this standard.
Q. Are dental, vision, life and flex plans covered under the 90 day eligibility period when offered as standalone plans?
A. These are generally HIPAA excepted benefits and most ACA insurance provisions don’t apply.
Q. Who is responsible for the 1.5 percent MNsure and 3.5 percent federal increase in premiums, employer or employee?
A. It will be included in the premium for individual market and small group.
Q. When does auto-enrollment go into effect?
A. Auto-enrollment will impact employers with 200-plus employees. We are waiting for guidance on auto-enrollment and when and how to count employees. According to a recent FAQ, the Department of Labor intends to complete this rulemaking by 2014.
Q. Can you discuss the $63 transitional reinsurance fee and what this is? Is it per year or per month?
A. The transitional reinsurance program fee pays for a temporary program to offset high-cost individuals moving into the insurance market and is effective for years 2014-2016. The proposed fee is currently estimated at $5.25 per covered life per month ($63 per year) in the first year. The fee will be progressively lower in 2015 and 2016.
Q. Can an employee access the exchange even if the employer does provide a health insurance plan?
A. Yes, but they can’t access a subsidy if their employer offers affordable coverage that meets minimum value requirements.
Q. A small business with less than 10 employees is not required to provide health insurance and will not penalized, correct?
A. Yes. Employer Shared Responsibility penalties do not apply in small groups.
Q. Will the ACA eliminate high deductible plans and HSAs because a high deductible plan wouldn’t meet acceptable rates?
A. There will still be viable HSA qualified plans that meet ACA requirements.
Q. Regarding the max deductible for small group of $2,000/$4,000, does an employers’ HSA contribution count toward the max deductible?
A. Maximum deductibles for small group plans will be determined in accordance with the ACA actuarial value rules. A health plan’s annual deductible may exceed the annual deductible limit if that plan may not reasonably reach the actuarial value of a given level of coverage (bronze, silver, gold, platinum). It is anticipated that in 2014, the only level that will be able to offer larger deductibles will be the bronze level. Employer contributions to an HRA or HSA, if known, can be counted towards actuarial value.
Q&A with Ed Wegerson, a partner at Minneapolis-based law firm Lindquist & Vennum who has 30 years of experience in employee-benefit and executive-compensation matters:
Q: Do you need to cover 95 percent of your employees or offer coverage to 95 percent of your employees?
A: The employer needs to offer 95 percent of its full-time employees the opportunity to enroll in minimum essential coverage under an eligible employer sponsored plan and offer the employee the opportunity to enroll the employee’s dependents (which may, but need not include the employee’s spouse). In order to “offer” the opportunity to enroll, the employer must give full-time employees the opportunity to elect to enroll (or decline to enroll) in coverage no less than once during the plan year.
Q: To be considered a large group, if a company has less than 50 full-time employees are we done counting or do we also need to count the full-time equivalent employees?
A: To determine if an employer is an applicable large employer, the employer must count its full-time employees and full-time equivalent employees.
Q: How is the 30 hours per week averaged for determining full-time employee status?
A: “Full-time employee” means an employee who is employed an average of at least 30 hours of service per week. Generally, you can use 130 hours per month as the monthly equivalent to 30 hours per week so long as it is applied on a reasonable and consistent basis. “Hours of service” means paid work time and paid time off.
Q: What percentage of ownership is required in each company to be considered a controlled group?
A: Generally, 80 percent common ownership is required to be considered a controlled group, but there are many variables that can change this analysis, such as certain stock that is not counted or is treated as owned by a related individual, if there are five or fewer owners that have common ownership, or if there are any affiliated companies whose employees provide services to the company.
Q: How does an employer know an employee’s “household income” to determine if coverage is affordable (9.5 percent or less of household income)? Will they need to collect employee's tax information to verify?
A: There are three safe harbors that employers can use for determining the affordability of health coverage that are based only on the employee’s income from the employer (Form W-2 safe harbor, rate of pay safe harbor, and the federal poverty line safe harbor). If the employer uses one of these three safe harbors, the employer will not need to collect any tax or household income information from the employee.
Q: Are leased employees or employees hired through a temp agency included in the test for large employer or coverage tests?
A: No, only common law employees are included. Leased employees, sole proprietors, partners in a partnership, and 2 percent S corporation shareholders are not considered employees.
Q: Will we still be able to continue to have a Code Section 125 cafeteria plan, or will all such plans be replaced by simple cafeteria plans?
A: Employers can still sponsor and maintain Section 125 cafeteria plans. In general, only employers with an average of 100 or fewer employees during either of the preceding two years may establish a simple cafeteria plan, which requires an employer contribution on behalf of all eligible employees, but will not be subject to certain nondiscrimination tests otherwise applicable to cafeteria plans (similar to safe harbor rules for 401(k) plans).
Q: If an employer has 75 full-time equivalent employees and only five full-time employees (the rest are part-time employees), would the employer be subject to a penalty if one of the full-time employees receives coverage through the Exchange?
A: Yes, the employer is subject to the play or pay penalties because it has over 50 full-time and full-time equivalent employees. However, the employer will only pay a penalty based on its number of full-time employees. If not all five employees are offered minimum essential health coverage, then the $2,000 annual penalty applies for each of the five employees. If the employer’s plan does not provide minimum value or if the employee’s premiums are more than 9.5 percent of his or her income, then the $3,000 annual penalty applies but only for the employees receiving coverage and a premium tax credit or cost-sharing reduction through the Exchange.