Bottom Line Driven
Health Benefits Planning
Are You Going To Pay or Play?
September 18, 2013
Jeffery A. Schultz
Phone: 262.207.1999 ext. 112
Email: [email protected]
Vice President, BeneCo of Wisconsin
Innovation. Dedication. Knowledge. Purpose. Integrity. Vision. Talent. Results.
Are you Going to Pay or Play?

What we will cover:
Impact on employer health plans
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Compliance implications
Cost implications
Micro and Macro views
Long term planning issues/thoughts
What employers need to do
How you can add value in the ACA discussion
Are You Going to Pay or Play?
1300+ Pages of Regulations – REALLY?
-3-
Are You Going to Pay or Play?
Ground rules
Some questions may fall under
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Haven't read,
Haven't heard,
Guidance not released,
Just don’t know…
Are You Going to Pay or Play?
As we start…
Beware Of All The Moving Parts
 ACA introduces a wide variety of moving parts:
 Mandates and plan tests
 New concepts and paradigms
 Inconsistent definitions
 Adverse selection possibility / health risk pool
 Industry wide taxes and fees
 Penalties & Cadillac Plan Excise Tax
 Additional Administrative complexities and costs
The moving parts interrelate – fixing one piece could introduce higher costs for another
parts.
It is a very complicated mix, where decisions need to be based on facts and quality
probability modeling.
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Are You Going to Pay or Play?
What is Delayed
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
The employer shared responsibility rule and accompanying
penalties, which also delays the requirement to offer
coverage to dependent children of full-time employees for
plans that had not previously extended that coverage.

The employer coverage informational reporting
requirements.
Are You Going to Pay or Play?
What is Not Delayed

-7-
As of now, no other provision of ACA is affected

No waiting periods for plan participation exceeding 90 days.

No annual dollar limits on essential health benefits.

No preexisting condition exclusions for any individual.

Offering coverage to all children up to age 26 without exclusion for other coverage
through the child's employer.

For non-grandfathered plans, out-of-pocket limits that do not exceed $6,350 for single
and $12,700 for family coverage.

For insured plans offered in the individual or small group marketplace, guaranteed
availability, guaranteed renewability, community rating systems and deductibles that
do not exceed $2,000 for single and $4,000 for family coverage.

The requirement that employers notify employees of the existence of the public health
insurance exchanges, also known as "marketplaces," by October 1, 2013 (for existing
employees).
Are You Going to Pay or Play?
Employer Play or Pay Penalties

Applies Only to “Large Employers” (>50 FTEs +
FTEQs)
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
FTE = employee works an average of at least 30 hrs/wk
FTEQ = part-time employee hours divided by 120

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Note: maximum number of hours per employee considered is 120
for the month
Are You Going to Pay or Play?
Underlying concepts:
Shared responsibility, Assessments (4980h Free rider penalties)
 Do not offer health plan

Penalty is $2,000 x FTEs (less 30 FTEs), if at least one FTE received premium
tax credit.
 Offered health plan considered not affordable


Employee contributions exceed 9.5% of income
Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
 Offered health plan less than 60% actuarial value

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Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
Are You Going to Pay or Play?
Full time eligibility

Why is FT status important ?
ACA mandates coverage for all FT employee
 Penalty imposed for non compliance (4980H)
 It has significant implications for many
 It has a new definition (for some)

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30 hours per week
Are You Going to Pay or Play?
Underlying concepts:
Shared responsibility, Assessments (4980h Free rider penalties)
The fun starts in 2014
 Do not offer health plan

Penalty is $2,000 x FTEs (less 30 FTEs), if at least one FTE received premium
tax credit.
 Offered health plan considered not affordable

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Employee contributions exceed 9.5% of income
Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
 Offered health plan less than 60% actuarial value
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Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
Are You Going to Pay or Play?
Pay or Play Calculation
2013 Employer
Cost
2014 Plan Termination
With No Pay Increase
ER Pays $2,000 Penalty
(Less first 30)
2014 Plan Termination
With No Pay Increase
ER Pays $2,000 Penalty
Tax Adjusted
2014 Plan Termination
With Pay Increase
$4,000 Stipend
ER Pays $6,000
2014 Plan Termination:
With Pay Increase
$4,000 Stipend
Tax Adjusted
$7,543
$2,000
$3,441
$6,000
$7,747
$2,979,545
$1,642,000
$2,828,129
$5,046,000
$6,492,535
Difference
$0
$1,337,545
$151,416
($2,066,455)
($3,512,990)
% Difference
0%
45%
5%
-69%
-118%
Est Cost/EE
Cost
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Are You Going to Pay or Play?
Underlying concepts:
Shared responsibility, Assessments (4980h Free rider penalties)
The fun starts in 2014
 Do not offer health plan

Penalty is $2,000 x FTEs (less 30 FTEs), if at least one FTE received premium
tax credit.
 Offered health plan considered not affordable


Employee contributions exceed 9.5% of income
Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
 Offered health plan less than 60% actuarial value
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Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
Are You Going to Pay or Play?
Single Analysis
Which associates are Subsidy or Medicaid Eligible?
(400% of FPL**)
Not Eligible for Premium Subsidy
$44,680 and above
(138% to 400% of FPL)
Not Eligible for Premium Subsidy due to Employee
Contributions Not Exceeding 9.5%
-Affordable-
Eligible for Premium Subsidy due to
Employee Contributions at 9.5% or higher
-Unaffordable-
Premium Contribution as a
percent of household income
0.0% to less than 9.5%***
9.5% and above***
(Under 138% of FPL)
For States with No Medicaid Expansion: ****
Not Eligible for Premium Subsidy due to Employee Contributions
Not Exceeding 9.5%
-Affordable-
For States with No Medicaid Expansion:
$15,415 to $44,680
$0 to $15,415
****
Eligible for Premium Subsidy down to 100% of FPL
due to Employee Contributions at 9.5% or higher
-Unaffordable-
Medicaid Eligible –
Medicaid Eligible –
No employer Penalties for Medicaid Enrolled associates
No employer Penalties for Medicaid Enrolled
associates
**
2012 Federal Poverty Level. Note: Single FPL @ 100% =$11,170
*** Employer’s Plan – Based on associate-Only or Single
**** States are no longer required to expand Medicaid to 138% Federal Poverty Level. There may be additional employer penalty exposure down to 100%
Federal Poverty Level.
Red text indicates employer penalties may apply
Family of 4 Analysis*
Which associates are Subsidy or Medicaid Eligible?
(400% of FPL**)
Not Eligible for Premium Subsidy
$92,200 and above
(138% to 400% of FPL)
Not Eligible for Premium Subsidy due to
Employee Contributions Not Exceeding 9.5%
-Affordable-
Eligible for Premium Subsidy due to Employee
Contributions at 9.5% or higher
-Unaffordable-
Premium Contribution as a
percent of household income
0.0% to less than 9.5%***
9.5% and above***
(Under 138% of FPL)
For States with No Medicaid Expansion: ****
Not Eligible for Premium Subsidy due to
Employer Contributions Not Exceeding 9.5%
-Affordable-
For States with No Medicaid Expansion:
****
Eligible for Premium Subsidy down to 100% of FPL due
to Employee Contributions at 9.5% or higher
-Unaffordable-
Medicaid Eligible –
No employer Penalties for Medicaid Enrolled
associates
Medicaid Eligible –
No employer Penalties for Medicaid Enrolled
associates
$31,809 to $92,200
$0 to $44,680
*
**
***
****
For larger families add $3,740 for each additional person.
2012 Federal Poverty Level. Note: Single FPL @ 100% =$11,170
Employer’s Plan – Based on associate-Only or Single
States are no longer required to expand Medicaid to 138% Federal Poverty Level. There may be additional employer penalty exposure down to
100% Federal Poverty Level.
Red text indicates employer penalties may apply
Affordability
Government deems what's affordable
 New standard
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9.5% of income for SINGLE coverage
 Each employee must be tested
 Cannot average incomes
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Month to month/real-time eligibility
 Lower wage/higher contribution likely issues
 Don’t pass test, plan pays penalty. Notified at year end.
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Health Care Reform: 301 How to Determine if We Will Pay or Play
Affordability
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The test
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Simple division for each employee
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Example:
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$160 monthly premium contribution =$1,920
Annual earnings $20,000 or $12.82 per hour @ 30 hr per week
$1920/20,000 = 9.6%
Fail affordability test due to contribution exceeding 9.5%
Remember eligibility is at 30 hours per week.
Health Care Reform: 301 How to Determine if We Will Pay or Play
Affordability
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The safe harbors
 W-2 earnings (Box 1)
 Rate of pay
 FPL
Health Care Reform: 301 How to Determine if We Will Pay or Play
Affordability
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The safe harbors
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W-2 earnings
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Uses the employee’s W-2 income (box1) from the employer for the
current year.
Does not include pre-tax contributions for 401(k) or cafeteria plans.
Calculated on an individual employee basis
Employer will not know the exact amount until after the end of the
year.
Employers may need to define the employee contribution as 9.5% of
W-2 wages.
Many holes in the application. Anticipating more guidance.
Health Care Reform: 301 How to Determine if We Will Pay or Play
Affordability

The safe harbors

Rate of pay
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Hourly Employee: Use employee's hourly rate as of the first
day of the plan year.
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Multiply x 130 hours per month (per government)
Multiply x 12
Divide into contribution
Salaried Employee: Use annual wages and divide by 12.
 Disadvantage: Can only use 130 hours per month even if
employees use more.
 Strategy: Set premium at 9.5% of lowest paid employee.

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Health Care Reform: 301 How to Determine if We Will Pay or Play
Affordability

The safe harbors

Federal Poverty level (FPL)
Uses 100% of FPL
 Assume all employees earn 100% of poverty level
 Calculate contribution against the $11,490 FPL
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$90.96 Per Month or $1091.55 Annually
Health Care Reform: 301 How to Determine if We Will Pay or Play
Important Points on Affordability and Penalties
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Less than a 9.5% of wage contribution immunizes
plan from penalties
Employees may still be eligible for subsidies due to
premium costs in excess of 9.5% of household
earnings
Plan will be notified retrospectively
Health Care Reform: 301 How to Determine if We Will Pay or Play
What Should We Do Now?
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Get educated.
Determine the subsidy eligible populations
Understand the position of states where employees reside.
Obtain assistance estimating in/out migration
Think about ways to leverage exchanges in your planning
strategy. (i.e wellness)
Understand the complexity will not go away.
Are You Going to Pay or Play?
Underlying concepts:
Shared responsibility, Assessments (4980h Free rider penalties)
The fun starts in 2014
 Do not offer health plan

Penalty is $2,000 x FTEs (less 30 FTEs), if at least one FTE received premium
tax credit.
 Offered health plan considered not affordable


Employee contributions exceed 9.5% of income
Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
 Offered health plan less than 60% actuarial value

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Penalty is lesser of $3,000 x FTE who receives premium tax credit, or $2,000
x FTEs (less 30 FTEs)
Are You Going to Pay or Play?
Determining actuarial/ minimum value
Plan
Plan Name
Deductible
Coinsurance
Out of Pocket
Minimum
Value
Plan Design #1
PPO
$500
90%
$2,000
88.5%
Pass
Plan Design #2
HSA
$2,000
90%
$4,000
76.0%
Pass
-25-
Pass/Fail
Are You Going to Pay or Play?
What Should Employers Do?
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Understand their plan’s Actuarial or Minimum value (may
need actuarial help).
Examine plan pricing integrity and spreads
Re- evaluate the number of plans offered, coverage levels and
price points
If employers to avoid penalties, consider offering a 60%
(bronze) level plan
Are You Going to Pay or Play?
ACA fees and taxes

Fully insured groups with other than January 1
renewal:
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Self insured groups
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Will be a factor in the renewal
Expect line item on billing post renewal
Will be paying the TPA or government directly
Are You Going to Pay or Play?
ACA fees and taxes and fees overview
PMPY =per member(belly button)/Per year
PMPm =per member(belly button)/Per month
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Are You Going to Pay or Play?
What Should Employers Do?
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Get educated.
Ask your carrier /TPA for specific fee amounts.
Make sure to include all fees in budgets.
Communicate fees to employees
Include fees in total cost and contribution calculations
Are You Going to Pay or Play?
COMPLETE THE CADILLAC PLAN EXCISE TAX CALCULATIONS
Cadillac Tax
According to the current healthcare law, beginning in 2018, health plans that
cost more than $10,200/single, $27,500 family will be taxed 40% on the
amount over threshold. Stand-alone dental and vision plans are not
included.
Assumed Annual Trend 8%
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Are You Going to Pay or Play?
Assumed annual trend:
8%
2012COBRA Rates S
Medical
Lim
F
Premier
Standard
$7,117
$4,829
$17,706
$11,802
$22,773
$16,510
2018 S
Lim
F
Premier
Standard
$10,457
$7,096
$26,016
$17,341
$33,461
$24,259
2023 S
Lim
F
Premier
$15,364
$38,226
$49,166
Standard
$10,426
$25,479
$35,644
2013
S
Lim
F
2014
S
Lim
F
$7,686
$19,122
$24,595
$5,216
$12,746
$17,831
2019 S
Lim
F
$11,293
$28,097
$36,138
$7,663
$18,728
$26,199
2024 S
Lim
F
$16,593 $11,260
$41,284 $27,518
$53,099 $38,496
2015
S
Lim
F
$8,301
$20,652
$26,563
$5,633
$13,766
$19,257
$6,083
$14,867
$20,798
$6,570
$16,056
$22,462
$8,276
$20,226
$28,295
$8,938
$21,844
$30,559
$17,921 $12,161
$44,586 $29,719
$57,347 $41,575
$8,965
$22,304
$28,688
$9,682
$24,089
$30,983
$12,197
$30,345
$39,029
$13,172
$32,772
$42,152
2025 S
Lim
F
S
Lim
F
2017 S
Lim
F
2020 S
Lim
F
2021 S
Lim
F
2022 S
Lim
F
$14,226
$35,394
$45,524
$9,654
$23,592
$33,004
2016
-31-
Premier
Standard
$549
$373
$1,366
$911
$1,757
$1,274
Are You Going to Pay or Play?
Determining full time employee eligibility:
The new frontier

IRS notice 2012-58 & Proposed Treasury Regulations
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Key issues:
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Eligibility is 30 hours per week in 2015
Employer selects measurement (look back) period in 2014
Employer selects beginning and ending points of periods
FT status during Stability period NOT required
Current FT status does not determine coverage eligibility
Employee types: current, new, variable hour and limited duration
Different measurement and stability periods can apply to
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Union and non union; Hourly and salaried
Other entities; Other states
Are You Going to Pay or Play?
Determining full time employee eligibility:
The new frontier

IRS notice 2012-58 & Proposed Treasury Regulations
 Exciting new acronyms
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IMP- Initial measurement period
SMP- Standard measurement period
SP- Stability period
SSP- Standard Stability period
AP – Administrative period
Are You Going to Pay or Play?
Plan sponsor strategic ACA Action Items
Review eligibility

Let’s get specific
“30 hours” means average 30 hours per week
What about:
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-34-
Those working between 30 hours per week and the current eligibility
Good “fill ins” 25 hours scheduled but working 32 hours in reality
Interns working FT for more than 90 days
Seasonal employees
FMLA , other leaves
How to measure and calculate average hours?
Are You Going to Pay or Play?
Measurement period and accompanying stability
periods as defined in IRS notice 2012-58 &
Proposed Treasury
YES
-35-
NO
Look Back Measurement
Period
Stability Period
Look Back Measurement
Period
Stability Period
3 Months
6 Months
3 Months
3 Months
6 Months
6 Months
6 Months
6 Months
9 Months
9 Months
9 Months
9 Months
12 Months
12 Months
12 Months
12 Months
Are You Going to Pay or Play?
Measurement periods
and Full time status over time
Measurement Period and FT Status Over Time
2014
2015
2016
2017
IMP/SMP
12/12
12
12
12
FT Status
Y
N
Y
Y
SP
12
12
12
12
Employment Status
Y
Y
Y
Y
Coverage
Y
Y
N
Y
-36-
Are You Going to Pay or Play?
Safe harbor for measuring employee hours
-37-
Are You Going to Pay or Play?
Safe harbor for measuring employee hours
-38-
Are You Going to Pay or Play?
Determining full time employee eligibility:
what should employers do?
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Audit workforce eligibility
Determine employee classes
Assess IMP, SMP and SPs
Document
Continue to change the paradigm
 Eligibility no longer real time
 Complexities will continue
 Safe harbors exist…use them
Are You Going to Pay or Play?
The Play and pay Trap
Why wellness is more important than ever
 New options for coverage that never existed now
exist.
 Low wage earners migrate out of plan to Medicaid.
 Mid wage earners receive subsidy and go to
exchange.
 More tenured workforce remains on plan.
 Lower headcount and higher unit cost ($PEPY or
$PMPM) is possible.
-40-
Are You Going to Pay or Play?
ACA and Wellness: The New Wellness Frontier

Plan sponsors will have to think like never before:
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-41-
Go on the offense to retain attractive risk.
Possibly allow poor risk to leave.
Create strategy to enhance/maintain risk pool
(defense to Medicaid eligible and subsidy eligible
migration)
Are You Going to Pay or Play?
How to Leverage Health Care Reform to Benefit Your Wellness
Program:
What is my plan’s response?
ACA 50% Wellness Surcharge
COBRA Rates
25%
50%
Total Premium
Total Premium
Annual
Contribution
Surcharge
Achiever
Non-Achiever
Difference
Single
$300
$75
$150
$75
$225
$1,800
Family
$1,200
$300
$600
$300
$900
$7,200
-42-
Are You Going to Pay or Play?
What do employers need to do about wellness?
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-43-
If they haven't started … get going.
Check these thoughts against company philosophy and culture.
Share the rationale with employees.
Implement objective measure for outcomes.
Implement programs to obtain full engagement.
Understand their risk pool and profile.
Measure and manage outcomes.
Developing a 2-5 year strategy.
Cast the vision to employees.
Communicate with employees well and often.
Are You Going to Pay or Play?
The Exchanges ( Marketplaces)

Basics
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-44-
Expedia for health insurance
Clearinghouse for state, federal plan/subsidy eligibility, private and
public plan enrollment and premium collection
Private insurers take risk, states do not
Insurers must agree to participate
Available in 2015 to groups with 50 employees or less
Available in 2017 to groups of over 100 employees+
UT and MA only current models
Multistate Employer complexity
Defined contribution methods will advance
Are You Going to Pay or Play?
What do employers need to do?
Audit, Assess, Analyze, Communicate and Decide
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Assess
 Probable exchange and Medicaid eligibility and migration
 Potential risk pool change
Analyze
 Budget /Financial Impact
 Contingency plans
 Risk preservation strategies
Communicate
 Often and well with

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
Decide
 On a 2-4 year strategy based on

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-45-
Leadership
associates
Affordability
Culture
Leveraging ACA to your advantage
Are You Going to Pay or Play?
What needs to be done?
Be Tactical and Strategic

Tactical
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Strategic
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-46-
Be accurate and timely with compliance
Know the tasking and timelines
Enlist the appropriate resources
Know your group
Know your risk
Model probable scenarios
Create risk enhancement /preservation incentives
Understand the $$ involved in pay or play
Leverage ACA to your advantage
Are You Going to Pay or Play?
How can payroll professionals add value in the
ACA strategy conversation?
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Know your system capabilities
Know your competitors capabilities
Know what employers need to do
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W-2 reporting
Testing
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-47-
To determine if an employer is an applicable large employer
tests
Affordability and its testing nuances
Are You Going to Pay or Play?
How can payroll professionals add value in the
ACA strategy conversation?

Measurement:
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Administration:
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Defined contribution
More product choices
Reporting:
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-48-
Variable hour employees
Measurement - Look back period
Stability period
For the employer on all of this stuff……..
To the government for attestation purposes
Are You Going to Pay or Play?
Pay or Play Webinar Series
Course
Level
Tactical ACA Issues Facing Plan
Sponsors
102
Wednesday, September 25, 2013
10:00-11:00
Strategies to Leverage ACA to
Improve Your Risk and Lower Your
Health Plan Spend
201
Wednesday, November 20, 2013
10:00-11:00
How to Determine if We Will Pay or
Play
301
Wednesday, December 18, 2013
10:00-11:00
-50-
Date
Time
Are You Going to Pay or Play?
ACA Learning Series:
Technical Aspects of Developing and Implementing Best
Practice ACA Strategy
Course
Level
Date
Time
Affordability: Understanding and Utilizing the
Appropriate Affordability Calculation Methodology
311
Wednesday, September 18, 2013
10:00-11:00
Wellness Based Incentives -Creating Culturally
Sensitive Outcome Based Premium Differentials
312
Wednesday, October 09, 2013
10:00-11:00
Exchanges and Potential Risk Migration:
Understanding Alternative Coverage Options and its
Impact on Plan Risk and Costs
313
Wednesday, November 13, 2013
10:00-11:00
Cadillac Tax: Creating a Glide Path to Minimize the
2018 Excise Tax Impact
314
Wednesday, December 11, 2013
10:00-11:00
-51-
Are You Going to Pay or Play?
MRA’s 2013 Health Care Implementation Workshop Series
Wellness Gains Strength & Benefit Mandates
Learn the new power behind 2014 Wellness Programs initiatives
Control future health care costs by planning wellness initiatives now
Explore the growing trend to use biometric premium cost sharing strategies to retain healthy employees
Learn how to avoid adverse selection in plan designs
Take advantage of the increased Small Employer Health Subsidies
Be aware of the latest information regarding Standardized Essential Health Benefits, plan limits, adult-children, pre-existing
conditions and annual limits
October 8, 2013 – 8:30 a.m. – 11:00 a.m.
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Post-workshop questions or to get the links for
upcoming webinars:
Jeff Schultz
Vice President
BeneCo of Wisconsin, Inc.
262-207-1999 x112
[email protected]
www.beneco.co
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Are You Going to Pay or Play?